Defense Management: Impediments Jeopardize Logistics Corporate Information Management
Released: 1994-10-28T00:00:00

Letter

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 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 studies 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.

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. 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, 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 logistics 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.

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.

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.

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.

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 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.

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:

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 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. 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 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 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, 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 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.

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

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 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 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.

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 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.

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.

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, 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. “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 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 cultures 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 April 1994 report 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 guide 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 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 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.

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.

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. 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 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, 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.