DOD Business Systems Modernization: Governance Mechanisms for Implementing Management Controls Need to Be Improved
Released: 2012-06-01T00:00:00

Letter

Background

DOD is one of the largest and most complex organizations in the world, and is entrusted with more taxpayer dollars than any other federal department or agency. For fiscal year 2013, the department requested approximately $613.9 billion—$525.4 billion in spending authority for its base operations and an additional $88.5 billion to support overseas contingency operations, such as those in Iraq and Afghanistan.

In support of its military operations, DOD performs an assortment of interrelated and interdependent business functions, such as logistics management, procurement, health care management, and financial management. As we have previously reported, the DOD systems environment that supports these business functions is overly complex and error prone, and is characterized by (1) little standardization across the department, (2) multiple systems performing the same tasks, (3) the same data stored in multiple systems, and (4) the need for data to be entered manually into multiple systems. The department recently requested about $17.2 billion for its business systems environment and IT infrastructure investments for fiscal year 2013.department’s systems inventory, this environment is composed of about 2,200 business systems and includes 310 financial management, 724 human resource management, 580 logistics, 254 real property and installation, and 287 weapon acquisition management systems.

DOD currently bears responsibility, in whole or in part, for 14 of the 30 areas across the federal government that we have designated as high risk. Seven of these areas are specific to the department, and 7 other high-risk areas are shared with other federal agencies. Collectively, these high-risk areas relate to DOD’s major business operations that are inextricably linked to the department’s ability to perform its overall mission. Furthermore, the high-risk areas directly affect the readiness and capabilities of U.S. military forces and can affect the success of a mission. In particular, the department’s nonintegrated and duplicative systems impair its ability to combat fraud, waste, and abuse. As such, DOD’s business systems modernization is one of the department’s specific high-risk areas and is an essential enabler in addressing many of the department’s other high-risk areas. For example, modernized business systems are integral to the department’s efforts to address its financial, supply chain, and information security management high-risk areas.

DOD’s Approach to Business Systems Modernization

The department’s approach to modernizing its business systems environment includes developing and using a BEA and associated enterprise transition plan, improving business systems investment management, and reengineering the business processes supported by its defense business systems. These efforts are guided by DOD’s Chief Management Officer and Deputy Chief Management Officer (DCMO). The Chief Management Officer’s responsibilities include developing and maintaining a departmentwide strategic plan for business reform and establishing performance goals and measures for improving and evaluating overall economy, efficiency, and effectiveness, and monitoring and measuring the progress of the department. The DCMO’s responsibilities include recommending to the Chief Management Officer methodologies and measurement criteria to better synchronize, integrate, and coordinate the business operations to ensure alignment in support of the warfighting mission. The DCMO is also responsible for developing and maintaining the department’s enterprise architecture for its business mission area.

The DOD Chief Management Officer and DCMO are to interact with several entities to guide the direction, oversight, and execution of DOD’s business transformation efforts, which include business systems modernization. These entities include the Defense Business Systems Management Committee, which is intended to serve as the department’s highest-ranking investment review and decision-making body for business systems programs and is chaired by the Deputy Secretary of Defense. The committee’s composition includes the principal staff assistants, defense agency directors, DOD Chief Information Officer (CIO), and military department Chief Management Officers. Table 1 describes key DOD business systems modernization governance entities and their composition.

Since 2005, DOD has employed a “tiered accountability” approach to business systems modernization. Under this approach, responsibility and accountability for business architectures and systems investment management are assigned to different levels in the organization. For example, the DCMO is responsible for developing the corporate BEA (i.e., the thin layer of DOD-wide policies, capabilities, standards, and rules) and the associated enterprise transition plan. Each component is responsible for defining a component-level architecture and transition plan associated with its own tiers of responsibility and for doing so in a manner that is aligned with (i.e., does not violate) the corporate BEA. Similarly, program managers are responsible for developing program- level architectures and plans and for ensuring alignment with the architectures and transition plans above them. This concept is to allow for autonomy while also ensuring linkages and alignment from the program level through the component level to the corporate level.

Consistent with the tiered accountability approach, the NDAA for Fiscal Year 2008 required the Secretaries of the military departments to designate the department Under Secretaries as Chief Management Officers with primary responsibility for business operations. Moreover, the Duncan Hunter NDAA for Fiscal Year 2009 required the military departments to establish business transformation offices to assist their Chief Management Officers in the development of comprehensive business transformation plans.departments have designated their respective Under Secretaries as the Chief Management Officers. In addition, the Department of the Navy (DON) and Army have issued business transformation plans. Air Force officials have stated that the department’s corporate Strategic Plan also serves as its business transformation plan.

DOD’s BEA is intended to serve as a blueprint for DOD business transformation. In particular, the BEA is to guide and constrain implementation of interoperable defense business systems by, among other things, documenting the department’s business functions and activities, the information needed to execute its functions and activities, and the business rules, laws, regulations, and policies associated with its business functions and activities. According to DOD, the BEA is being developed using an incremental approach, where each new release addresses business mission area gaps or weaknesses based on priorities identified by the department. The department considers its current approach to developing the BEA both a “top-down” and “bottom-up” approach. Specifically, it focuses on developing content to support investment management and strategic decision making and oversight (“top-down”) while also responding to department needs associated with supporting system implementation, system integration, and software development (“bottom-up”).

The department’s most recent BEA version (version 9.0), released in March 2012, focuses on documenting information associated with its 15 end-to-end business process areas. (See table 2 for a list and description of these business process areas.) In particular, the department’s most recent Strategic Management Plan has identified the Hire-to-Retire and Procure-to-Pay business process areas as its priorities. According to the department, the process of documenting the needed architecture information also includes working to refine and streamline each of the associated end-to-end business processes.

In addition, DOD’s approach to developing its BEA involves the development of a federated enterprise architecture. Such an approach treats the architecture as a family of coherent but distinct member architectures that conform to an overarching architectural view and rule set. This approach recognizes that each member of the federation has unique goals and needs, as well as common roles and responsibilities with the levels above and below it. Under a federated approach, member architectures are substantially autonomous, although they also inherit certain rules, policies, procedures, and services from higher-level architectures. As such, a federated architecture gives autonomy to an organization’s components while ensuring enterprisewide linkages and alignment where appropriate. Where commonality among components exists, there are also opportunities for identifying and leveraging shared services. Figure 1 provides a conceptual overview of DOD’s federated BEA approach.

The certification of business system investments is a key step in DOD’s IT investment selection process that the department has aimed to model after GAO’s Information Technology Investment Management (ITIM) framework. While defense business systems with a total cost over $1 million are required, as of June 2011, to use the Business Capability Lifecycle,are also subject to the formal review and certification process through the IRBs before funds are obligated for them. a streamlined process for acquiring systems, these systems Under DOD’s current approach to certifying investments, there are several types of certification actions as follows:

Certify or certify with conditions: An IRB certifies the modernization as fully meeting criteria defined in the act and IRB investment review guidance (certify) or imposes specific conditions to be addressed by a certain time (certify with conditions).

Recertify or recertify with conditions: An IRB certifies the obligation of additional modernization funds for a previously-certified modernization investment (recertify) or imposes additional related conditions to the action (recertify with conditions).

Decertify: An IRB may decertify or reduce the amount of modernization funds available to an investment when (1) a component reduces funding for a modernization by more than 10 percent of the originally certified amount, (2) the period of certification for a modernization is shortened, or (3) the entire amount of funding is not to be obligated as previously certified. An IRB may also decertify a modernization after development has been terminated or if previous conditions assigned by the IRB are not met.

Summary of NDAA Requirements

Congress included provisions in the act, as amended, that are aimed at ensuring DOD’s development of a well-defined BEA and associated enterprise transition plan, as well as the establishment and implementation of effective investment management structures and processes. The act requires DOD to develop a BEA and an enterprise transition plan for implementing the identify each business system proposed for funding in DOD’s fiscal year budget submissions, delegate the responsibility for business systems to designated establish an investment review structure and process, and not obligate appropriated funds for a defense business system program with a total cost of more than $1 million unless the approval authority certifies that the business system program meets specified conditions.

The act also requires that the Secretary of Defense annually submit to the congressional defense committees a report on the department’s compliance with the above provisions.

In addition, the act sets forth the following responsibilities: the DCMO is responsible and accountable for developing and maintaining the BEA, as well as integrating business operations; the CIO is responsible and accountable for the content of those portions of the BEA that support DOD’s IT infrastructure or information assurance activities; the Under Secretary of Defense for Acquisition, Technology, and Logistics is responsible and accountable for the content of those portions of the BEA that support DOD’s acquisition, logistics, installations, environment, or safety and occupational health activities; the Under Secretary of Defense (Comptroller) is responsible and accountable for the content of those portions of the BEA that support DOD’s financial management activities or strategic planning and budgeting activities; and the Under Secretary of Defense for Personnel and Readiness is responsible and accountable for the content of those portions of the BEA that support DOD’s human resource management activities.

Prior GAO Reviews of DOD’s Business Systems Modernization

Between 2005 and 2008, we reported that DOD had taken steps to comply with key requirements of the NDAA relative to architecture development, transition plan development, budgetary disclosure, and investment review, and to satisfy relevant systems modernization management guidance. However, each report also concluded that much remained to be accomplished relative to the act’s requirements and relevant guidance.areas.

We made recommendations to address each of the In May 2009, we reported that the pace of DOD’s efforts in defining and implementing key institutional modernization management controls had slowed compared with progress made in each of the previous 4 years, leaving much to be accomplished to fully implement the act’s requirements and related guidance. In addition, between 2009 and 2011, we found that long-standing challenges we previously identified remained to be addressed.

The corporate BEA had yet to be extended (i.e., federated) to the entire family of business mission area architectures, and the military departments had yet to address key enterprise architecture management practices and develop important content.

Budget submissions included some, but omitted other, key information about business system investments, in part because of the lack of a reliable, comprehensive inventory of all defense business systems.

The business system information used to support the development of the transition plan and DOD’s budget requests, as well as certification and annual reviews, was of questionable reliability.

DOD and the military departments had not fully defined key practices (i.e., policies and procedures) related to effectively performing both project-level (Stage 2) and portfolio-based (Stage 3) investment management as called for in the ITIM.

Business system modernizations costing more than $1 million continued to be certified and approved, but these decisions were not always based on complete information. Further, we concluded that certification and approval decisions may not be sufficiently justified because investments were certified and approved without conditions even though our prior reports had identified program weaknesses that were unresolved at the time of certification and approval.

Accordingly, we reiterated existing recommendations and made additional recommendations to address each of these areas. DOD partially agreed with our recommendations and described actions being planned or under way to address them. Nonetheless, DOD’s business systems modernization efforts remain on our high-risk list due in part to issues such as those described above.

Furthermore, in 2011, we reported that none of the military department enterprise architecture programs had fully satisfied the requirements of our Enterprise Architecture Management Maturity Framework and recommended that they each develop a plan to do so. Our recommendation further stated that if any department did not plan to address any element of our framework, that department should include a rationale for determining why the element was not applicable. DOD and Army concurred, and Air Force and DON did not. In this regard, DOD stated that Air Force and DON did not have a valid business case that would justify the implementation of all of our framework elements. However, Air Force and DON did not address why the elements called for by our recommendation should not be developed. Further, Army officials stated that the department had not yet issued a plan. To date, none of the military departments have addressed our recommendation.

GAO-11-278. management processes. These management controls are vital to ensuring that DOD can effectively and efficiently manage an undertaking with the size, complexity, and significance of its business systems modernization, and minimize the associated risks.

DOD Lacks Governance Mechanisms for Institutionalizing Modernization Management Controls

DOD continues to take steps to comply with the provisions of the Ronald W. Reagan NDAA for Fiscal Year 2005, as amended, and to satisfy relevant system modernization management guidance. However, despite undertaking activities to address NDAA requirements and its future vision; the department has yet to demonstrate significant results. Specifically, DOD has updated its BEA and is beginning to modernize its corporate business processes, but the architecture is still not federated through development of aligned subordinate architectures for each of the military departments, and it still does not include common definitions for key terms and concepts to help ensure that the respective portions of the architecture will be properly linked and aligned. has not included all business system investments in its fiscal year 2013 budget submission, due in part to an unreliable inventory of all defense business systems. has made limited progress regarding investment management policies and procedures and has not yet established the new organizational structure and guidance that DOD has reported will address statutory requirements. In addition, while DOD implemented a business process reengineering (BPR) review process, the department is not measuring and reporting its results. continues to describe certification actions for its business system investments based on limited information. has fewer staff than it identified as needed to execute its responsibilities for business systems modernization. Specifically, the office of the DCMO, which took over these responsibilities from another office that was disestablished in 2011, reported that it had filled only 82 of its planned 139 positions, with 57 positions vacant.

DOD’s limited progress in developing and implementing its federated BEA, investment management policies and procedures, and our related recommendations is due in part, to the roles and responsibilities of key organizations and senior leadership positions being largely undefined. Furthermore, the impact of DOD’s efforts to reengineer its end-to-end business processes has yet to be measured and reported, and efforts to execute needed activities are limited by challenges in staffing the office of the DCMO. Until the long-standing institutional modernization management controls provided for under the act, addressed in our recommendations, and otherwise called for in best practices are fully implemented, it is likely that the department’s business systems modernization will continue to be a high-risk program.

DOD Has Made Progress in Developing Its BEA but Has Not Developed Important Architecture Content or Fully Defined Roles and Responsibilities

Among other things, the act requires DOD to develop a BEA that would cover all defense business systems and their related functions and activities and that would enable the entire department to (1) comply with all federal accounting, financial management, and reporting requirements and (2) routinely produce timely, accurate, and reliable financial information for management purposes. The BEA should also include policies, procedures, data standards, and system interface requirements that are to be applied throughout the department. In addition, the NDAA for Fiscal Year 2012 added requirements that the BEA include, among other things, performance measures that are to apply uniformly throughout the department and a target defense business systems computing environment for each of DOD’s major business processes. Furthermore, the act requires a BEA that extends to (i.e., federates) all defense organizational components and requires that each military department develop a well-defined enterprisewide business architecture and transition plan.

According to DOD, achieving its vision for a federated business environment requires, among other things, creating an overarching that can effectively map the taxonomy and associated ontologiescomplex interactions and interdependencies of the department’s business environment. Such a taxonomy and ontologies will provide the various components of the federated BEA with the structure and common vocabularies to help ensure that their respective portions of the architecture will be properly aligned and coordinated. In April 2011, DOD provided additional guidance that calls for the use of ontologies for federating the BEA and asserting systems compliance. In addition, DOD guidance states that, because of the interrelationship among models and across architecture efforts, it is useful to define an overarching taxonomy with common definitions for key terms and concepts in the development of the architecture. The need for such a taxonomy and associated ontologies was derived from lessons learned from federation pilots conducted within the department that showed that federation of architectures was made much more difficult because of the use of different definitions to represent the same architectural data.

In addition, we have previously reported that defining and documenting roles and responsibilities is critical to the success of enterprise architecture efforts. More specifically, our Enterprise Architecture Management Maturity Framework calls for a corporate policy that identifies the major players associated with enterprise architecture development, maintenance, and use and provides for a performance and accountability framework that identifies each player’s roles, responsibilities, and relationships and describes the results and outcomes for which each player is responsible and accountable.

In 2009, we reported that the then-current version of the BEA (version 6.0) addressed, to varying degrees, missing elements, inconsistencies, and usability issues that we previously identified, but that gaps still remained. In March 2012, DOD released BEA version 9.0, which continues to address the act’s requirements. For example, version 9.0 organizes BEA content around its end-to-end business processes and adds additional content associated with these processes. For example, version 9.0 added the “Accept Purchase Request” subprocess and placed this subprocess in the context of its Procure- to-Pay end-to-end business process. In addition, the Hire-to-Retire end-to-end business process includes the subprocess “Manage Benefits,” which is linked to over 1,200 laws, regulations, and policies, as well as 11 subordinate business activities, such as “Manage Retirement Benefits.” As a result, users can navigate the BEA to identify relevant subprocesses for each end-to-end business process and determine important laws, regulations, and policies, business capabilities, and business rules associated with a given business process. includes enterprise data standards for the Procure-to-Pay and Hire-to- Retire end-to-end business processes. Specifically, as part of the Procure-to-Pay end-to-end business process, enterprise standards for Procurement Data and Purchase Request Data were added. In addition, for the Hire-to-Retire end-to-end business process, DOD updated the Common Human Resources Information Standards, which is a standard for representing common human resources management data concepts and requirements within the defense business environment. As a result, stakeholders can accelerate coordination and implementation of the high priority end-to-end business processes and related statutory requirements. uses a standardized business process modeling approach to represent BEA process models. For example, the BEA uses the business process modeling notation standard to create a graphical representation of the “Accept Goods and Services” business process. Using a modeling approach assists DOD in its effort to eventually support automated queries of architecture information, including business models and authoritative data, to verify investment compliance and validate system solutions. includes performance measures and milestones for initiatives in DOD’s Strategic Management Plan and relates the end-to-end business processes and operational activities documented in the BEA with the plan’s initiatives and performance measures. For example, the BEA identifies that the Procure-to-Pay end-to-end business process is related to the Strategic Management Plan’s measure to determine the percentage of contract obligations competitively awarded. This is important for meeting the act’s new requirements associated with performance measures and to enable traceability of BEA content to the Strategic Management Plan.

DOD has defined a federated approach to its BEA that is to provide overarching governance across all business systems, functions, and activities within the DOD. This approach involves the use of semantic web technologies to provide visibility across its respective business architecture efforts. Specifically, this approach calls for the use of non- proprietary, open standards and protocols to develop DOD architectures to allow users to, among other things, locate and analyze needed architecture information across the department. Among other things, DOD’s approach calls for the corporate BEA, each end-to-end business process area (e.g., Procure-to-Pay), and each DOD organization (e.g., Army) to establish a common vocabulary and for the programs and initiatives associated with these areas to use this vocabulary when developing their respective system and architecture products.

However, in 2011, we reported that each of the military departments had taken steps to develop architectural content, but that none had well-defined architectures to guide and constrain its business transformation initiatives. Further, since May 2011, the BEA has yet to be federated through development of aligned subordinate architectures for each of the military departments. Specifically, DON reported that it has not made any significant changes to its BEA content. Army reported that it has adopted the end-to-end processes as the basis of the Army BEA, and Air Force reported that it has added additional architecture business process content and mapped some of this content to the end-to-end processes. However, each has yet to fully satisfy the requirements of our Enterprise Architecture Management Maturity Framework.

In addition, the BEA does not include other important content that will be needed for achieving the office of the DCMO’s vision for BEA federation. For example,

While DOD has begun to develop a taxonomy that provides a hierarchical structure for classifying BEA information into categories, it has yet to develop an overarching taxonomy that identifies and describes all of the major terms and concepts for the business mission area. Further, version 9.0 does not include a systematic mechanism for evaluating and adding new taxonomy terms and rules for addressing ambiguous terms and descriptions. This is important since federation relies heavily on the use of taxonomy to provide the structure to link and align enterprise architectures across the business mission area, thus enabling architecture federation. Without an overarching taxonomy, there is an increased risk of not finding the most relevant content, thereby making the BEA less useful for making informed decisions regarding portfolio management and implementation of business systems solutions.

DOD has begun to define corporate BEA ontologies and is developing ontologies in the human resources management area and for the U.S. Transportation Command. However, BEA 9.0 does not include ontologies for all business mission domains and organizations. According to DOD officials, each domain and organization will develop its own ontology. This is important since ontologies promote a comprehensive understanding of data and their relationships. In addition, they enable DOD to implement automated queries of information and integrate information across the department. However, DOD has yet to describe how military departments will be held accountable for executing tasks needed to be accomplished for establishing domain ontologies for their respective BEAs or whether these ontologies are also to be used for their respective corporate enterprise architecture efforts. Without these ontologies, there is an increased risk of not fully addressing the act’s requirements relating to integrating budget, accounting, and program information and systems and achieving DOD’s vision for a federated architecture.

DOD officials acknowledged these issues and stated that future versions of the BEA will leverage semantic technologies to create and document a common vocabulary and associated ontology. However, the department has yet to describe how each of the relevant entities will work together in developing the needed taxonomy and ontology.

In addition to describing certain content required to be in the BEA, as described earlier, the act assigns responsibility for developing portions of the BEA to various entities. The department has developed strategies that begin to document certain responsibilities associated with architecture federation. For example, the Global Information Grid Architecture Federation Strategy states that the DOD enterprise is responsible for establishing a governance structure for DOD architecture federation. The strategy also states that each mission area, such as the business mission area, is to develop and maintain mission area architectures, such as the BEA. However, given the many entities involved in BEA and DOD architecture federation, officials from the office of the DCMO have expressed concerns over who is accountable for achieving specific federation tasks and activities and how the new vision for BEA federation will be enforced.

Fiscal Year 2013 Budget Submission Did Not Include Key Information on All Business Systems

Another requirement of the NDAA for Fiscal Year 2005, as amended, is that DOD’s annual IT budget submission must include key information on each business system for which funding is being requested, such as the system’s precertification authority and designated senior official, the appropriation type and amount of funds associated with modernization and current services (i.e., operation and maintenance), and the associated Defense Business Systems Management Committee approval decisions.

The department’s fiscal year 2013 budget submission includes a range of information for 1,657 business system investments, including the system’s name, approval authority, and appropriation type.submission also identifies the amount of the fiscal year 2013 request that is for development and modernization versus operations and maintenance and notes the certification status (e.g., approved, approved with conditions, not applicable, and withdrawn) and the Defense Business Systems Management Committee approval date, where applicable.

However, similar to prior budget submissions, the fiscal year 2013 budget submission does not reflect all business system investments. To prepare the submission, DOD relied on business system investment information (e.g., funds requested, mission area, and system description) that the components entered into the department’s system used to prepare its budget submission (SNAP-IT). In accordance with DOD guidance and according to DOD CIO officials, the business systems listed in SNAP-IT should match the systems listed in the Defense Information Technology Portfolio Repository (DITPR)—the department’s authoritative business systems inventory. However, the DITPR data provided by DOD in March 2012 included 2,179 business systems. Therefore, SNAP-IT did not reflect about 500 business systems that were identified in DITPR.

In 2009, we reported that the information between SNAP-IT and DITPR data repositories were not consistent and, accordingly, recommended that DOD develop and implement plans for reconciling and validating the completeness and reliability of information in its two repositories, and to include information on the status of these efforts in the department’s fiscal year 2010 report in response to the act. DOD agreed with the need to reconcile information between the two repositories and stated that it had begun to take actions to address this. In 2011, we reported that, according to the office of the DOD CIO, efforts to provide automated SNAP-IT and DITPR integration work were delayed due to increased SNAP-IT requirements in supporting the fiscal year 2012 budget submission and ongoing reorganization efforts within the department. DOD officials also told us that the department planned to restart the process of integrating the two repositories beginning in the third quarter of fiscal year 2011.

Since that time, DOD CIO officials have reiterated the department’s commitment to integrating the two repositories and taken steps toward achieving this end. For example, the officials stated that they have added a field to the DITPR repository that allows components to identify an individual system as a defense business system. These officials added that this change, once fully implemented, will be a key to providing automated DITPR and SNAP-IT integration. The Deputy DOD CIO (Resources) has also sent memoranda to specific DOD components identifying systems listed in DITPR that are not properly associated with systems identified in SNAP-IT and requesting that the components take action to address these inconsistencies. Nevertheless, DOD CIO officials responsible for the DITPR and SNAP-IT repositories stated that efforts to integrate them continue to be limited by ongoing organizational changes and the time required to address new system requirements unrelated to integrating the repositories. For example, these officials cited slowdowns resulting from the recent disestablishment of DOD’s Networks and Information Integration organization, as well as time spent making adjustments to the SNAP-IT repository to accommodate new Office of Management and Budget reporting requirements.data are owned by the components and therefore it is ultimately the responsibility of the components to update their respective data. However, DOD has not established a deadline by which it intends to complete the integration of the repositories and validate the completeness and reliability of information.

They added that all Until DOD has a reliable, comprehensive inventory of all defense business systems, it will not be able to ensure the completeness and reliability of the department’s IT budget submissions. Moreover, the lack of current and accurate information increases the risk of oversight decisions that are not prudent and justified.

DOD Has Not Yet Redefined Its Investment Management Process

DOD has made limited progress in defining and implementing investment management policies and procedures as required by the act and addressed in our ITIM framework since our last review in 2011. In addition, while the department has reported its intent to implement a new organizational structure and guidance to address statutory requirements, this structure and guidance have yet to be established. DOD also continues to approve investments on the basis of BEA compliance assessments that have not been validated. Further, while DOD has conducted various BPR activities related to its business system investments and underlying business processes, the department has not yet begun to measure associated results. Thus, the extent to which these efforts have streamlined and improved the efficiency of the underlying business processes remains uncertain.

The act requires DOD to establish an IRB and investment management processes that are consistent with the investment management provisions of the Clinger-Cohen Act of 1996. As we have previously reported, organizations that satisfy Stages 2 and 3 of our ITIM framework have the investment selection, control, and evaluation governance structures, and the related policies, procedures, and practices that are consistent with the investment management provisions of the Clinger-Cohen Act. We have used the framework in many of our evaluations, and a number of agencies have adopted it.

In 2011, we reported that DOD had continued to establish investment management processes described in our ITIM framework but had not fully defined all key practices. For example, we reported that DOD had fully implemented two critical processes associated with capturing investment information and meeting business needs, and partially completed the Stage 2 critical process associated with instituting an investment board. However, the department had yet to address other critical processes, including those associated with selecting investments and providing investment oversight.

Since 2011, DOD has not fully implemented any additional key practices.progress in addressing elements of our ITIM framework that we previously reported as unsatisfied. For example, Furthermore, the military departments have made very little In 2011, we reported that Air Force had implemented four key practices related to effectively managing investments as individual business system programs (Stage 2). The Air Force had also addressed a key practice associated with portfolio-level investment management (Stage 3) — assigning responsibility for the development and modification of IT portfolio selection criteria. However, it has not implemented any additional practices since that time. The Air Force has described its intent to change its IT investment management structure and form a new branch to lay the foundation for integrated, efficient IT portfolio management processes; however, according to Air Force officials, this office is not yet fully established and faces competing personnel issues within the department. Further, Air Force officials stated that they are working to update the department’s IT portfolio management and IT investment guidance, but the updates are not expected to be issued until November 2012.

In 2011, we reported that DON had implemented four key practices related to effectively managing investments as individual business system programs (Stage 2) and one key practice related to managing IT investments as a portfolio of programs (Stage 3). Since that time, DON has not fully implemented any additional key practices. While the department demonstrated that it has documented policies and procedures related to establishing assessment standards to describe a program’s health (e.g., cost, schedule, and performance), these policies and procedures do not describe the enterprisewide IT investment board’s role in reviewing and making decisions based on this information. Such a description is important because the investment board has ultimate responsibility for making decisions about IT investments.

In 2011, we reported that Army had implemented two key practices associated with capturing investment information. Specifically, it had established policies and procedures for collecting information about the department’s investments and had assigned responsibility for investment information collection and accuracy. These are activities associated with effectively managing investments as individual business system programs (Stage 2). However, with regard to managing IT investments as a portfolio of programs (Stage 3), the Army had not fully defined any of the five key practices. Further, since that time, the Army has not fully implemented any additional Stage 2 or Stage 3 practices. Army officials stated that the department has been focused on performing extensive portfolio reviews that are intended to inform many of the ITIM key practices and lead to updates of its investment management policies and procedures. As of April 2012, Army officials stated that the department had completed its first round of portfolio reviews. According to Army officials, the department has also worked to release its Business Systems Information Technology Implementation Plan, which is to provide details for its investment management strategy, due as part of the 2012 Army Campaign Plan; however, this plan has not yet been released.

According to the department, the slow progress made on the investment management process at DOD and the military departments in the past year is due, in part, to the department’s activities to address the new NDAA for Fiscal Year 2012 requirements. Specifically, in April 2012, DOD reported that it was in the process of constituting a single IRB.

According to DOD, this IRB is to replace the existing governance structure and is to be operational by October 2012. In addition, DOD reported that it intends to incrementally implement an expanded investment review process that analyzes business system investments using common decision criteria and establishes investment priorities while ensuring integration with the department’s budgeting process. The department has stated its intention to use our ITIM model to assess its ability to comply with its related investment selection and control requirements. Further, DOD officials stated that this new investment review process will encompass a portfolio-based approach to investment management that is to employ a structured methodology for classifying and assessing business investments in useful views across the department. DOD officials stated that an initial review of all systems requiring certification under the new NDAA requirements is also planned to be completed by the start of the new fiscal year.

While the department has reported its intent to implement this new organizational structure and guidance to address statutory requirements and redefine the process by which the department selects, evaluates, and controls business systems investments, this structure and guidance have yet to be established. DOD officials stated that the process has not yet been completed because they want to make sure they consider the best approach for investment management going forward. Accordingly, DOD is taking a phased approach as described in the department’s congressional report, which it intends to fully implement by October 2012.

While it is too soon to evaluate the department’s updated approach to business system investment management, we will further evaluate DOD’s progress in defining and implementing its updated investment review processes in our fiscal year 2013 report on defense business systems modernization. Until DOD redefines and implements its investment management processes by the established deadline and until the military departments make additional progress on their own investment management processes, it is unlikely that the thousands of DOD business system investments will be managed in a consistent, repeatable, and effective manner.

Since 2005, DOD has been required to certify and approve all business system modernizations costing more than $1 million to ensure that they meet specific conditions defined in the act. This process includes asserting that an investment is compliant with the BEA.

The department continues to approve investments on the basis of architecture compliance. However, the department’s policy and guidance associated with architecture compliance still does not call for compliance assertions to be validated and officials agreed that not all of the compliance information has been validated. Department officials stated that some information associated with the compliance process has been validated, such as information associated with complying with DOD’s Standard Financial Information Structure. recommendations that the department amend existing policy and requirements to explicitly call for such validation to occur. DOD agreed with our findings and recommendations and stated that it planned to assign validation responsibilities and issue guidance that described the methodology for performing validation activities. Nonetheless, the department has not yet addressed our recommendation.

The Standard Financial Information Structure is intended to provide a standard financial management data structure and uniformity throughout DOD in reporting on the results of operations.

Among other things, BEA compliance is important for helping to ensure that DOD programs have been optimized to support DOD operations. However, as we have reported, without proper validation of compliance assertions, there is an increased risk that DOD will make business system investment decisions based on information that is inaccurate and unreliable. Under DOD’s vision for a semantic BEA, described previously in this report, officials have stated that compliance validations will be conducted automatically using specialized software tools as program architecture artifacts are developed. However, until DOD achieves its semantic BEA vision and addresses our prior recommendation, compliance assertions will continue to be unvalidated.

In addition to the requirement that covered business systems be certified and approved to be in compliance with the BEA, the act requires that the Chief Management Officer certify that these business systems have undergone appropriate BPR activities. BPR is an approach for redesigning the way work is performed to better support an organization’s mission and reduce costs. After considering an organization’s mission, strategic goals, and customer needs, reengineering focuses on improving an organization’s business processes. We have issued BPR guidance that, among other things, discusses the importance of having meaningful performance measures to assess whether BPR activities actually achieve In this regard, the act, as amended, identifies the intended results.intended results of BPR reviews such as ensuring that the business process to be supported by the defense business system will be as streamlined and efficient as practicable and the need to tailor commercial- off-the-shelf systems to meet unique requirements or incorporate unique interfaces has been eliminated or reduced to the maximum extent practicable.

While DOD has conducted various BPR activities, including preparing BPR assessment guidance; conducting assessments to meet the act’s requirements; and performing other BPR efforts including refining its end- to-end business processes, the department has not yet begun to measure associated results. The department’s BPR activities are summarized as follows:

DOD issued interim guidance in April 2010 and final guidance in April 2011 to assist programs in addressing the act’s BPR requirement.This guidance describes the types of documentation required for systems seeking certification, including a standardized BPR assessment form, and illustrates the process for submitting documentation for review and approval. DOD’s final BPR guidance related to system certification generally comports with key practices described in our guidance. For example, DOD’s guidance recognizes the importance of developing a clear problem statement and business case, analyzing the as-is and to-be environments, and developing a change management approach for implementing the new business process.

Consistent with its guidance, DOD has begun to implement its BPR review process in an effort to meet the act’s requirements. Specifically, all systems in fiscal year 2011 submitted BPR assessment forms for review. In addition, the DCMO and military department Chief Management Officers are in the process of signing formal determinations that sufficient BPR was conducted with respect to each program.

The department has also performed BPR to respond to specific needs that have been identified by departmental components and to refine its end-to-end business processes. For example, the Defense Commissary Agency, in cooperation with the Business Transformation Agency and now the office of the DCMO, used BPR to help formulate a future enterprise transition plan for the agency. In addition, DOD officials described activities to refine DOD’s debt management business process, which is part of the Budget-to-Report end-to-end process. The standardization of related business process models related to debt management led to updates in the latest BEA, which now provide tools that can be used to guide and constrain investments.

While DOD has performed the BPR activities described above, the extent to which these efforts have streamlined and improved the efficiency of the underlying business processes remains uncertain because the department has yet to establish specific measures and report outcomes that align with the department’s efforts. For example, the department does not track information, such as the number of systems that have undergone material process changes or the number of interfaces reduced or eliminated as a result of BPR reviews. DOD officials noted that addressing these requirements has been challenging and measuring progress, such as the number of interfaces reduced, has not been a priority. However, until the department develops and reports on performance measures associated with the development of its end-to-end processes and their related BPR activities, the department and its stakeholders will not know the extent to which BPR is effectively streamlining and improving its end-to-end business processes as intended.

DOD’s Annual Report Continues to Describe Certification Actions for Its Business System Investments

Among other things, the act requires DOD to include, in its annual report to congressional defense committees, a description of specific actions the department has taken on each business system submitted for certification. As applicable in fiscal year 2011, the act required that modernization investments involving more than $1 million in obligations be certified by a designated approval authority as meeting specific criteria, such as whether or not the system is in compliance with DOD’s BEA and appropriate BPR efforts have been undertaken. Further, the act requires that the Defense Business Systems Management Committee approve each of these certifications.

DOD’s annual report identifies that the Defense Business Systems Management Committee approved 198 actions to certify, decertify, or recertify defense business system modernizations. These 198 IRB certification actions represented a total of about $2.2 billion in modernization spending. Specifically, the annual report states that during fiscal year 2011, the Defense Business Systems Management Committee approved 58 unique certifications, 102 recertifications, and 38 decertifications—101 with and 97 without conditions. Examples of conditions associated with individual systems include conditions related to business process engineering and BEA compliance.

While DOD has continued to report its certification actions, these actions have been based on limited information, such as unvalidated architecture compliance assertions, as discussed in the previous section. Until DOD addresses our prior recommendations, the department faces increased risk that it will not effectively be able to oversee its extensive business systems investments.

DCMO Lacks Staff It Identified as Needed to Support Departmentwide Business Systems Modernization

Among other things, the act calls for the DCMO to be responsible and accountable for developing and maintaining the BEA, as well as integrating defense business operations. Although responsibility for these activities previously resided with the Business Transformation Agency, DOD announced the disestablishment of this agency in August 2010. In June 2011, we recommended that DOD expeditiously complete the implementation of the announced transfer of functions of the agency and provide specificity as to when and where these functions will be transferred.structure consisting of a front office and six directorates and identified the staff resources it would need to fulfill its new responsibilities, which became effective in September 2011.

Subsequently, the DCMO defined an organizational However, the office reported that it has not yet filled many of the positions needed to execute these responsibilities. In particular, as of April 2012, the office reported that it had filled only 82 of its planned 139 positions, with 57 positions (41 percent) remaining unfilled. had filled only 12 of 43 positions within its Technology, Innovation, and Engineering Directorate; which, among other things, is responsible for developing the BEA. Further, only 10 of 19 positions within the Planning and Performance Management Directorate, 14 of 22 positions within its Business Integration Directorate, and 16 of 23 positions within its Investment and Acquisition Management Directorate had been filled. Table 3 identifies the key responsibilities of each DCMO organizational component as well as planned and actual staffing.

Conclusions

Establishing a well-defined, federated BEA and modernizing DOD’s business systems and processes are critical to effectively improving the department’s business systems environment. The department is taking steps to establish such a business architecture and modernize its business systems and processes, but long-standing challenges remain. Specifically, while DOD had made progress in developing its corporate enterprise architecture, it has yet to be federated through the development of aligned subordinate architectures for each of the military departments. The department has also taken effective steps to establish an infrastructure for establishing a federated BEA, including documenting a vision for the BEA and developing content around its end-to-end business processes. However, the department’s ability to achieve its federated BEA vision is limited by the lack of common definitions for key terms and concepts to help ensure that each of the respective portions of the architecture will be properly linked and aligned, as well as by the absence of a policy that clarifies roles, responsibilities, and accountability mechanisms. In addition, information used to support the development of the DOD’s budget requests continues to be of questionable reliability and no deadline for validating reliable information has been set. DOD has also not implemented key practices from our ITIM framework since our last review in 2011. Further, while the department has begun taking steps to reengineer its business systems and processes, and has issued sound guidance for conducting BPR associated with individual business systems, it has yet to measure and report on the impact these efforts have had on streamlining and simplifying its corporate business processes. Finally, the efforts of the office of the DCMO have been impacted by having fewer staff than the office identified as needed to support departmentwide business systems modernization.

Collectively, these limitations continue to put the billions of dollars spent annually on about 2,200 business system investments that support DOD functions, such as departmentwide financial management and military personnel health care at risk. Our previous recommendations to the department have been aimed at accomplishing these and other important activities related to its business systems modernization. While the department has agreed with these recommendations, its progress in addressing the act’s requirements, its vision for a federated architecture, and our related recommendations is limited, in part, by continued uncertainty surrounding the roles and responsibilities of key organizations and senior leadership positions. In light of this, it is essential that the Secretary of Defense issue a policy that resolves these issues, as doing so is necessary for the department to establish the full range of institutional management controls needed to address its business systems modernization high-risk area. It is equally important that DOD measure the impact of its BPR efforts and include information on the results of these efforts and its efforts to fully staff the office of the DCMO in the department’s annual report in response to the act.

Recommendations for Executive Action

Because we have existing recommendations that address many of the institutional management control weaknesses discussed in this report, we reiterate those recommendations.

In addition, to ensure that DOD continues to implement the full range of institutional management controls needed to address its business systems modernization high-risk area, we recommend that the Secretary of Defense ensure that the Deputy Secretary of Defense, as the department’s Chief Management Officer, establish a policy that clarifies the roles, responsibilities, and relationships among the Chief Management Officer, Deputy Chief Management Officer, DOD and military department Chief Information Officers, Principal Staff Assistants, military department Chief Management Officers, and the heads of the military departments and defense agencies, associated with the development of a federated BEA. Among other things, the policy should address the development and implementation of an overarching taxonomy and associated ontologies to help ensure that each of the respective portions of the architecture will be properly linked and aligned. In addition, the policy should address alignment and coordination of business process areas, military department and defense agency activities associated with developing and implementing each of the various components of the BEA, and relationships among these entities.

To ensure that annual budget submissions are based on complete and accurate information, we recommend that the Secretary of Defense direct the appropriate DOD organizations to establish a deadline by which it intends to complete the integration of the repositories and validate the completeness and reliability of information.

To facilitate congressional oversight and promote departmental accountability, we recommend that the Secretary of Defense ensure that the Deputy Secretary of Defense, as the department’s Chief Management Officer, direct the Deputy Chief Management Officer to include in DOD’s annual report to Congress on compliance with 10 U.S.C. § 2222, the results of the department’s BPR efforts. Among other things, the results should include the department’s determination of the number of systems that have undergone material process changes, the number of interfaces eliminated as part of these efforts (i.e., by program, by name), and the status of its end-to-end business process reengineering efforts, and an update on the office of the DCMO’s progress toward filling staff positions and the impact of any unfilled positions on the ability of the office to conduct its work.

Agency Comments and Our Evaluation

In written comments on a draft of this report, signed by the Deputy Chief Management Officer and reprinted in appendix II, the department partially concurred with our first recommendation, concurred with our second and third recommendations, and did not concur with the remaining recommendation.

The department partially concurred with our first recommendation to establish a policy that clarifies the roles, responsibilities, and relationships among its various management officials associated with the development of a federated BEA. In particular, the department stated its belief that officials’ roles, relationships, and responsibilities are already sufficiently defined through statute, policy, and practice, and that additional guidance is not needed. However, the department added that it will continue to look for opportunities to strengthen and expand guidance, to include the new investment management and architecture processes. We do not agree that officials’ roles, relationships, and responsibilities are sufficiently defined in existing policy. For example, we found that DOD has not developed a policy that fully defines the roles, responsibilities, and relationships associated with developing and implementing the BEA. Moreover, in our view, responsibility and accountability for architecture federation will not be effectively addressed with additional guidance because guidance cannot be enforced. Rather, we believe a policy, which can be enforced, will more effectively establish responsibility and accountability for architecture federation. Without a policy, the department risks not moving forward with its vision for a federated architecture. Thus, we continue to believe our recommendation is warranted.

The department concurred with our second recommendation, to establish a deadline by which it intends to complete the integration of the repositories and validate the completeness and reliability of information, and described commitments and actions being planned or under way. We support the department’s efforts to address our recommendation and reiterate the importance of following through in implementing the recommendation within the stated time frame.

DOD also concurred with our third recommendation that the Deputy Secretary of Defense, as the department’s Chief Management Officer, direct the Deputy Chief Management Officer to include the results of the department’s BPR efforts in its annual report to Congress. However, the department stated that given the passage of the NDAA for Fiscal Year 2012, BPR authority now rests with the military department Chief Management Officers. As such, DOD stated that it would be appropriate for the recommendation to be directed to the BPR owners. We agree that the act requires the appropriate precertification authority for each covered business system to determine that appropriate BPR efforts have been undertaken. However, we disagree that our recommendation should be directed to the BPR owners. The recommendation is not intended to be prescriptive as to who should measure the impact of the BPR efforts. Rather, it calls for the reporting of the results of such efforts in the department’s annual report to Congress, which is prepared by the office of the DCMO under the department’s Chief Management Officer.

The department did not concur with our fourth recommendation to provide an update on the office of the DCMO’s progress toward filling staff positions and the impact of any unfilled positions in its annual report to Congress. DOD stated that it does not believe that the annual report is the appropriate communication mechanism; however, it offered to provide us with an update. While we support the department’s willingness to provide us with an update, we, nonetheless, stand by our recommendation. The purpose of the annual report is to document the department’s progress in improving its business operations through defense business systems modernization. Thus, the potential for staffing shortfalls in the office of the DCMO to adversely impact the department’s progress should be communicated to the department’s congressional stakeholders as part of the report. Including information about the department’s progress in staffing the office that was recently established to be responsible for business systems modernization would not only facilitate congressional oversight, but also promote departmental accountability.

We are sending copies of this report to the appropriate congressional committees; the Director, Office of Management and Budget; the Secretary of Defense; and other interested parties. This report also is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff members have any questions on matters discussed in this report, please contact me at (202) 512-6304 or melvinv@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III.

Appendix I: Objective, Scope, and Methodology

As agreed with the congressional defense committees, our objective was to assess the Department of Defense’s (DOD) actions to comply with key aspects of section 332 of the National Defense Authorization Act (NDAA) for Fiscal Year 2005 (the act), as amended, 10 U.S.C. § 2222 and related federal guidance. These include (1) developing a business enterprise architecture (BEA) and a transition plan for implementing the architecture, (2) identifying systems information in its annual budget submission, (3) establishing a system investment approval and accountability structure along with an investment review process, and (4) certifying and approving any business system program costing in excess of $1 million. (See the background section of this report for additional information on the act’s requirements.) Our methodology relative to each of the four provisions is as follows: To address the architecture, we analyzed version 9.0 of the BEA, which was released on March 15, 2012, relative to the act’s specific architectural requirements and related guidance that our previous annual reports in response to the act identified as not being fully implemented. Specifically, we interviewed office of the Deputy Chief Management Officer (DCMO) officials and reviewed written responses and related documentation on steps completed, under way, or planned to address these weaknesses. We then reviewed architectural artifacts in BEA 9.0 to validate the responses and identify any discrepancies. We also determined the extent to which BEA 9.0 addressed 10 U.S.C. § 2222, as amended by the NDAA for Fiscal Year 2012. In addition, we analyzed documentation and interviewed knowledgeable DOD officials about efforts to establish a federated business mission area enterprise architecture. Further, we reviewed the military departments’ responses regarding actions taken or planned to address our previous recommendations on the maturity of their respective enterprise architecture programs. We did not determine whether the DOD Enterprise Transition Plan addressed the requirements specified in the act, because an updated plan was not released during the time we were conducting our audit work.

See, for example, GAO-09-586 and GAO-11-684.

To determine whether DOD’s fiscal year 2013 IT budget submission was prepared in accordance with the criteria set forth in the act, we reviewed and analyzed the Report on Defense Business System Modernization Fiscal Year 2005 National Defense Authorization Act, Section 332, dated March 2012, and compared it with the specific requirements in the act. We also compared information contained in the department’s system that is used to prepare its budget submission (SNAP-IT) with information in the department’s authoritative business systems inventory (DITPR) to determine if DOD’s fiscal year 2013 budget request included all business systems and assessed the extent to which DOD has made progress in addressing our related recommendation. In addition, we reviewed DOD’s budget submission to determine the extent to which it addresses 10 U.S.C. § 2222, as amended by the NDAA for Fiscal Year 2012. We also analyzed selected business system information contained in DITPR, such as system life cycle start and end dates, to validate the reliability of the information. We also interviewed officials from the office of DOD’s Chief Information Officer (CIO) to discuss the accuracy and comprehensiveness of information contained in the SNAP-IT system, the discrepancies in the information contained in the DITPR and SNAP-IT systems, and efforts under way or planned to address these discrepancies.

To assess the establishment of DOD enterprise and component investment management structures and processes, we followed up on related weaknesses that our previous reports in response to the act have identified as not being fully implemented. Specifically, we interviewed the office of the DCMO and military department officials and reviewed written responses and related documentation on steps completed, under way, or planned to address these weaknesses. We also met with cognizant officials on steps taken to address new investment management requirements of the NDAA for Fiscal Year 2012. Further, we reviewed DOD’s most recent BEA compliance guidance to determine the extent to which it addressed our related open recommendations. Finally, we reviewed business process reengineering documentation provided to support assertions that modernization programs had undergone business process reengineering assessments.

To determine whether the department was certifying and approving business system investments with annual obligations exceeding $1 million, we reviewed and analyzed all Defense Business Systems Management Committee certification approval memoranda. We also reviewed IRB certification memoranda issued prior to the Defense Business Systems Management Committee’s final approval decisions for fiscal year 2011. We contacted officials from the office of the DCMO and investment review boards to discuss any discrepancies. In addition, we discussed with officials from the office of the DCMO its plans for updating the investment review process consistent with requirements of the NDAA for Fiscal Year 2012 and obtained related documentation. To assess the office of the DCMO’s progress toward filling staff positions, we compared the number of authorized positions with the staff on board as of late April 2012; reviewed and analyzed related staffing documentation; and interviewed office of the DCMO officials about staffing.

We did not independently validate the reliability of the cost and budget figures provided by DOD because the specific amounts were not relevant to our findings. We conducted this performance audit at DOD offices in Arlington and Alexandria, Virginia, from September 2011 to June 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective.

Appendix II: Comments from the Department of Defense

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the individual named above, Neelaxi Lakhmani and Mark Bird, Assistant Directors; Debra Conner; Rebecca Eyler; Michael Holland; Anh Le; Donald Sebers; and Jennifer Stavros-Turner made key contributions to this report.