United States General Accounting Office

GAO Report to the Chairman, Committee on

Governmental Affairs, U.S. Senate

October 1994 DEFENSE

MANAGEMENT

Impediments

Jeopardize Logistics

Corporate Information

Management

GAO/NSIAD-95-28

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-257006 

October 21, 1994

The Honorable John Glenn

Chairman, Committee on

 Governmental Affairs

United States Senate

Dear Mr. Chairman:

This report was prepared in response to your request that we review implementation of the

Department of Defense’s Corporate Information Management (CIM) initiative. It focuses

specifically on progress made to improve the logistics functions of materiel management and

depot maintenance under the CIM initiative and identifies impediments to further progress.

Unless you publicly announce its contents earlier, we plan no further distribution of this report

until 7 days from its issue date. At that time, we will send copies to the appropriate

congressional committees; the Secretaries of Defense, the Army, the Navy, and the Air Force;

and the Director, Office of Management and Budget. Copies also will be made available to

others on request.

If you have any questions, please call me on (202) 512-8412. Major contributors to this report

are listed in appendix IV.

Sincerely yours,

Donna M. Heivilin

Director, Defense Management

 and NASA Issues
Executive Summary

Purpose In 1992, the Department of Defense (DOD) projected that its Corporate

Information Management (CIM) initiative would enable it to save $36 billion

by fiscal year 1997. According to the Joint Logistics Systems Center (JLSC),

established to help achieve CIM goals, as much as $28 billion would be

saved by improving DOD’s logistics functions. Today, however, DOD is

neither projecting nor tracking CIM savings. DOD officials acknowledge that

the CIM initiative will be difficult to implement, and it may be many years

before the majority of savings materialize.

Because of concerns about the CIM progress, the Chairman of the Senate

Committee on Governmental Affairs asked GAO to review the CIM initiative,

focusing on the DOD logistics function of materiel management. Because

DOD had established one organization, JLSC, to oversee the improvement of

its logistics functions of materiel management and depot maintenance, this

report discusses these two functions. GAO’s specific objectives were to

identify (1) improvements made to business processes and supporting

information systems and (2) impediments, if any, to achieving expected

CIM results.

Background In October 1989, DOD established the CIM initiative to improve business

practices, make better use of information technology, and eliminate

duplicate administrative systems in areas such as civilian payroll, materiel

management, and medical. Since then DOD has significantly broadened the

initiative to encompass all DOD functional areas, including procurement,

logistics, finance, and command and control. Its primary objective is to

dramatically improve the way DOD conducts business, by adopting the best

practices used in the public and private sectors. Nevertheless, developing

standard information systems to support improved business practices

remains an important CIM component.

To implement CIM, DOD directed senior officials within the Office of the

Secretary of Defense, called Principal Staff Assistants to identify—through

a process known as business process reengineering—major improvements

to business practices. At the same time, service and agency managers are

taking a bottom-up look to identify and implement business process

improvements that have servicewide or agencywide application.

To help identify and implement major improvements in materiel

management and depot maintenance, DOD established JLSC. JLSC is staffed

with personnel from the military services and the Defense Logistics

Agency (DLA) and relies on the active participation of the services and DLA

Page 2 GAO/NSIAD-95-28 Defense Management
Executive Summary

to accomplish its efforts. This report deals with JLSC’s progress toward

implementing the CIM initiative, as well as the status of the overall CIM

effort.

Results in Brief The CIM initiative has had little effect on materiel management and depot

maintenance business practices. As directed by DOD, JLSC has focused on

selecting standard logistics information systems—called migration

systems—that the services and DLA are to implement by mid-1997. As a

result, business process reengineering efforts (where most savings occur)

may be delayed several years. JLSC believes, however, that selecting and

implementing migration systems are necessary first steps in the

reengineering process.

Although some progress has been made, several impediments have

delayed JLSC’s first steps. Three critical impediments are (1) some DOD

managers in the services and DLA have not fully accepted the initiative,

(2) DOD has not integrated its various CIM efforts, and (3) CIM management

authority is unclear because of confusing DOD guidance. These

impediments indicate fundamental weaknesses in DOD’s management of

the CIM initiative. For example, until recently DOD had not developed either

a strategic plan for improving business operations nor a mechanism to

handle cross-functional issues. Also, DOD has not devised a management

strategy to encourage the active participation and leadership of functional

managers, particularly the service Chiefs of Staff and the DLA Director, nor

has it ensured that its employees understand CIM objectives and

implementation strategies. As a result, DOD has not made the cultural

changes needed to successfully implement CIM.

Principal Findings

Emphasis on Selecting

Migration Systems May

Delay Major CIM Savings

DOD’s focus on selecting migration systems has delayed reengineering

efforts. DOD, however, believes that having migration systems is necessary

to (1) obtain short-term cost savings to offset recent budget reductions

and (2) develop a standard logistics environment across the military

services and DLA. By June 1994, JLSC, working with the services and DLA,

had selected 32 migration systems for the materiel management and depot

maintenance business areas. It has also eliminated service and DLA funding

Page 3 GAO/NSIAD-95-28 Defense Management
Executive Summary

requests ($22.7 million in 1993 and $320.6 million in 1994) for information

system projects it deemed redundant.

Originally, JLSC planned to implement migration systems over a 7- to 8-year

period, which exceeded the 3-year milestone mandated by the Deputy

Secretary of Defense. Consequently, the Deputy Under Secretary of

Defense (Logistics), in March 1994, proposed that a new organization

replace JLSC. This new organization, called the Logistics Standard Systems

Joint Program Office, is to provide intensive management to meet the

Deputy Secretary’s 3-year mandate. As of September 1994, this proposed

organization change had not been approved. This emphasis on deploying

migration systems may further delay significant improvements to the

logistics processes. In addition, 3 years may not be enough time to ensure

the migration systems meet the services’ and DLA’s operational

requirements.

Impediments to Further

Progress

In trying to implement the CIM initiative, JLSC has confronted (1) DOD

managers who have not fully accepted the methods for achieving CIM

objectives, (2) poor integration of CIM efforts across DOD business areas,

and (3) confusion about the authority over development of information

systems. These three impediments have delayed JLSC’s implementation

efforts and may be systemic to the overall DOD CIM initiative.

Although JLSC has tried to get support and commitment of DOD logistics

managers, it has encountered a strong bias against CIM. Independent

organizations that have studied major reengineering efforts have

concluded that to succeed, an organization must make a major shift in

culture. As discussed in a recent report on CIM,

1 GAO believes such a shift in

DOD requires top management to develop and clearly articulate its vision

and goals to all employees. In addition, DOD needs to structure its

organization to help transition to the new culture, create a specific

management strategy that encourages active participation of functional

managers (particularly the service Chiefs of Staff and the DLA Director),

and train its employees to help them understand the organization’s new

business principles and practices.

DOD’s efforts to reengineer its functions are to a great extent being made in

isolation from one another. For example, in implementing CIM across DOD’s

materiel management and depot maintenance functions, JLSC has

1

Defense Management: Stronger Support Needed for Corporate Information Management Initiative to

Succeed (GAO/AIMD/NSIAD-94-101, Apr. 12, 1994).

Page 4 GAO/NSIAD-95-28 Defense Management
Executive Summary

encountered duplication and conflict with other CIM efforts such as

procurement. While JLSC has tried to resolve these problems, it does not

have the authority to arbitrate disputes among the CIM efforts or enforce

integration decisions.

Clear lines of management authority over the development of migration

systems have also been a problem. A DOD directive grants service and DLA

program managers the sole authority for managing their system

development projects. However, JLSC has been directed to manage the

design, development, and implementation of materiel management and

depot maintenance systems. According to JLSC officials, this dual authority

over system development projects has resulted in dissension between JLSC

and program managers. While JLSC has sought compromise with and

assistance from these managers, conflicting lines of authority remain.

DOD officials told us that they have taken three actions to help overcome

these impediments. First, in October 1993, the Deputy Secretary of

Defense reemphasized top-level support for CIM and required senior

managers to take specific remedial actions within established time frames.

Second, DOD established a board, chaired by the Deputy Secretary of

Defense, and a supportive council to ensure that cross-functional issues

are resolved. Third, on June 13, 1994, DOD issued the CIM Strategic Plan to

demonstrate clear, top-level support for the initiative, provide guidance to

DOD managers, and establish clear lines of authority over CIM projects.

These latest DOD actions are positive steps toward accomplishing CIM

objectives and goals. The success of these actions, however, depends on

how they are implemented and whether DOD makes other important

changes to improve the management of its CIM initiative.

Recommendations To correct the fundamental weaknesses in CIM management, GAO

recommends that the Secretary of Defense promote understanding and

acceptance of cultural changes needed to implement CIM by (1) revising

the CIM management strategy to ensure that DOD functional managers,

particularly the service Chiefs of Staff and the DLA Director, actively

participate and lead efforts to reengineer DOD’s business processes under

the CIM initiative; (2) training DOD employees at all levels to ensure they

understand the organization’s business operations, how those operations

interrelate, why current business practices must be improved, and what

part they should play in making the improvements; and (3) renaming the

Page 5 GAO/NSIAD-95-28 Defense Management
Executive Summary

initiative to accurately communicate its primary objective to all

employees.

Agency Comments In commenting on a draft of this report, DOD generally agreed with most of

GAO’s findings. DOD, however, was concerned about the tone of the report

and GAO’s interpretation of CIM plans, expert advice, and reviews. DOD also

disagreed with GAO’s recommendation to rename the CIM initiative. GAO

changed the report where appropriate based on clarifications to DOD’s

positions and updates to its efforts. Also, GAO revised recommendations in

the draft report to reflect actions DOD has taken to address CIM

impediments. Additional comments and responses appear in chapter 4 and

in appendix III.

Page 6 GAO/NSIAD-95-28 Defense Management
Page 7 GAO/NSIAD-95-28 Defense Management
Contents

Executive Summary 2

Chapter 1 

Introduction

10

The CIM Initiative 10

CIM Involves Both a Top-Down and a Bottom-Up Look at DOD 12

Joint Office Created to Improve DOD’s Materiel Management and

Depot Maintenance

12

Logistics Improvements Expected to Provide Significant CIM

Savings

13

Objectives, Scope, and Methodology 13

Chapter 2 

DOD Directed JLSC to

Develop Migration

Systems

15

JLSC Selected and Deployed Near-Term Initiatives 15

JLSC Directed to Refocus on a Migration Strategy 17

Experts Advise DOD to Focus on Business Processing

Reengineering

19

DOD Believes Migration Systems Are Critical to Business Process

Improvement

20

Concerns About the Migration System Strategy 21

Chapter 3 

JLSC Has Made

Progress

Implementing the

Migration Systems

24

JLSC Has Selected Migration Systems 24

JLSC Has Begun Preliminary Work for Improving Business

Processes

25

JLSC Reduced Budget Requests for Information Systems 26

Chapter 4 

Impediments to

Further Progress

28

DOD Officials Have Not Fully Accepted CIM 28

CIM Efforts Remain Isolated From One Another 32

Program Authority Is Unclear 34

Conclusions 35

Recommendations to the Secretary of Defense 36

Agency Comments and Our Evaluation 36

Appendixes Appendix I: Description of Ongoing Near-Term Initiatives 38

Appendix II: Description of Migration Systems 43

Appendix III: Comments From the Department of Defense 47

Appendix IV: Major Contributors to This Report 77

Page 8 GAO/NSIAD-95-28 Defense Management
Contents

Related GAO Reports 80

Tables Table 3.1: JLSC Reductions of Fiscal Year 1993 Budget Requests 26

Table 3.2: JLSC Reductions of Fiscal Year 1994 Budget Requests 27

Abbreviations

C3I Command, Control, Communications, and Intelligence

CIM Corporate Information Management

DLA Defense Logistics Agency

DMR Defense Management Report

DOD Department of Defense

GAO General Accounting Office

JLSC Joint Logistics Systems Center

PSA Principal Staff Assistant

Page 9 GAO/NSIAD-95-28 Defense Management
Chapter 1 

Introduction

The Department of Defense (DOD), faced with constraints on its budget, is

seeking ways to improve operations and manage resources more

efficiently. The Corporate Information Management (CIM) initiative is a

major part of that effort. DOD launched CIM in 1989 as a way to improve

business practices, make better use of information technology, and

eliminate duplicative information systems across seven administrative

areas, including civilian payroll, materiel management, and medical. Initial

DOD efforts to implement CIM focused on eliminating separate service

systems and providing integrated systems across DOD.

Since that time, the CIM scope has broadened dramatically to include all

DOD functional areas, including procurement, logistics, finance, and

command and control. Today, its primary objective is to significantly

improve business processes of all functional areas through such

techniques as business process reengineering and continuous process

improvements. Nevertheless, standardization and improvement of DOD’s

supporting information systems remains a major CIM objective.

The CIM Initiative CIM has its origins in the recommendations of the President’s Blue Ribbon

Commission on Defense Management (the Packard Commission). The

Commission’s overall objectives were to identify ways to streamline and

restructure DOD business operations. In July 1989, the Secretary of Defense

issued the Defense Management Report (DMR) to implement the

Commission’s recommendations. DMR estimated that DOD could save about

$70 billion by improving its management and organization.

In October 1989, DOD initiated CIM as a management method for achieving

DMR objectives. In November 1989, the Deputy Secretary of Defense issued

the DMR Decision 925, which announced the initiative. He said, “Corporate

Information Management (CIM) will enhance the availability and

standardization of information in common areas and provide for the

development of integrated management information systems.” He

characterized CIM activities as a unique opportunity to capture savings

while at the same time dramatically improving efficiency and effectiveness

of operations.

By eliminating separate service information systems and providing

integrated systems across DOD, it expected to avoid the cost of developing

and supporting redundant systems designed to perform the same basic

functions. For example, each service had developed its own process and

system for paying active military personnel. While there were procedural

Page 10 GAO/NSIAD-95-28 Defense Management
Chapter 1 

Introduction

differences that had evolved among the services, there was no justification

for the multiple systems that perform the same function.

On February 26, 1990, the Deputy Secretary of Defense convened the

Executive Level Group of high-level industry and DOD officials to evaluate

DOD’s business practices and suggest an overall direction for the DOD. The

group noted that government agencies had traditionally viewed

information management as merely automating existing business methods

in order to cut costs. Little effort was made to improve the methods,

themselves. The group recommended that DOD adopt a management

philosophy that emphasized continuous improvement of business methods

before identifying specific computing and communication technologies.

It stated, “Forward-looking organizations took a path which put primary

emphasis on continuously improved business methods. Computing and

communication technology played a subordinate role, and only now is

being applied to the superior business methods that have evolved.”

In January 1991, the Deputy Secretary of Defense endorsed a plan where

DOD would “reengineer,” or thoroughly study and redesign, its business

processes before it standardized its information systems. DOD believed this

CIM implementation concept would emphasize the importance of

improving the way it does business rather than merely standardizing old,

inefficient business processes. DOD expected this new focus on business

improvement to offer opportunities for substantial savings.

In April 1992, DOD projected that these efficiency and productivity

improvements would account for $36 billion of the more than $70 billion in

anticipated DMR savings. A number of studies1

 have since found that these

DMR and CIM projections were overly optimistic. DOD now acknowledges

that this $36 billion estimate is obsolete and no longer projects CIM savings.

There is agreement, however, that CIM improvements can save DOD tens of

billions of dollars over the next 10 years.

In November 1992, DOD shifted CIM’s implementation emphasis back to

information systems. Looking for ways to offset significant defense budget

reductions, the DOD Comptroller recommended that CIM implementation

efforts in the logistics functional area focus on selecting standard, or

“migrating,” information systems that could be used departmentwide.

1

See FY 1994-99 Future Years Defense Plan, Defense Science Board Task Force (May 1993);

Acquisition Reform: Defense Management Report Savings Initiatives (GAO/NSIAD-91-11, Dec. 4,

1990.); and Defense ADP: Corporate Information Management Savings Estimates Are Not Supported

(GAO/IMTEC-91-18, Feb. 22, 1991).

Page 11 GAO/NSIAD-95-28 Defense Management
Chapter 1 

Introduction

Under this new implementation strategy, business process improvements

would be done concurrently with the selection and implementation of the

migration systems. DOD has since implemented this CIM migration strategy

across all CIM efforts.

CIM Involves Both a

Top-Down and a

Bottom-Up Look at

DOD

The Assistant Secretary of Defense for Command, Control,

Communication, and Intelligence (C3I) is responsible for providing overall

technical direction for the CIM effort. Principal Staff Assistants (PSA) are

responsible for providing guidance and oversight for implementing the

initiative within their assigned functional areas.2 PSAs are to develop a

“corporate” view of their areas and identify major changes to improve

business processes. DOD believes that this top-down review offers the best

opportunity for innovative improvements that have the greatest potential

for significant cost savings.

Meanwhile, under the DOD enterprise model,3

 service and Defense

Logistics Agency (DLA) managers are taking a bottom-up look at their

organizations to identify and implement business process improvements

that have service or agencywide application. While such improvements

have smaller cost savings potential, they usually can be achieved sooner.

They also help achieve acceptance of CIM changes by actively involving

more managers and staff in the change process.

Joint Office Created

to Improve DOD’s

Materiel Management

and Depot

Maintenance

In November 1991, the PSA for logistics4 established the Joint Logistics

System Center (JLSC) to achieve CIM goals for the materiel management and

depot maintenance business areas. Simply stated, JLSC’s charter is to work

with the services and DLA to identify business process improvements and

the appropriate application of information systems. Under this concept,

JLSC serves primarily as a facilitator; the services and DLA design, develop,

integrate, and implement the new corporate logistics systems.

2

PSAs include the Under Secretaries, Assistant Secretaries, General Counsel, Inspector General,

Comptroller, Assistants to the Secretary of Defense, and the Office of the Secretary of Defense

Directors or equivalents, including the Chairman of the Joint Chiefs of Staff, who report directly to the

Secretary or Deputy Secretary of Defense.

3

In January 1994, DOD issued the “DOD Enterprise Model” to provide a common view of all defense

activities. The model is the principal mechanism for senior managers to understand their missions and

functions, plan and direct improvements from a DOD-wide perspective, and measure overall progress

toward CIM goals.

4

When JLSC was created, the PSA for logistics was the Assistant Secretary of Defense for Production

and Logistics. Following a reorganization in the Office of the Secretary of Defense, the PSA for

logistics is now the Deputy Under Secretary of Defense for Logistics.

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Chapter 1 

Introduction

Recognizing the importance of active participation by the services and DLA

in the CIM process, the PSA staffed JLSC with about 250 personnel from all

four military services and DLA. In addition, the services and DLA provide

experts to ensure JLSC fully addresses mission requirements.

Logistics

Improvements

Expected to Provide

Significant CIM

Savings

JLSC expects that improvements to DOD’s logistics functions will provide

most of the CIM-related cost savings. Logistics is the acquisition,

management, movement, and maintenance of the material in the DOD

inventory. This report focuses on two logistics functions: materiel

management and depot maintenance.5

Materiel management includes deciding what supply items to stock,

determining how many of each are needed, purchasing needed items from

private vendors or manufacturing agencies within DOD, storing the items,

and tracking them from the time they are ordered until they are used.

Depot maintenance includes manufacturing, overhauling, and repairing

parts, assemblies, subassemblies, and end items such as aircraft, ships,

and tanks.

Objectives, Scope,

and Methodology

The Chairman of the Senate Committee on Governmental Affairs asked us

to review DOD’s implementation of the CIM initiative. In response to his

request, we focused our review on the logistics functions of materiel

management and depot maintenance because the Committee had

expressed particular interest in materiel management and because one

organization, JLSC, had been established to oversee the implementation of

CIM in these two areas. Our specific objectives were to identify (1) CIM

improvements made to business processes and supporting information

systems and (2) impediments, if any, to achieving expected CIM results.

To identify CIM improvements in materiel management and depot

maintenance, we analyzed implementation plans, project information

maintained by JLSC managers, and progress briefings given to senior DOD

officials. Further, we interviewed DOD officials who are implementing CIM

across DOD, officials who are managing CIM efforts in the logistics areas,

and project managers responsible for specific efforts under the initiative.

We also examined analyses that JLSC used to establish cost and benefit

projections, budget documents, and updates of cost and benefit estimates.

5

DOD logistics also includes the areas of distribution and transportation. DOD has the CIM efforts

ongoing in each of these areas.

Page 13 GAO/NSIAD-95-28 Defense Management
Chapter 1 

Introduction

We did not independently validate JLSC’s savings estimates for its

initiatives.

To identify major impediments to achieving expected CIM results, we

reviewed guidance provided by the Deputy Under Secretary of Defense

(Logistics), including DOD’s logistics objectives, strategic business plans,

the Logistics CIM Migration Master Plan, and DOD memorandums

establishing and implementing the initiative. Also, we interviewed JLSC

officials responsible for the overall progress of the implementation and

reviewed correspondence and briefings concerning delays. We also

reviewed independent studies and prior audits and held discussions with

DOD officials responsible for overall CIM implementation, as well as those

responsible for logistics processes.

We performed our work at the Office of the Assistant Secretary of Defense

for C3I, Washington, D.C.; the Office of the Assistant Secretary of Defense

for Production and Logistics, Alexandria, Virginia; and the Joint Logistics

Systems Center, Wright-Patterson Air Force Base, Ohio. We conducted our

work between October 1992 and July 1994 in accordance with generally

accepted government auditing standards.

Page 14 GAO/NSIAD-95-28 Defense Management
Chapter 2 

DOD Directed JLSC to Develop Migration

Systems

When activated, JLSC took actions to achieve quick, identifiable cost

savings through CIM, primarily by facilitating the deployment of business

processes and supporting information systems from one of the services or

DLA—where they had been successfully implemented—to the others. JLSC

identified 20 of these near-term projects during late 1992 and early 1993

and had begun implementing 7 of them before it was directed by DOD to

refocus its efforts.

As directed by DOD, JLSC focused its CIM implementation efforts on selecting

and testing migration information systems for materiel management and

depot maintenance. This strategy runs counter to expert advice received

by DOD concerning how to best improve its business practices. DOD

believes the selection and implementation of migration systems is

necessary to achieve quick cost savings and critical to forming a

foundation upon which major business process improvements can be

made. While we have no basis to question the need for migration systems,

we are concerned that the implementation strategy may delay significant

improvement of the logistics processes, result in the deployment of

information systems that do not meet services’ and DLA’s operational

requirements, and divert funds from ongoing improvement projects.

JLSC Selected and

Deployed Near-Term

Initiatives

In March 1992, JLSC identified 20 improvement projects—15 in materiel

management and 5 in depot maintenance—that it termed near-term

initiatives. JLSC selected these projects because they could make current

business processes more efficient and effective and because they were

doable; that is, they could be quickly implemented at a few service and DLA

sites to achieve quick cost savings. According to JLSC, it was also important

to have some early successes to get the services and DLA to accept the CIM

concept. These projects primarily involved the expanded deployment of

business processes and supporting information systems that were used

successfully by one service or DLA. Overall, JLSC projected that

implementation of the 20 projects would save the services more than

$2 billion over time periods ranging from 5 to 20 years.

As of October 1992, JLSC had begun implementing seven of the near-term

initiatives (five materiel management and two depot maintenance). Before

JLSC could implement the remaining 13 near-term initiatives, however, DOD

officials questioned the viability of the near-term strategy and redirected

JLSC’s implementation approach to CIM. According to JLSC, the initiatives

had saved at least $7.7 million and located previously lost or unaccounted

government assets worth about $12.7 million by October 1993. Although

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Chapter 2 

DOD Directed JLSC to Develop Migration

Systems

additional savings may have accrued, JLSC had not validated all cost and

benefit projections. Following are two examples of the seven near-term

initiatives that have been implemented. (App. I describes all seven

initiatives.)

Cataloging Tools On-Line This initiative is a materiel management productivity aid for DOD

catalogers. When DOD introduces a new supply item into its inventory, the

item is listed in a catalog provided to the services and DLA. Currently,

catalogers use paper technical drawings, specifications, vendor catalogs,

guidebooks, procedural manuals, and regulations to complete cataloging

steps such as writing a brief description of the supply item, using

drawings, and assigning it a stock number.

Cataloging Tools On-Line, a DLA system, enables the cataloger to

electronically access reference documents, simultaneously compare

technical data with drafted descriptions, and automatically check for

errors. Catalogers using this automated aid are expected to create catalog

entries much faster and more accurately than is currently done.

JLSC projects that the 10 new sites receiving the Cataloging Tools On-Line

system will save about $71.7 million over the next 8 years through the

elimination of manual processes, reduced rejection rates of transactions,

and better availability of and access to cataloging information.

Depot

Maintenance—Hazardous

Material Management

System

This depot maintenance initiative is intended to reduce the amount of

money maintenance depots spend for hazardous materials such as paint

thinner, oils, and chlorine. Currently, the depots spend more than

$300 million each year to buy hazardous materials used in the repair and

maintenance of end items. Officials acknowledge that a significant portion

of these materials is wasted.

In 1992, the Air Force implemented the Depot Maintenance—Hazardous

Material Management System at its Ogden Air Logistics Center to provide

information about who received hazardous materials; which and how

much they received; and when, where, and how the materials were used.

With this information, Ogden managers identified wasteful practices, such

as workers receiving more material than needed for the job. In addition,

they found that workers were storing excess material in their lockers and

that stored materials were being improperly sealed.

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Chapter 2 

DOD Directed JLSC to Develop Migration

Systems

Depot management subsequently changed the methods for handling

hazardous materials. For example, materials are now issued only in the

amount needed. As a result, Ogden reduced the amount of hazardous

materials purchased in 1992 by nearly 39 percent, or a $7.7 million net cost

savings.

JLSC plans to install the Depot Maintenance—Hazardous Material

Management System at 27 maintenance depots and projects that they will

save between $83.3 million and $202.3 million over a 6-year period. As of

September 1993, the system had been installed at seven sites.

JLSC Directed to

Refocus on a

Migration Strategy

In October 1992, the Acting DOD Comptroller (responsible for reviewing

the justification for any requests for capital budget funding) expressed

concern that JLSC’s CIM approach would not produce the cost savings

needed to help offset significant defense budget reductions. He favored an

approach where JLSC would quickly select and implement standard

information systems. By doing this, the Comptroller hoped that DOD could

transition to a standard logistics system within a reasonable period of time

at an affordable cost. The Comptroller recommended that JLSC

immediately select a functionally and technically integrated information

system from those being operated by one of the services and DLA for each

of the materiel management and depot maintenance business areas.

In November 1992, the PSA for logistics (at that time the Assistant

Secretary of Defense for Production and Logistics) issued the Logistics CIM

Migration Master Plan. This plan established the selection of migration

systems as the CIM implementation strategy within the logistics area. As a

result, JLSC shifted its focus from implementing the near-term initiatives to

selecting migration systems for materiel management and depot

maintenance. Although JLSC continued to implement the 7 near-term

initiatives it had started, it incorporated the remaining 13 projects into the

analysis used to select migration systems.

JLSC also developed a three-step strategy designed to gradually evolve the

services and DLA from their multiple and often redundant materiel

management and depot maintenance business practices to a single, or

corporate, DOD logistics process. As presented in its DOD Logistics CIM

Migration Plan, the three steps of the migration strategy are as follows:

Page 17 GAO/NSIAD-95-28 Defense Management
Chapter 2 

DOD Directed JLSC to Develop Migration

Systems

• Select and deploy migration systems—either single information systems or

groups of information systems—in each functional area. The systems are

to be linked together to satisfy users’ total requirements.

• Improve current business processes and add new functions to fill voids.

• Combine the improved and new business processes with the new

information systems to form a corporate logistics process.

Once the selected migration systems are deployed (step 1 of the strategy),

JLSC plans to work with the services and DLA to add needed functions and

make incremental improvements to logistics business processes (step 2).

Developing a corporate logistics process (step 3) is where JLSC expects to

use such tools as reengineering to identify and implement major and

innovative changes in the logistics area. While the strategy appears to be

sequential, JLSC is concurrently working on all three steps. Later in this

report, we discuss JLSC’s work to identify how to improve current materiel

management and depot maintenance business processes.

In October 1993, the Deputy Secretary of Defense, noting the necessity to

offset declining resources, reemphasized the priority given to information

systems by directing that senior DOD managers accelerate the selection and

deployment of migration systems. The Deputy Secretary stated, “We must

accelerate the pace at which we define standard baseline process and data

requirements, select and deploy migration systems, implement data

standardization and conduct functional process improvements, reviews

and assessments (business process re-engineering) within and across all

functions of the Department.”

Although he stated that the acceleration of all these actions was key to

containing the functional costs of performing the DOD mission within

constrained budgets, he established specific milestones only for the

selection and implementation of migration systems and the completion of

data standardization. The Secretary stated that “our near-term strategy

requires: the selection of migration systems within six months, with

follow-on DOD-wide transition to the selected systems over a period not to

exceed three years.” He also stated that data standardization was to be

accomplished within 3 years. The remaining activities such as functional

process improvement were to continue on an expedited basis, but their

completions were not to be “prerequisites” to implementation of the

migration systems and data standardization acceleration strategy.

Because JLSC’s migration strategy would take 7 to 8 years to complete, the

Deputy Under Secretary of Defense (Logistics) in March 1994 proposed

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DOD Directed JLSC to Develop Migration

Systems

changing JLSC’s management structure and mission. He recommended the

replacement of JLSC with a Logistics Standard Systems Joint Program

Office. This new office would be staffed with personnel specializing in

automated information systems to provide intensive focus on information

systems improvement and deployment. At the end of our audit work in

July 1994, the services and DLA were commenting on this proposal.

Experts Advise DOD

to Focus on Business

Processing

Reengineering

Industry experts who have studied organizations that have successfully

improved their business practices advised DOD to focus its efforts on

reengineering its business processes before improving the automated

information systems supporting these processes. Reengineering, these

experts believe, offers DOD the best opportunity to move to a new plateau

of performance

As stated in chapter 1, this was articulated by the Executive Level Group

in November 1989, when CIM was being initiated. The group recommended

that DOD adopt a management philosophy that emphasized continuous

improvement of business methods before identifying specific computing

and communications technologies. This recommendation was endorsed by

the Information Technology Association of America, in its July 1993 study

on “enterprise integration” within DOD.

1

 According to the study, companies

that had experience in enterprise integration took steps to ensure that

their corporatewide focus was on process improvement first and on

technology improvements last. They stated that “Reengineered business

processes reflect how the corporation truly functions. Automation was

applied only after processes were analyzed and cross-functional

integration achieved.”

In reviewing the CIM initiative, the association observed that DOD’s

definition of enterprise integration did not differ from the industry’s. DOD’s

view on implementation and objectives, however, is different. The

association stated, “For instance, the Corporate Information Management

initiative in DOD seems to be primarily driven by cost avoidance, rather

than on BPR [business process reengineering] in order to meet mission

requirements.” Noting DOD’s migration phase focused on near-term cost

avoidance, the association recommended that DOD accelerate out of this

migration phase as quickly as possible and move directly into their target

objective phase. According to the association, the sooner DOD makes this

1

Enterprise Integration in the Department of Defense (July 1993). Enterprise integration embraces CIM

principles and calls for redesigning the existing DOD (the enterprise) mission activities to eliminate

redundant or low-value functions and processes, enhance war-fighting capabilities, and achieve

significant cost savings.

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DOD Directed JLSC to Develop Migration

Systems

move the more money it will save and the sooner war-fighting capability

will be enhanced.

We also reported on potential problems DOD faces if too much emphasis is

placed on improving information systems, rather than business process

reengineering. In our 1992 report,2

 we concluded that business

improvements needed to be made concurrent with technology selection.

To select technology alone invited risk and created only an illusion of

progress. We also concluded that by selecting information systems before

improving business processes, DOD may be wasting money modifying and

implementing systems to support old, inefficient ways of doing business.

DOD, in its early estimates, acknowledged that business process

improvements held the greatest potential for significant cost savings. In

April 1992, DOD officials projected that CIM-related business process

improvements would provide about $30 billion, or 83 percent, of cost

savings expected, whereas better use of information technology would

account for only $6 billion, or 17 percent, of these savings.

Although DOD no longer projects CIM savings, it concluded in the

January 1994 DOD enterprise model that information systems alone could

not yield the dramatic business improvements necessary to achieve a new

plateau of performance required to respond to major new challenges of

the post-Cold War era. Yet, DOD continues to focus on information

technology and migration systems. As described in the following section,

DOD believes that selecting a common set of information systems is

necessary to make functional integration and interoperability possible so

that all DOD activities can work together more efficiently and effectively.

DOD Believes

Migration Systems

Are Critical to

Business Process

Improvement

In its Logistics CIM Migration Master Plan, DOD gives two reasons why the

selection and implementation of migration systems are critical first steps

toward business process improvement. First, they provide needed quick

cost recoveries. Second, they establish a common business environment to

reengineer business processes.

According to JLSC, the CIM migration strategy resulted from a request from

the service secretaries. The service secretaries, concerned about the slow

progress of the CIM effort and the amount of funding stripped from their

fiscal years 1993 through 1997 budgets as a result of multiple DMR savings

2

Defense ADP: Corporate Information Management Must Overcome Major Problems

(GAO/IMTEC-92-77, Sept. 14, 1992).

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DOD Directed JLSC to Develop Migration

Systems

targets, asked the DOD Comptroller to come up with a technique for getting

more immediate cost savings. This request was the genesis for the CIM

strategy of studying current information systems and selecting a few for

use across DOD.

DOD officials have stated that the vast number of different logistics

processes and supporting information systems in DOD must be reduced

before it can make significant improvements. For example, the Deputy

Director for Materiel and Logistics Functional Information Management

stated, “While it is the intent of the Corporate Information Management

(CIM) program to determine the Business Process Improvements (BPI)

prior to automation efforts, in the case of the Logistic systems, we must

first ’standardize’ the existing process to be improved.” The Deputy

Director cited the experience of General Telephone and Electronics

Corporation as support for this position. He said that in moving toward an

integrated system the company first selected a single migration system.

JLSC supports the migration system concept as a necessary tool to

eliminate multiple information systems supporting the same business

functions. According to the migration plan, standard information systems

will form the foundation upon which significant improvements to current

logistics practices can be made. This foundation of migratory systems will

eliminate the need to implement significant changes across the multitude

of systems and processes that exist throughout the services and DLA. More

importantly, the resulting standardization of the best of the existing

logistics processes across DOD will, in itself, result in significant business

process improvements.

Concerns About the

Migration System

Strategy

Although DOD and JLSC believe that selecting migration systems is a

necessary first step in the reengineering process, we have several

concerns about this strategy. First, people familiar with business process

reengineering believe that the focus should be on process improvement

first and on technology improvements last. We believe that by doing

otherwise DOD increases the risk of locking itself into inefficient ways of

doing business and not achieving the cost savings that it needs in the

current environment of shrinking budgets.

Second, DOD’s requirement to select and implement migrating systems

within 3 years adds a new dimension of risk to the CIM process. Without

some flexibility in this schedule, the services and DLA may have to

implement migration systems that are not capable of meeting their needs.

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DOD Directed JLSC to Develop Migration

Systems

DLA officials told us, for example, that the migration system for materiel

management—as currently configured—does not meet its operational

requirements. Unless additional capabilities are added to this system to

handle DLA’s requirements, these officials predicted that it will be a major

failure.

Nevertheless, JLSC believes that the accelerated migration system schedule

is what the CIM initiative needed. The JLSC Commander stated that the

accelerated schedule forced JLSC and others to stop their analysis and

actually begin to implement change. He conceded that the first versions of

the migration systems will not likely include all the capabilities the

services and DLA need or desire. His goal, however, is to make the systems

functional for all users before they are deployed in 3 years. Under CIM’s

continuous improvement concept, additional capabilities can be

incorporated in later versions of the systems.

As discussed previously, DOD has proposed a major reorganization of JLSC

to meet its accelerated CIM schedule. Under this proposal, the number of

personnel assigned to the new joint program office would be reduced from

about 250 (JLSC staffing) to 120. It is unclear how this new smaller office

will be able to deploy materiel management and depot maintenance

migration systems in half the time planned by JLSC.

Third, some DLA managers also believe that CIM in general, and JLSC’s focus

on selecting and implementing migration systems in particular, is affecting

their ability to implement business process improvements. DLA, for

example, is attempting some innovative pilot projects to find better, more

efficient ways of doing business. Encouraged by a series of reports we

issued over the past 3 years, which compared DLA practices to the best in

the private sector, DLA is looking at concepts such as direct vendor

delivery and supplier parks. If these concepts prove successful, DLA could

significantly reduce its inventories, storage space requirements, and the

number of supply depots. Eventually, DLA may be able to eliminate supply

depots altogether—at least as DOD knows them today.

To effectively carry out the pilot projects, however, DLA officials said they

will need funds to develop supporting information systems or help from

JLSC to ensure the selected migration systems satisfy their new process

requirements. At the time we met with DLA officials, however, they said

that JLSC had not provided assistance. They were concerned that the pilot

projects might have to be stopped or significantly curtailed. Subsequent to

our meeting with DLA officials, JLSC officials told us they had met with DLA

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DOD Directed JLSC to Develop Migration

Systems

officials and were taking steps to arrive at a mutual solution to the

problem.

Page 23 GAO/NSIAD-95-28 Defense Management
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JLSC Has Made Progress Implementing the

Migration Systems

As directed by DOD, JLSC selected migration systems for materiel

management and depot maintenance functions. JLSC also began

documenting current logistics processes to identify opportunities for

improvements, although it has not yet made major changes to current

processes. Finally, in accordance with its mandate, JLSC eliminated service

and DLA funding requests ($22.7 million in 1993 and $320.6 million in

1994) for information system projects that it deemed redundant.

JLSC Has Selected

Migration Systems

By June 1994, JLSC—in cooperation with teams of service and DLA

experts—had selected 32 migration systems from among the more than

200 information systems currently being used to support major materiel

management and depot maintenance business processes.

Before the systems were selected, JLSC gave each service and DLA the

opportunity to identify the system (or combination of systems) that it used

to support its logistics business area. Service and DLA experts for materiel

management and depot maintenance presented their candidate systems in

an open forum for consideration. These presentations included detailed

information on their systems’ capabilities, interfaces with other logistics

systems, and other information, such as cost, benefit, and technical data.

On the basis of this information, service, DLA, and JLSC representatives

reached consensus on 32 candidate systems—24 for materiel management

and 8 for depot maintenance. The selections of these systems was later

approved by Deputy Under Secretary of Defense for Logistics. (App. II

describes each of the 32 selected systems.)

Materiel Management

Migration Systems

The 24 migration systems for materiel management support the four major

materiel management business processes: asset management, supply and

technical data, and requirements determination. Together, they form what

JLSC calls the Materiel Management Standard System. JLSC planned to

deploy the first version—functional release 1—of this combined system at

one site—the Marine Corps Logistics Base, Albany, Georgia—beginning in

July 1994. Upon successful deployment of this first version, JLSC will assist

the services and DLA in implementing the new DOD standard system at

additional sites.

As of September 1993, on the basis of a preliminary functional economic

analysis, JLSC projected that improved business processes and reductions

in the number of systems would help the services and DLA recover as much

Page 24 GAO/NSIAD-95-28 Defense Management
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JLSC Has Made Progress Implementing the

Migration Systems

as $12 billion over a 10-year period ending in fiscal year 2005. While we did

not review the support behind this estimate, JLSC cautioned that it is their

first look at potential savings.

JLSC must do much additional data collection and analysis before cost

recoveries can be predicted with any certainty. However, it believes that

the standard system will eventually result in numerous improvements to

materiel management business processes, primarily because it

incorporates general business improvements from DOD initiatives such as

DMR, prior CIM efforts, and a compilation of best practices identified in

numerous DOD, service, and DLA initiatives.

Depot Maintenance

Migration Systems

The eight migration systems selected for depot maintenance support the

three major depot maintenance business processes of project management

(planning and allocating labor, material, and capital resources for

repairing major end items, such as airplanes, ships, and tanks), reparables

management (activities for making labor and equipment more productive

on the shop floor), and specialized support (various individual functions

such as tracking hazardous materials, tools and test samples). These eight

migration systems, along with a system yet to be selected, form the Depot

Maintenance Standard System. JLSC plans to test this combined system at

the Warner-Robbins Air Logistics Center beginning in January 1995. Upon

successful completion of the test, JLSC will assist the services’ and DLA’s

implementation of the new system at additional sites.

On the basis of a preliminary functional economic analysis completed in

January 1994, JLSC expected that improvements to depot maintenance

processes and reductions in the number of systems would help the

services and DLA recover as much as $4 billion over the period ending in

fiscal year 2003. This estimate, however, assumed a 7-year implementation

period, not the 3-year period later mandated by DOD.

JLSC Has Begun

Preliminary Work for

Improving Business

Processes

While it facilitated the selection of migration systems under the first step

of its CIM implementation strategy, JLSC also took preliminary steps to

identify how it could improve current materiel management and depot

maintenance business processes—the second step of its CIM

implementation strategy. As of September 1993, JLSC, in conjunction with

service and DLA representatives, had developed models documenting 484

logistics practices used by the services and DLA to accomplish materiel

management and depot maintenance activities. Service and DLA officials

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JLSC Has Made Progress Implementing the

Migration Systems

are now analyzing these JLSC models to further define their current

business environment, establish business requirements, and identify the

best business practices.

When complete, these models are to serve two purposes. In the near term,

they form a basis for understanding and discussing logistics processes,

evaluating their effectiveness, and identifying opportunities for

improvement. In the longer term, JLSC plans to use the models to help

reengineer business processes, control this evolution, integrate new

technologies, and communicate new functions of reengineered business

processes.

JLSC Reduced Budget

Requests for

Information Systems

As part of the CIM strategy, the Assistant Secretary of Defense for

Production and Logistics gave JLSC review authority over the services’ and

DLA’s budget requests for development of new materiel management and

depot maintenance information systems. Under this authority, JLSC is to

identify funding that could be eliminated from a budget request for any

information system development project that duplicates a project or

operational system of another service.

JLSC reviewed the services’ and DLA’s requests and justifications for fiscal

year 1993 project funds and compared the proposed new information

systems to those (1) already existing or being developed by other services

and (2) selected by JLSC as near-term initiatives. As shown in table 3.1, JLSC

reduced the requests by $22.7 million, or about 36 percent.1

Table 3.1: JLSC Reductions of Fiscal

Year 1993 Budget Requests Dollars in millions

Component

Amount

requested

Amount

approved Difference

Air Force $16.9 $8.1 $8.8

Army 12.5 5.2 7.3

DLA 20.2 14.1 6.1

Navy 13.7 13.2 0.5

Marine Corps 0 0 0

Total $63.3 $40.6 $22.7

In 1993, JLSC performed the same type of analysis on fiscal year 1994

budget requests from the services and DLA. The only difference was that

1

Fiscal year 1992 funds were used to fund near-term initiatives in early fiscal year 1993. Additionally,

the services and DLA made their fiscal year 1993 budget requests before JLSC was established.

Page 26 GAO/NSIAD-95-28 Defense Management
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JLSC Has Made Progress Implementing the

Migration Systems

JLSC analyzed these requests to determine if any systems overlapped with

the systems selected as the migration systems for materiel management

and depot maintenance. As shown in table 2.2, JLSC reduced the budget

requests by $320.6 million, or about 96 percent.

Table 3.2: JLSC Reductions of Fiscal

Year 1994 Budget Requests Dollars in millions

Component

Amount

requested

Amount

approved Difference

Air Force $70.6 $3.4 $67.2

Army 203.7 4.4 199.3

DLA 22.4 1.8 20.6

Navy 34.6 3.1 31.5

Marine Corps 2.3 0.3 2.0

Total $333.6 $13.0 $320.6

According to JLSC officials, the reduction of these requests may not directly

equate to cost savings of the same amount because (1) the requests could

have been overstated (which sometimes happens early in a budget request

cycle), (2) the requested funds may not have been approved by DOD under

the traditional budget process, and (3) the services or DLA may have

received funding for their projects through other budget submissions.

JLSC, however, believes this type of drastic reduction in budget requests

can be sustained only for a short period of time—2 or 3 years. According

to the JLSC commander, the downsizing of DOD has resulted in the services

and DLA having fewer people to run their current business processes. Over

the short term, he believes that the services and DLA can manage the

situation. It cannot, however, be sustained over the longer term. For this

reason, the commander said that JLSC must provide more efficient materiel

management and depot maintenance information systems to the services

and DLA or, once again, allow them some amount of funding to improve or

replace their existing systems.

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Impediments to Further Progress

Three critical impediments are jeopardizing JLSC’s ability to successfully

implement its strategy for improving business practices. First, some DOD

functional and technical managers have not fully accepted CIM. Second,

DOD has not integrated its various CIM efforts, including those of JLSC. Third,

program management authority is unclear because of confusing DOD

guidance. These impediments are not confined to materiel management

and depot maintenance but cut cross DOD’s overall management of the CIM

initiative.

To help resolve these impediments, DOD has taken several actions,

including issuance of a strategic plan to demonstrate top-level support for

the initiative and guide its implementation and creation of a board chaired

by the Deputy Secretary of Defense to exchange views about

cross-functional issues. These actions are good “first steps,” but more

must be done. Private companies that have successfully reengineered their

business operations generally agree that changing their organizational

cultures to support new ways of doing business was critical to their

success. While DOD recognizes that it needs to change its organizational

culture to overcome CIM’s impediments, it has been slow to make these

changes.

DOD Officials Have

Not Fully Accepted

CIM

Independent studies have shown that for major improvement initiatives

such as CIM to succeed, employees from all levels in an organization must

accept and actively participate in the changes. For example, the

Information Technology Association of America, in its July 1993 report,

said that DOD must ensure that all parties buy into the enterprise

integration effort and are willing to work wholeheartily to form and

implement the enterprise integration plan. Similarly, the Policy Analysis

Center of the Institute of Public Policy, in its November 1993 report,

Functional Process Improvement Implementation: Public Sector

Reengineering, stated that even the best constructed improvement plans

are likely to fail unless employees are involved at all stages of the

reengineering effort.

Recognizing that “buy in” was a critical success factor, JLSC took actions to

involve the services and DLA in implementing CIM. For instance, more than

250 logistics personnel from the services and DLA were brought together to

work at JLSC. Also, JLSC has tried to maintain a continual dialogue with the

Office of the Secretary of Defense, service, and DLA managers responsible

for DOD logistics. Nevertheless, JLSC officials said they have still

encountered a strong institutional bias against the changes posed by CIM,

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Impediments to Further Progress

primarily because managers view these changes as a threat to their

authority over logistics business decisions.

This lack of acceptance, according to JLSC officials, has slowed

implementation of CIM. For example, during the evaluation of the Air

Force’s Combat Ammunition System as a proposed migration system, JLSC

representatives visited the Air Force program office developing the system

to obtain needed cost and requirements data. However, program

management officials were unwilling to provide the data because,

according to the JLSC Deputy Commander, Air Force officials would have

to relinquish some of their authority and control over the system’s

development. Air Force officials eventually provided the data but only

after the JLSC Commander notified them that due to the lack of

cooperation JLSC intended to select a competing Army system. JLSC officials

did not estimate the length of delay caused by this lack of cooperation.

Resistance to the CIM initiative is not limited to JLSC’s efforts. The DOD

Inspector General, in its report, Defense Corporate Information

Management Initiative, Program Evaluation (Jan. 1993), concluded that the

lack of consensus and support for the overall CIM initiative by DOD

functional and technical managers had severely hampered its

implementation. The Inspector General attributed this lack of support to

the absence of an overall CIM plan that was clearly presented to and

understood by the managers. The Inspector General stated:

“Based on our interviews with both functional and technical areas managers, we found

there is no clear and consistent definition or understanding of the CIM initiative and its

respective elements . . . While they accept the broad precepts of the CIM Initiative, they are

reluctant to give full support until they see and fully understand the complete CIM plan. That

reluctance manifested itself in two broad areas—support for organizational realignments

and for selection of technical solutions.”

Because this impediment appeared to affect more than JLSC’s efforts within

materiel management and depot maintenance, we discussed it with DOD

officials responsible for implementing CIM across logistics areas, as well as

those responsible for all CIM efforts. These officials confirmed that service

and DLA managers agree with the intent of CIM, which is to improve

business operations, but not with the manner in which it was being

implemented.

DOD officials in C3I agree that for CIM to succeed, employees should

understand the nature of the changes that must be made. They did not

Page 29 GAO/NSIAD-95-28 Defense Management
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Impediments to Further Progress

agree, however, that the lack of consensus and support for the overall CIM

initiative by DOD managers was hampering its implementation. They said

that executive level commitment, involvement, and authority were

sufficient for CIM to succeed and that the Secretary of Defense, the Deputy

Secretary of Defense, their Principal Staff Assistants, and the military

departments strongly supported the initiative. On October 13, 1993, for

example, the Deputy Secretary of Defense issued a memorandum that

reemphasized top-level support for CIM and required senior managers to

take specific actions within established milestones to help implement the

initiative. DOD officials also noted that clear, top-level support and

guidance for the initiative were given in the CIM Strategic Plan issued on

June 13, 1994.

While DOD may have top-level management support and commitment for

CIM, which are critical prerequisites for a major reengineering effort, we do

not believe that is enough to overcome the type of cultural barriers

impeding the initiative. If CIM is to succeed, we believe that DOD needs to

change its management strategy to get service and DLA managers,

particularly the service Chiefs of Staff and DLA Director, more actively

involved in managing CIM and leading the reengineering efforts. This action

is particularly important for DOD to undertake because service secretaries

and other top-level managers in the Office of the Secretary of Defense,

who are currently leading the CIM initiative, typically change on a regular

basis. Because CIM is a long-term effort that will likely transcend many

management reorganizations, it is important to have support of CIM

principles and ideals throughout all levels of the organization, particularly

in the military services and DLA.

In February 1992, for example, we reported that private companies that

had undergone massive changes (such as DOD is proposing in its CIM

initiative) had to overcome cultural barriers. Those companies that

succeeded in changing their cultures1

 not only had top-management

support and commitment but also created specific management styles and

organizational structures that were compatible with and reinforced their

desired visions and goals. They also trained their employees to instill in

them the organizations’ new missions, values, and guiding principles.

Our studies of organizational change also support more active

participation by functional managers in major reengineering efforts. In our

1

Organization Culture: Techniques Companies Use to Perpetuate or Change Beliefs and Values

(GAO/NSIAD-92-105, Feb. 27, 1992).

Page 30 GAO/NSIAD-95-28 Defense Management
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Impediments to Further Progress

April 1994 report2 on the CIM initiative, for example, we stated that “unless

Defense’s executive-level leadership and mid-level managers take a more

active and visible role, broad acceptance and understanding of CIM will not

occur and cultural opposition to change will continue.” The importance of

functional managers to the overall success of major reengineering efforts

was again highlighted in a recent executive guide3

 we prepared on using

information technology to improve mission performance. We observed

that in every successful organization studied, senior executives realized

that getting managers to work differently meant putting them in charge of

the change process. The Information Technology Association of America

in its study on enterprise integration in DOD also noted that in the view of

functional managers, CIM efforts are being directed by DOD’s information

technology offices. In private industry, information technology is used as a

tool to facilitate enterprise integration, not as an end in itself. Functional

managers must lead the effort with the information technology community

in support.

DOD, in its June 13, 1994, strategic plan and elsewhere, has recognized the

need to change its culture and management strategy to build consensus

throughout the Department, but implementation (and actual change) has

been slow. For example, today the Assistant Secretary of Defense for C3I is

responsible for implementing CIM—overseeing and integrating business

process innovation within and across all DOD functional areas. The

Assistant Secretary, however, is also the Senior Information Management

Official for DOD. We believe that this has contributed to functional

managers’ misunderstanding of the CIM initiative and has reenforced their

view that CIM is primarily an information technology initiative.

In addition to changing the CIM management strategy and providing

training to all employees, DOD may need to rename the initiative. Contrary

to what its name implies to many DOD managers, CIM is much more than an

information technology initiative. As designed, CIM is supposed to be a

major effort to reengineer business processes, with information

technology being a necessary support function. As discussed previously,

however, many defense managers view it as either a budget-cutting or

information technology initiative and have not given it their full support

and cooperation. While top-level support, strategic planning, changing

management strategy, and training would help solve this problem, we

2

Defense Management: Stronger Support Needed for Corporate Information Management Initiative to

Succeed (GAO/AIMD/NSIAD-94-101, Apr. 12, 1994).

3

Executive Guide: Improving Mission Performance Through Strategic Information Management and

Technology (GAO/AIMD-94-115, May 1994).

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Impediments to Further Progress

believe a name change would also give the improvement effort a fresh

start.

CIM Efforts Remain

Isolated From One

Another

In draft CIM guidance dated January 1993, DOD recognizes that no DOD

function can be accomplished in isolation from other functions. For

example, improvements to weapon systems management could cut across

several business areas, including logistics, finance, and procurement.

Consequently, when trying to improve DOD functions, it is important to

address all related business areas.

We found that the CIM improvement efforts are to a great extent being

made in isolation from one another. According to JLSC officials, there is

continual overlap of CIM issues across the efforts underway in the different

DOD business areas. However, the integration requirements of the related

business areas have not been fully identified and established. Nor is any

one office overseeing the integration of CIM business process

improvements across these areas. While JLSC has sought to resolve

integration issues among CIM efforts and maintains liaisons with offices

responsible for CIM efforts in finance and procurement, it does not have

the authority to arbitrate disputes between CIM efforts or enforce

integration decisions.

Because of this isolation, or “stovepiping,” CIM improvements made in one

business area can duplicate or conflict with those made in another

business area even though the function being improved is common to

both. According to JLSC officials, stovepiping impeded its progress in

selecting migration systems for the materiel management and depot

maintenance business areas. For example, JLSC reviewed the practices

involved in buying supply items. Functions involved in preparing

procurement requests, such as determining the type and amount of

supplies needed, fall under the logistics CIM effort. Functions performed

after a supply contract is awarded are the responsibility of the

procurement CIM effort.

In consultation with service and DLA representatives, JLSC chose the

Integrated Technical Item Management and Procurement information

system as the migration system for supply contract pre-award practices.

However, the Procurement CIM Council reviewed the practices performed

after a supply contract is awarded and chose the Defense Procurement

and Contracting System. Although the pre-contracting and

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Impediments to Further Progress

post-contracting activities are part of the larger procurement process, the

logistics and procurement CIM efforts were not integrated.

While they did not estimate the resources involved, JLSC officials stated

that much time has been spent working on such integration issues with

various service and DLA representatives. Without some direct attention by

top-level management in this area, we believe that DOD will likely develop,

deploy, operate, and maintain two automated systems to provide

information on different parts of the procurement process. Such a result

would be inconsistent with the stated CIM purpose of streamlining business

processes and standardizing their supporting information systems.

Recognizing the need to integrate CIM efforts, DOD established a number of

boards and councils to facilitate their integration, but these efforts have

not succeeded. For example, DOD established the Information Policy

Council to facilitate the integration of information management functions,

activities, and systems. According to DOD officials, this Council was not

successful because it did not meet frequently enough and did not include

in its membership the officials needed to decide integration issues, nor did

it have decision-making authority. Also, in January 1992, the Assistant

Secretary of Defense for C3I established the Corporate Functional

Integration Board to build more active CIM participation. While this Board

has identified some cross-functional issues, DOD said that a higher level

body with decision-making authority was needed to successfully resolve

integration issues.

DOD, in April 1994, established the Enterprise Integration Executive Board,

chaired by the Deputy Secretary of Defense, to resolve cross-functional

integration issues. As established, this Board and its supporting Enterprise

Integration Corporate Management Council are to exchange information

and views about cross-functional management concepts, policies, and

plans to achieve CIM goals. With membership of DOD senior-level managers,

service secretaries, and the Chairman of the Joint Chiefs of Staff, this

Board has the membership and authority to make decisions on

cross-functional and integration issues.

Commenting on a draft of this report, DOD officials stated that DOD is

moving aggressively to integrate its CIM efforts. They cited the Deputy

Secretary of Defense’s issuance of the DOD Enterprise Integration

Implementing Strategy to support the CIM Strategic Plan as evidence of

actions being taken.

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Impediments to Further Progress

These latest actions, we believe, are important steps toward resolving

cross-functional issues. According to DOD officials, the success of the

Enterprise Integration Executive Board and its supportive Enterprise

Integration Corporate Management Council will depend on the level of

interest and commitment from the members, as well as the quality and

implementation of their decisions. Success of additional actions also will

depend on their quality and implementation.

Program Authority Is

Unclear

With the establishment of JLSC, DOD created two separate lines of authority

for managing the development of logistics information systems. DOD

Directives 5000.1, “Defense Acquisition,” and 5000.2, “Defense Acquisition

Management Policies and Procedures,” grant service program managers

sole authority for managing their assigned programs. However, under

authority granted by the Assistant Secretary of Defense for Production and

Logistics, JLSC is to manage the design, development, implementation, and

maintenance of logistics information systems and to exercise funding

control over these acquisitions.

According to JLSC officials, this dual authority has resulted in dissension

between JLSC and program offices about which office has overall authority

over the development and implementation of information systems. For

example, the Air Force’s Depot Maintenance Management Information

System was selected as a migration system to be installed at the

Warner-Robbins Air Logistics Center test site in January 1995. The Air

Force project manager, however, believed that the development project is

under the Air Force acquisition program and, as such, must follow the

direction of the senior project manager.

Under this direction, the new information system could not be exported to

other installations until it passed 90 days of operational testing and

evaluation and obtained approval from the Major Automated Information

Systems Review Council. The operational tests, originally scheduled for

August 1993, were delayed until December 1993. As of April 1994, the data

collection phase of the test was complete but the final report had not been

issued and reviewed by the Major Automated Information Systems Review

Council. According to the Deputy Under Secretary of Defense (Logistics)

official responsible for logistics CIM, this program authority problem will

be remedied by making JLSC, not the Air Force, responsible for managing

the system project.

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Impediments to Further Progress

In late 1993, a DOD logistics review group found that current program

management direction divides the responsibility and accountability for

developing CIM migration systems. The core issue, the review group said,

was the need to “minimize management layering and delegate review and

milestone approval authority commensurate with the resources and risks

involved.” Although the group reviewed the problem within logistics, it

identified four options for assigning program management responsibilities

in all CIM efforts to a particular organizational unit or senior DOD manager.

In its comments on a draft of this report, DOD officials said they did not

agree that the current guidance was conflicting; it was just misunderstood

by those responsible for implementing it. However, DOD cited the issuance

of its CIM Strategic Plan as a recent effort that should clarify program

authority under the CIM initiative.

Private industry and our studies show that a strategic plan that clearly

articulates responsibilities and describes how the initiative fits with other

organizational priorities is critical. We have stated in the past that the

Office of Secretary of Defense would need to provide strong leadership

and establish a stable organization with clear lines of authority and

accountability for CIM to succeed.4

 To the extent that DOD’s CIM Strategic

Plan establishes clear lines of authority, we believe that it can successfully

resolve conflicts over who manages projects to develop migratory

information systems.

Conclusions The impediments JLSC faces illustrate fundamental problems in DOD’s

management of the overall CIM initiative. While DOD has taken some

important steps to address these problems, more needs to be done. First,

DOD needs to ensure that functional service and DLA managers actively

participate in the management and implementation of the initiative with

the information technology community in support. Private companies that

have reengineered their business operations cite the active participation of

their line managers as critical to their success.

Second, DOD needs to take specific action to build the support and

commitment of all DOD employees for the cultural changes that must be

made to implement CIM. Although DOD has taken actions to demonstrate

top-level support and commitment to the initiative, the DOD employees are

the ultimate key to CIM’s success. As private companies have learned by

4

Defense ADP: Corporate Information Management Must Overcome Major Problems

(GAO/IMTEC-92-77, Sept. 14, 1992); and Defense Management: Stronger Support Needed for Corporate

Information Management Initiative to Succeed (GAO/AIMD/NSIAD-94-101, Apr. 12, 1994).

Page 35 GAO/NSIAD-95-28 Defense Management
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Impediments to Further Progress

implementing massive changes in their organizations, employee support

and commitment is essential to overcome deeply entrenched barriers to

change. To build this support and commitment, employees must be trained

to ensure that they understand why business practices need to be

changed, how changes will improve business operations, and what they

must do to implement needed changes.

While training may be the most comprehensive method for ensuring

employee understanding, renaming the initiative could greatly increase its

acceptance. Because of the evolution of the initiative and the shifts in its

emphasis, many employees are confused and misunderstand CIM’s primary

purpose. Renaming the initiative to clearly communicate its primary

objectives, would help remove employees’ confusion and serve as a first

step for building their support and commitment.

Recommendations to

the Secretary of

Defense

To overcome the fundamental weaknesses in the management of the CIM

initiative and to further encourage cultural changes needed to support the

new DOD business operations, we recommend that the Secretary take the

following actions:

• Revise the CIM management strategy to ensure that functional managers,

particularly the service Chiefs of Staff and DLA Director, actively

participate and lead efforts to reengineer DOD’s business processes under

the CIM initiative.

• Train DOD employees at all levels to promote understanding and

acceptance of changes needed to their current ways of doing business.

• Change the name of the CIM initiative to lessen the confusion created as

the initiative has evolved and to more accurately communicate the primary

CIM objective.

Agency Comments

and Our Evaluation

DOD appreciated our overall support for the CIM initiative and our

recognition that JLSC had made progress toward developing logistics

standard systems and reengineering processes in support of the materiel

management and depot maintenance functions. DOD, however, was

concerned about the tone of the report and the differences between our

and its interpretation of CIM plans, expert advice, and reviews.

Consequently, we modified our draft report where appropriate. A number

of modifications were designed to present a balanced view of the CIM

initiative while others were made to clarify our interpretation of CIM plans,

expert advice, and reviews. When differences in interpretation remained,

Page 36 GAO/NSIAD-95-28 Defense Management
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Impediments to Further Progress

we added DOD’s view to the report. Finally, DOD has taken several actions

since we completed our audit work that addressed strategies to

management and implement CIM. In view of these actions, we deleted two

recommendations and modified a third to more precisely identify the

actions we believe the Secretary should take.

DOD concurred with our recommendation on training but did not concur

with our recommendation on renaming the initiative. According to DOD,

renaming the initiative would create confusion because it would signal a

change in the initiative or in management that has not taken place. Our

review showed, however, that DOD managers are already confused about

the initiative’s primary objective. This confusion has resulted in a negative

perception about CIM and the failure by many service and DLA managers to

fully accept and support the effort. Despite DOD arguments, we continue to

believe that renaming the initiative to more accurately communicate its

primary objective would promote understanding and acceptance. The risk

of creating some additional confusion is more than offset by the

advantages that a name change should produce. Additional DOD comments

and our responses appear in appendix III.

Page 37 GAO/NSIAD-95-28 Defense Management
Appendix I 

Description of Ongoing Near-Term

Initiatives

This appendix provides a brief description of the five materiel

management and two depot maintenance near-term initiatives that are

being implemented through the logistics Corporate Information

Management (CIM) initiative. Each description includes information on the

purpose, expected costs and benefits, and schedule.

Materiel Management

Initiatives

Cataloging Tools On-Line This initiative is a materiel management productivity aid for the

Department of Defense (DOD) catalogers. When DOD introduces a new

supply item into its inventory, the item is listed in a catalog provided to the

services and the Defense Logistics Agency (DLA). Currently, catalogers use

paper technical drawings, specifications, vendor catalogs, guidebooks,

procedural manuals, and regulations to complete cataloging steps such as

writing a brief description of the supply item and assigning it a stock

number.

Cataloging Tools On-Line, a DLA system, enables a cataloger to

electronically access reference documents, simultaneously compare

technical data with drafted descriptions, and automatically check for

errors. Catalogers using this automated aid are expected to create catalog

entries much faster and more accurately than is currently done.

The Joint Logistics System Center (JLSC) projects that the 10 sites receiving

the Cataloging Tools On-Line system will save about $71.7 million over the

next 8 years through the elimination of manual processes, reduced

rejection rates of transactions, and better availability of and access to

cataloging information.

Commercial Asset

Visibility

This initiative enables DOD supply item managers to better monitor the

repair of government-owned equipment by private contractors. DOD

routinely contracts with private companies to repair government

equipment and usually provides the equipment and the material a

contractor needs to make the repairs. The Commercial Asset Visibility

system, which combines parts of automated systems operational at Navy

and Air Force sites, provides item managers with automated records on a

contractor’s repair process. Using these automated records, item

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Appendix I 

Description of Ongoing Near-Term

Initiatives

managers can compare on a daily basis contractor and government

records of equipment status, condition, location, and quantity.

JLSC expects that with more timely and accurate information, the Army,

which currently does this process manually, will gain better visibility over

its assets that are located at contractor sites. As a result of this increased

visibility, the Army might be able to reduce its equipment losses by

one-third (from 1.5 percent of the total value of reparables to 1 percent).

JLSC projects that this reduction will save the Army about $22.8 million

over a 20-year period.

Also, item managers can use equipment status information in the system to

ensure contractors are provided with the right material needed to repair

the equipment in a more timely manner. Based on a preliminary analysis,

JLSC believes this can reduce the average time Army contractors spend

making repairs from 120 days to 118 days. This 2-day reduction could save

the Army about $5.5 million over a 20-year period.

As of September 1993, the Commercial Asset Visibility system was

operating at 10 Army contractor sites. As a by-product of this

implementation, item managers have found that contractors had about

$12.7 million more in government-owned equipment than shown in DOD

records. JLSC is assessing whether this found equipment can be used to

reduce the amount of equipment the Army expected to buy for use by the

contractors.

Configuration and

Logistics Information

Program

This program enables service users to make more accurate and timely

purchases of replacement and repair parts for weapon systems and

equipment. The services maintain various versions (configurations) of the

same weapon system and equipment tailored to a unit’s specific mission

requirements. Each of these configurations require unique replacement

and repair parts. Currently, most service users rely on manual

documentation, which is often inaccurate and out of date.

The Configuration and Logistics Information Program is an automated

information system used by the Marine Corps and the Navy. It provides

users with detailed information to build, procure, maintain, and repair

each of the various weapon system and equipment configurations. It

enables the users to purchase the right parts for each weapon system or

piece of equipment. Although JLSC expects the system to be installed at

various sites across all services, it has not yet projected the overall cost

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Appendix I 

Description of Ongoing Near-Term

Initiatives

savings. However, as of September 1993, it had projected that one Marine

Corps site would save from $1.8 million to $2.8 million from fiscal years

1992 through 2000.

Defense Expert Supply

System

This initiative is intended to enable supply centers to provide better

customer service with fewer employees. Currently, supply center

customers can order supplies, check stock numbers, and receive status

information on their supply orders over the telephone. However, they

must wait for supply personnel to become available to manually query the

automated supply information system.

The Defense Expert Supply System, in operation at some DLA supply

centers, allows customers using touch-tone telephones to directly access

the automated supply system for answers to their questions. As of

September 1993, the system had been installed at 4 of the 10 planned sites.

Although system benefits have not yet been validated, JLSC expects that

customer service costs at each of these sites will be reduced by about

$400,000.

Integrated Technical Item

Management and

Procurement

This initiative decreases the time needed to prepare and award contracts

for commonly used supplies such as nuts, bolts, fuses, and electronic

parts. Currently, most services must manually obtain and compile

documents into purchase requests needed to buy supplies from

manufacturers; identify manufacturers that produce the supply items;

solicit bids from available manufacturers; select the manufacturer to be

used; and print, sign, and award contracts. Because of the manual

intervention required to develop and compile these purchase requests, the

process is time-consuming and error prone.

The Integrated Technical Item Management and Procurement system,

being used by two Navy inventory control points, automates the DOD

supply contract development and award process. The system consolidates

information on the quantity, quality, and type of supply items being

purchased; the manufacturers of the item; and the contract bid and award

procedures. It allows supply managers to automatically develop supply

contracts and send them to manufacturers.

As of September 1993, the latest version of the system had been installed

at two Navy and one Marine Corps sites. Data were being collected to

validate costs and benefits at these sites.

Page 40 GAO/NSIAD-95-28 Defense Management
Appendix I 

Description of Ongoing Near-Term

Initiatives

Depot Maintenance

Initiatives

Depot

Maintenance—Hazardous

Material Management

System

This depot maintenance initiative is intended to reduce the amount of

money maintenance depots spend for hazardous materials such as paint

thinner, oils, and chlorine. Currently, the depots spend more than

$300 million each year to buy hazardous materials used in the repair and

maintenance of end items. Officials acknowledge that a significant portion

of these materials is wasted.

In 1992, the Air Force implemented the Depot Maintenance—Hazardous

Material Management System at its Ogden Air Logistics Center to provide

information about who received hazardous materials; which and how

much they received; and when, where, and how the materials were used.

With this information, Ogden managers identified wasteful practices, such

as workers receiving more material than needed for the job. In addition,

they found that workers were storing excess material in their lockers and

that stored materials were being improperly sealed. Depot management

subsequently changed the methods for handling hazardous materials. For

example, materials are now issued only in the amount needed. As a result,

Ogden reduced the amount of hazardous materials purchased in 1992 by

nearly 39 percent, or a $7.7 million net cost savings.

JLSC plans to install the system at 27 maintenance depots and projects that

they will save between $83.3 million and $202.3 million over a 6-year

period. As of September 1993, the system had been installed at seven sites.

Programmed Depot

Maintenance Scheduling

System

This initiative is intended to streamline the planning, scheduling, and

production repair, overhaul, and modification of major end items by

maintenance depots. Currently, many depots use manual procedures or

antiquated automated systems to plan, schedule, and manage their repair

activities. Accordingly, these plans and schedules are not easily changed.

They must include extensive and detailed information such as descriptions

of work tasks to be performed, time required for the work, skills and

materiel needed to do the work, and the sequence in which the work

should be done to optimize available resources.

To manage the repair activities, managers track information such as the

status of work done, work planned, resources used, and resources

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Appendix I 

Description of Ongoing Near-Term

Initiatives

available. However, the depots often experience unanticipated changes

such as an increase in work to be done, fewer resources available to do

the work, or a shift in work priorities. These changes usually result in

significant delays to the repair work.

The Programmed Depot Maintenance Scheduling System, operating at the

Air Force’s San Antonio Air Logistics Center, automates and integrates the

maintenance depot’s repair planning, scheduling, and management

information processes. Using the system, depot management can plan and

schedule the most optimum use of available resources to perform repair

work. As unanticipated changes to workload, resources, and work

priorities occur, the system allows depot managers to quickly develop new

plans and schedules that optimize operations. In addition, the system

provides managers with up-to-date status information, including work

completed, resources used, work to be done, and resources needed to do

it.

Based on the then-planned workloads at the specific depots, JLSC projected

that use of the automated system at 16 maintenance depots would reduce

DOD costs by at least $126.8 million over the 6-year period ending in fiscal

year 1997. As of September 1993, the system had been installed at seven

maintenance depots. JLSC was collecting cost and benefit data at these

operational sites to validate its savings projections.

Page 42 GAO/NSIAD-95-28 Defense Management
Appendix II 

Description of Migration Systems

This appendix provides brief descriptions of the 27 CIM migration systems

selected to support the logistics functions of materiel management and

depot maintenance.

Materiel Management Automated Inventory Management Support System: Enables item

managers to automatically process recommended buys, simulate changes,

and view historical data. Provides the capability to modify recommended

acquisition quantities or levels and add or delete delivery/storage

locations.

Cataloging System (DO43): Receives on-line descriptions of federal and

service supply items and sends them to the Defense Logistics Service

Center.

Cataloging Tools On-Line: Automates paper copy guidebooks, procedures,

and regulations needed to catalog new consumable items.

Central Secondary Item Stratification: Automates the retrieval, analyses,

adjustment, and arrangement of supply requirements data used to budget

procurement and repairs, report inventory, stratify assets by need

(operational, war reserve, long supply), display readiness of supply

position, and manage the inventory.

Commercial Asset Visibility: Enables users to monitor the status of

government-owned equipment in the possession of commercial

contractors. Automates the reconciliation of contractor and government

records of equipment condition, location, and quantity.

Configuration and Logistics Information Program: Allows users to collect

and record engineering data, engineering change proposals, and directives;

provides documentation and technical data for every configured item; and

enables users to record the implemented configuration on weapon

systems and equipment.

Defense Supply Expert System: Allows users to requisition supply items

over the telephone. Users can create and modify asset requisitions, access

asset requisition status and stock availability, and reach a customer

service representative.

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Appendix II 

Description of Migration Systems

Deficiency Reporting System: Automates the collection, processing, and

storage of deficiency and discrepancy data on weapon systems and

equipment.

Generic Configuration Status Accounting System: Provides status of

accounting information and interfaces with retail-level maintenance

systems. Changes made to aircraft configurations are also captured and

forwarded to a data repository.

Integrated Technical Item Management and Procurement: Automates

pre-procurement functions, including purchase request processing, and

passes validated requirements information to procurement personnel.

Interactive Computer Aided Provisioning System: Automates initial

provisioning functions and allows users to track design change notices on

a personal computer.

Initial Provisioning Management Information System: Develops and

supports contract and planning information used to track initial

provisioning schedules and milestones. Provides the capability to review

funding and item requirements.

Logistics Planning and Requirements Simplification System: Provides

provisioning, processes data item selection sheets, and generates logistics

support plans.

Joint Engineering Data Management Information Control System: Stores

engineering drawings in a standardized format for use by all services.

Maintenance Planning and Execution System: Automates the computation

of repair schedules and budgets; gives workload management data; tracks

the value of unserviceable assets; serves as the central repository for

depot-level maintenance requirement and resource data, including

schedule rates, staff-hours, and dollar requirements; and provides program

status for aircraft, missiles, and support equipment.

Modification Management Information System: Tracks engineering change

proposals from their initiation through the approval process and, if

approved, through implementation.

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Appendix II 

Description of Migration Systems

Multi-User Engineering Change Proposal Automated Review: Automates

the receipt and storage of proposed engineering changes made by

contractors and the government.

Pre-Procurement Support System (J090A/B): Enables logistics personnel

to develop and move a complete procurement requirements package from

requirements identification to contract approval.

Repair Priority and Distribution: Allows item managers to prioritize

repairs by item, optimize weapon system availability through marginal

analysis, and direct redistribution of repaired items. Reallocates assets in

support of weapons.

Requirements Determination and Execution System: Automates the

calculation of requirements for procurement cycles and safety level of

supplies.

Statistical Demand Forecasting System: Enables item managers to track

observed demands against expected demands and indicates which

significant dollar items have legitimate changes in demand pattern.

Identifies items requiring reforecasting using statistical and workload

parameters.

Stock Control System: Processes information from requisitions and

receipts; assists in requirements determination; integrates materiel

management, depot maintenance, and retail data; provides requisition

status, disposal management, financial inventory reporting, pricing and

tracking, and deficiency reporting; and serves as a repository for

information necessary for transportation links.

Technical Data Management System: Builds supply requests, screens

transactions, creates and modifies federal catalog items, maintains freight

data, and processes annual price changes.

Total Asset Visibility: Provides for total visibility of assets from storage,

production, and repair to delivery during both wholesale and retail

activities.

Depot Maintenance Depot Maintenance Management Information System: Provides depot

maintenance managers with an automated capability to forecast

workloads; schedule repair activities; track and control inventories;

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Appendix II 

Description of Migration Systems

program staffing, materials, and other resources; and track and manage

production costs.

Enterprise Information System: Provides the ability to interface to existing

data sources, extract relevant data, and package the information to

support decisionmakers with timely summary information.

Facilities and Equipment Maintenance: Provides an integrated tracking

and control system for equipment and facility maintenance, preventive

maintenance, and calibration of precision measurement equipment.

Hazardous Material Maintenance System: Records the receipt and issue of

all hazardous material within a maintenance depot. Provides inventory

visibility of all hazardous material to control the issue of hazardous

material to authorized users.

Interservice Material Accounting and Control System: Tracks Depot

Maintenance Interservice Support agreements and visibility and control

for interservice workloads.

Laboratory Information Management System: Monitors and controls

laboratory data such as sample order status, order tracking, backlog,

scheduling, location tracking, workload prediction, pricing, and invoicing.

Automates tracking and archiving for depot material samples and test

results.

Programmed Depot Maintenance Scheduling System: Supports the

planning, scheduling, and management of programmed depot maintenance

of major end items.

Tool Inventory Management Application: Provides total inventory tracking

and accountability of both hard and perishable (consumable) tools and

tooling assets. Tracks issues and receipts of assets to both individuals and

in tool kits.

Page 46 GAO/NSIAD-95-28 Defense Management
Appendix III 

Comments From the Department of Defense

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 47 GAO/NSIAD-95-28 Defense Management
Appendix III 

Comments From the Department of Defense

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Appendix III 

Comments From the Department of Defense

Page 49 GAO/NSIAD-95-28 Defense Management
Appendix III 

Comments From the Department of Defense

Now on pp. 2-3 and

10-13.

See comment 1.

See comment 2.

See comment 1.

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Appendix III 

Comments From the Department of Defense

See comment 3.

See comment 4.

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Appendix III 

Comments From the Department of Defense

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Appendix III 

Comments From the Department of Defense

Now on pp. 15-17.

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Appendix III 

Comments From the Department of Defense

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Appendix III 

Comments From the Department of Defense

Now on pp. 3-4 and

17-19.

See comment 5.

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Appendix III 

Comments From the Department of Defense

Now on pp. 19-20.

See comment 6.

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Appendix III 

Comments From the Department of Defense

See comment 3.

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Appendix III 

Comments From the Department of Defense

Now on pp. 20-21.

See comment 7.

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Appendix III 

Comments From the Department of Defense

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Appendix III 

Comments From the Department of Defense

Now on pp. 3-4 and

21-23.

See comment 8.

See comment 9.

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Comments From the Department of Defense

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Comments From the Department of Defense

Now on pp. 3-4 and

24-25.

Now on pp. 3-4 and

25-26.

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Comments From the Department of Defense

Now on pp. 3-4 and

26-27.

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Comments From the Department of Defense

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Appendix III 

Comments From the Department of Defense

Now on pp. 4-5 and

28-32.

See comment 10.

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Appendix III 

Comments From the Department of Defense

See comment 11.

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Appendix III 

Comments From the Department of Defense

Now on pp. 3-4 and

32-34.

See comment 12.

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Comments From the Department of Defense

Now on pp. 3-4 and

34-35.

See comment 13.

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Appendix III 

Comments From the Department of Defense

Now on pp. 5-6 and 36.

Now on pp. 5-6 and 36.

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Appendix III 

Comments From the Department of Defense

Now on pp. 5-6 and 36.

See comment 11.

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Appendix III 

Comments From the Department of Defense

The following are GAO’s comments on the Department of Defense’s letter

dated August 18, 1994.

GAO Comments 1. DOD disagrees with our depiction of the evolution of the CIM initiative

and believes it is a properly balanced program that has not changed

objectives or emphasis since its inception in October 1989. However, the

facts do not support that position. We agree that the current objectives of

the CIM initiative are to improve DOD business practices, make better use of

information technology, and eliminate duplicative information systems.

Early in its implementation, however, DOD clearly emphasized information

systems improvement. As early as November 1989, the Deputy Secretary of

Defense in the Defense Management Report Decision 925, stated that

“Corporate Information Management (CIM) will enhance the availability

and standardization of information in common areas and provide for the

development of integrated management information systems.” Further, in

his March 6, 1990, testimony before the Senate Committee on

Governmental Affairs, the Deputy Secretary stated that he had launched a

“Corporate Information Management initiative to integrate the data flow

within common functional areas.” Stating that Defense Management

Report and CIM initiatives were changing management techniques and

structures, as well as information system requirements, he identified seven

initiatives that described “efforts intended to eliminate separate Service

systems and provide integrated systems that can relate to each other, as

well as across all DOD.” Finally, the fact CIM started as an information

technology initiative was supported in the DOD Enterprise Model, Volume

II: Using the DOD Enterprise Model—A strategic View of Change in DOD—A

White Paper, January 1994. In this model, DOD states:

“The Office of the Secretary of Defense established the Corporate Information Management

(CIM) program to leverage DOD information resources to help make the activities of the

Department far more effective and efficient. ASD (C3I) has been assigned to lead this

program. In response to the major new challenges and opportunities facing the

Department, the CIM initiative has broadened its focus to address strategic re-engineering of

defense activities using a DOD-wide approach and enterprise model.”

In January 1991, as cited in our report, the Deputy Secretary of Defense

endorsed a plan where DOD would reengineer its business processes before

standardizing its information systems. We believe this plan shifted more

emphasis to business process improvement. In October 1993, however, the

Deputy Secretary established specific milestones for the selection and

deployment of information systems. This direction reemphasized the

Page 71 GAO/NSIAD-95-28 Defense Management
Appendix III 

Comments From the Department of Defense

priority given to information systems. Our analysis of JLSC’s activities

demonstrates the changes in priorities and emphasis that have occurred

throughout the history of the CIM initiative. As described in chapters 2 and

3 of our report, JLSC was directed to change its priorities several times and

it is clear that its current focus is on selecting and implementing migratory

information systems. In addition, DOD is currently considering a

reorganization that would concentrate on information technology

standardization.

2. We agree that it is important to compare the DOD initiative with the

process reengineering efforts of other organizations. We made such

comparisons throughout the report and used “lessons learned” by industry

as a basis for our recommendations. We recognized in our report that DOD

may have unique attributes by providing DOD’s position when it differed

from industry.

3. We agree with DOD that the $36 billion estimate has no basis in fact. It

was apparently developed with little or no analysis, which DOD quoted (as

late as April 1992) in several CIM documents and communications with the

Congress. We understand DOD’s desire to disassociate itself from this

estimate and, contrary to DOD’s comments, have pointed out in chapter 1

that the estimate is no longer supported by DOD. We continue to cite the

estimate, however, for two reasons. First, it is a part of CIM history, which

we describe in chapter 1 so the reader fully understands the evolution of

the initiative. Second, DOD does not have a more current estimate of

potential CIM savings and, as we point out in our report, is not attempting

to track savings that result from CIM efforts. Therefore, it is the only

information that helps put the CIM savings potential into some type of

perspective. Finally, contrary to DOD’s comment, our report also contains

specific reference to the 1993 Defense Science Board Task Force on Fiscal

Year 1994-1999 Future Years Defense Plan (“The Odeen Panel”).

4. We revised our draft report to use the same terminology as did the

Executive Level Group. Our position, however, remains unchanged. We

also modified our draft report to include the Executive Level Group’s

statement that “Forward-looking organizations took a path which put

primary emphasis on continuously improved business methods.

Computing and communication technology played a subordinate role, and

only now is being applied to the superior business methods that have

evolved.”

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Appendix III 

Comments From the Department of Defense

5. We agree with DOD that our report describes JLSC’s logistics migration

strategy in three steps. We presented the strategy as it is contained in

DOD’s Logistics CIM Migration Plan and as described to us by JLSC managers.

However, we also state in our report that while the strategy generally

focuses efforts sequentially, some work is done concurrently on all three

steps. We revised our draft report to more clearly state that JLSC is

concurrently working on all three steps.

We agree that DOD is doing some work to improve business processes. DOD

said, however, that it is not singling out the selection of migration systems

for emphasis in implementing the CIM initiative. We disagree. To support

its position, DOD cites the Deputy Secretary of Defense’s October 1993

memorandum. However, as stated in chapter 2, the Deputy Secretary

established time frames for the selection and implementation of

migrations systems and the completion of data standardization. He did not

establish milestones for the completion of process improvements. On the

contrary, he stated that the remaining activities such as functional process

improvement were to continue on an expedited basis, but were not to be

“prerequisites” to implementation of the migration systems and data

standardization acceleration strategy.

We should point out that we had many interviews with JLSC officials who

said that the Deputy Secretary’s memorandum placed primary emphasis

on system consolidation. As they explained to us, JLSC only has a certain

number of resources. If DOD wanted to emphasize the reengineering of

business processes, it could do that. But, that was not the direction they

had been given.

We also recently talked with several DOD officials responsible for

implementation of the Depot Maintenance Standard System. Because of

DOD’s insistence that the CIM initiative was not singling out the selection of

migration systems for emphasis, we specifically asked about their

perception of the CIM program. They said it is unusual that DOD would

officially take this position because it was clear to them that they were

directed to emphasize system selection and implementation.

6. Despite DOD’s comments, we did not take the statements of outside

experts out of context. In fact, we provided direct quotes we believe

represented the underlying theme of the experts’ reports to DOD. These

experts advised DOD that successful organizations have focused on

reengineering their business processes before emphasizing information

systems. While the Information Technology Association of America did

Page 73 GAO/NSIAD-95-28 Defense Management
Appendix III 

Comments From the Department of Defense

recommend that DOD accelerate out of its migration phase, unlike DOD, we

do not view this recommendation as support for DOD’s migration strategy.

On the contrary, the Association is telling DOD that it must conclude this

migration phase as soon as possible so that it can focus on

reengineering—where most savings can be made.

7. We recognized in our draft report DOD’s view that the selection and

deployment of migratory information systems were critical to business

process improvement. We agree that DOD cannot afford to develop or

maintain duplicative or overlapping systems. In fact, we have long

recommended that DOD consolidate and standardize its information

systems for common functions, such as military pay. However, we

disagree with the emphasis DOD has placed on information systems under

an initiative with the primary objective of business process improvement.

8. As stated in our report, we recognize that DOD needs to eliminate costly,

duplicative information systems. We continue to believe, however, that if

DOD is to achieve a maximum amount of savings from the CIM initiative, it

should emphasize business process reengineering first and information

system improvement last.

We agree with DOD that the mandated 6-month selection and 3-year

transition periods for migratory system are ambitious. However, we

disagree with DOD’s philosophy that it is better to set tight time frames with

some potential slippage. The former Director of Defense Information,

Principal Deputy Assistant Secretary of Defense for C3I, and member of the

Executive Level Group; in his October 17, 1993, memorandum to the

Deputy Secretary of Defense (now Secretary of Defense) stated:

“. . . I feel obligated to tell you that DOD cannot possibly deliver the stated results within

three years. The existing software technology platforms, software engineering practices

and technical management skills are inadequate to cope with the challenge of migrating

approximately 11,000 major applications and perhaps as many as 50,000 data bases to a

lower cost, interoperable and integrated schema. The current DOD inventory of software

code exceeds well over 500 million lines. The CIM goal to reverse engineer this inventory is

20 to 50 times bigger and twice as fast than anything ever attempted in the commercial

sector. Software errors and costs escalate exponentially with the scope of the effort. The

DOD record to date in delivering on time even one million lines of code on schedule and on

budget shows a 100% failure rate.”

Over the past 10 years, we have issued several reports that deal with

unsuccessful DOD attempts to develop major information systems.

Page 74 GAO/NSIAD-95-28 Defense Management
Appendix III 

Comments From the Department of Defense

Consistently, DOD has significantly exceeded schedules and budgets and

failed to develop systems capable of performing as they were originally

intended. Based on our experience on these assignments, we agree with

the former Director’s view of DOD’s 3-year migration strategy.

9. DLA officials we spoke to did not view their innovative projects as part of

the CIM initiative. In fact, they were concerned that DOD’s emphasis on

migration systems would slow or even halt their efforts. Recognizing that

these officials do not have the authority to determine what projects DOD

will consider to be under its initiative, we removed the phase “outside the

CIM umbrella” from our draft report.

10. Contrary to DOD’s position, we recognized in our draft report that

top-level management support and commitment were “critical

prerequisites” for success of any major reengineering effort—including

DOD’s CIM initiative. However, we believe that executive level support and

commitment alone are not sufficient to overcome the cultural barriers we

found. The Association (on p. 8 of its report) states, “DOD must ensure that

all parties buy into EI [enterprise integration] and are willing to work

wholeheartedly to form and implement the EI plan.” Further, the

Association notes that “It is important that the principals participate in the

creation of the plan. This will prevent the plan from being ’imposed’ on the

services, PSAs, and CINCs by an external organization.” As cited in the

draft report, organizations that have successfully reengineered their

business operations realized early-on that getting active participation by

line managers and the support and commitment of all their employees

were critical factors to their success.

We have modified the draft report to clarify our position on the

importance to CIM success of DOD obtaining active participation by service

and DLA managers and support and commitment from all employees at all

levels. Also, we modified our proposed recommendations to include

revising the CIM management strategy to ensure active participation by

functional Defense managers.

11. We believe that the initiative’s name reenforces negative views

currently held by many Defense managers. Because of the evolution of the

initiative (during which CIM has undergone dramatic changes in scope and

emphasis, as well as management) many service and DLA managers

perceive CIM as either a budget-cutting initiative or an effort to standardize

information systems. By renaming the initiative, DOD could more clearly

communicate the primary objective of CIM and lessen the negative views of

Page 75 GAO/NSIAD-95-28 Defense Management
Appendix III 

Comments From the Department of Defense

these managers. This, in turn, could help DOD gain needed participation of

service and DLA managers and the support and commitment from DOD

employees.

Concerning our April 1994 recommendation that DOD establish a Chief

Information Officer, DOD has misinterpreted the role we envisioned for this

position with regard to business process reengineering. As stated in our

April 1994 report, the primary duties of the Chief Information Officer

would be to help strengthen DOD’s information technology management.

While the Chief Information Officer would also support DOD’s

reengineering efforts, we anticipated that senior DOD leadership, including

the Deputy Secretary of Defense, the military services, and the Principal

Staff Assistants would lead DOD’s reengineering efforts. In fact, industry

experts consistently state that it may not be appropriate for an

organization’s chief information resources management official to manage

the agencies’ reengineering efforts. Doing so may cause the agencies to

place too much emphasis on technological solutions to problems rather

than attempting to reengineer their processes.

12. We have added information in the report to cite additional actions that

DOD has taken to more aggressively integrate its CIM efforts.

13. We agree that we did not cite the Assistant Secretary of Defense for C3I

1993 memorandum in our draft report. We did cite, however, the guidance

causing the conflict between JLSC and the Air Force’s Depot Maintenance

Management Information Systems’ project office. Also, we do not believe

that the memorandum and the directive cited by DOD provided clear

guidance because (1) officials from these organizations, as well as a

Defense logistics review group that also found program authority was

unclear, did not use this guidance to resolve their confusion about project

management authority and (2) DOD states that it recently issued the CIM

strategic plan to “clarify program authority.”

We modified our draft report to recognize DOD’s latest actions to clarify

program management authority under its CIM initiative.

Page 76 GAO/NSIAD-95-28 Defense Management
Appendix IV 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

James E. Hatcher

Jerome P. Pederson

Cincinnati Regional

Office

Bruce D. Fairbairn

Sanford F. Reigle

Roberto Rivera

Benjamin F. Jordan

Shari A. Kolnicki

Page 77 GAO/NSIAD-95-28 Defense Management
Page 78 GAO/NSIAD-95-28 Defense Management
Page 79 GAO/NSIAD-95-28 Defense Management
Related GAO Reports

Defense IRM: Management Commitment Needed to Achieve Defense Data

Administration Goals (GAO/AIMD-94-14, Jan. 21, 1994).

Defense IRM: Business Strategy Needed for Electronic Data Interchange

Program (GAO/AIMD-94-17, Dec. 9, 1993).

Defense Transportation: Commercial Practices Offer Improvement

Opportunities (GAO/NSIAD-94-26, Nov. 26, 1993).

Defense Inventory: Applying Commercial Purchasing Practices Should

Help Reduce Supply Costs (GAO/NSIAD-93-112, Aug. 6, 1993).

Commercial Practices: DOD Could Save Millions by Reducing Maintenance

and Repair Inventories (GAO/NSIAD-93-155, June 7, 1993).

DOD Food Inventory: Using Private Sector Practices Can Reduce Costs and

Eliminate Problems (GAO/NSIAD-93-110, June 4, 1993).

DOD Medical Inventory: Reductions Can Be Made Through the Use of

Commercial Practices (GAO/NSIAD-92-58, Dec. 5, 1991).

Commercial Practices: Opportunities Exist to Reduce Aircraft Engine

Support Costs (GAO/NSIAD-91-240, June 28, 1991).

Defense Logistics: Observations on Private Sector Efforts to Improve

Operations (GAO/NSIAD-91-240, June 13, 1991).

Defense ADP: Corporate Information Management Initiative Faces

Significant Challenges (GAO/IMTEC-91-35, Apr. 22, 1991).

(398141) Page 80 GAO/NSIAD-95-28 Defense Management
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