DLA is DOD’s logistics manager for all DOD consumable items and some DOD repair items; its primary business function is providing supply support to sustain military operations and readiness. In addition to this primary function, which DLA refers to as either materiel management or supply-chain management, DLA performs five other major business functions: distributing materiel ordered from its inventory, purchasing fuels for DOD and the U.S. government, storing strategic materiel,marketing surplus DOD materiel for reuse and disposal, and providing numerous information services, such as item cataloging, for DOD and the U.S. and selected foreign governments. DLA consists of a central command authority supported by a number of field commands that manage the agency’s six business functions. Table 1 shows DLA’s field commands, their respective business functions, and examples of the consumable and/or repair items each manages. To support the current materiel management business function, DLA reports that it relies on a collection of mainframe-based Cobol systems, which are not integrated and are more than 30 years old. These legacy systems support DLA’s traditional mission as a manager of physical inventory; that is, they support materiel management functions such as acquisition/ procurement, inventory control, requirements forecasting, requisition processing, technical data maintenance, and financial management. The systems consist of two primary systems—the Standard Automated Materiel Management System (SAMMS) and the Defense Integrated Subsistence Management System (DISMS)—and two subsidiary systems—SPEDE (SAMMS Procurement by Electronic Data Exchange) and DPACS (Defense Pre-award Contracting System). The functions of these systems are summarized in table 2. DLA reports that these legacy systems are the product of decades of accumulated and divergent business practices and use obsolete technology that is no longer supported by the original equipment manufacturers and the software support provider. Further, DLA maintains that these systems, consisting of several million lines of unstructured and expensive-to-maintain code, provide inadequate analytical capability and no real-time data access. Joint Vision 2020, published in June 2000, was preceded by Joint Vision 2010, published in 1996. It was issued by the Chairman, Joint Chiefs of Staff. force the right assets (personnel, equipment, and supplies) in the right place, at the right time, and in the right quantity. To achieve this goal, DOD envisions a real-time, Web-based information system providing both logisticians and field commanders with total asset visibility within a given theater of operations. Additionally, this system is to include decision support tools to improve requirements analysis and planning, as well as provide real-time control of the logistics supply chain, regardless of whether the requirements are to be fulfilled by the commercial sector or within DOD. 21st Century Logistics calls for the military services and DLA to pursue system modernization efforts to bring about the focused logistics goals described in Joint Vision 2020. The systems are to be an integrated collection of applications sharing a common data environment, which are to be deployed to all forces by fiscal year 2006. To fulfill Joint Vision 2020, the Deputy Secretary of Defense issued a memorandum in March 2000 to the military services and DLA requiring submission of logistics transformation plans, documenting, on an annual basis, planned actions and related resources for implementing focused logistics, as well as any other logistics initiatives. The military services and DLA were directed to satisfy the 21st Century Logistics objectives by fiscal year 2006, including developing logistics process and system modernization plans by the end of fiscal year 2001 and implementing these plans by fiscal year 2006. DLA was directed to submit its transformation plan to the Under Secretary of Defense for Acquisition, Technology, and Logistics by July 1, 2000. To fulfill its direction under DOD’s 21st Century Logistics plan, DLA has outlined strategic goals and objectives in its Strategic Plan 2000: DLA 21and Logistics Transformation Plan. Under Goal 2 of DLA 21, DLA plans to reduce costs, improve efficiency, and increase effectiveness through organizational redesign, business systems modernization, strategic sourcing, infrastructure consolidation, and optimally sized inventories. To achieve this goal, DLA is first focusing on transforming its materiel management (supply-chain management) function, because according to the DLA Director, this is DLA’s most critical business function. More specifically, it plans to implement a Web/network-based logistics system using commercial, off-the-shelf (COTS) products. To select the most appropriate COTS products, DLA evaluated potential solutions against business processes for certain of its commodities (including clothing, aircraft parts, and medical supplies). According to DLA, it chose important, widely differing commodities so that its analysis would be sufficiently comprehensive to be extrapolated to the rest of the commodities within the materiel management business function. Further, DLA chose to evaluate solutions against business processes that had been previously reengineered, so that the system solution chosen would be based on modernized business processes. Through this analysis, which used scripted demonstrations of the reengineered requirements, DLA sought to ensure that the chosen applications could effectively meet DLA’s materiel management/supply-chain management requirements. The resulting COTS-based system is to be used to reengineer the agency’s materiel management business processes. DLA refers to its acquisition and implementation of this COTS-based system, and the associated business process reengineering, as Business Systems Modernization (BSM). DLA’s BSM program is intended to modernize DLA’s materiel management business function, changing DLA from solely a provider and manager of physical inventory to primarily a manager of supply chains. In this role, DLA would link customers with appropriate suppliers and track physical and financial assets. DLA expects this approach to enhance supply-chain visibility and capabilities, resulting in reduced logistics cycle times, increased customer satisfaction, reduced customer wait time, and decreased materiel costs. In short, DLA’s goal is “to do business as business does business.” According to BSM program documents, DLA’s transformation from its current to its future role requires modernization of the IT systems that now support DLA’s materiel management business function, subfunctions, and processes. The BSM system solution is envisioned as consisting of Web- and COTS-based applications supported by an enterprise application tool. Through the use of COTS products, DLA expects to reduce materiel management systems operating costs and take advantage of the continuous technology insertion and continuous functional improvement that COTS packages allow. The BSM COTS will consist of enterprise resource planning (ERP) software. DLA plans to acquire and deploy its BSM COTS system solution through a series of four system releases/increments. First, it plans to demonstrate successful application of its new concept of doing business to selected commodities, namely, earth-moving equipment, medical/pharmaceutical supplies, and F/A-18 engine components. These commodities were chosen for the first release because each is an important responsibility of one of the three Defense Supply Centers. Thus, the first release will be deployed to all three Defense Supply Centers at once. Once this first release is successfully demonstrated, DLA plans to expand the system solution to other commodities and to other users within the materiel management business function. According to DLA’s fiscal year 2001 budget submission, DLA will invest approximately $897 million to acquire and implement BSM from fiscal years 2000 through 2007 (see table 3). Thus far, DLA has obligated about $150 million for BSM. From this total, about $56 million was obligated in fiscal year 2000 to prepare and validate functional requirements, conduct pre-award contract functions for selection of the systems integration contractor, perform initial work on the program by awarding the integration contract, and begin detailed business process reengineering planning for the first increment of the program. The remaining approximately $93 million was obligated in fiscal year 2001 for the development of a materiel management enterprise architecture (referred to by DLA as the BSM Business Architecture Blueprint) and for the initial implementation, including testing, of the BSM concept demonstration. Of the unobligated portion of the BSM budget, about $549 million is to fund implementation and sustainment of the COTS solution (system releases 1 through 4) within the materiel management business area, including its extension to the commodities not covered by the concept demonstration. DLA officials told us that the remaining unobligated funds for fiscal years 2006 and 2007, about $201 million, are to be used for extending the BSM ERP software to the distribution and cataloging business areas. Only about 1 percent of the BSM budget is for new network and computing platform infrastructure (hardware and systems software). This is because DLA’s current and future investments in IT infrastructure, which will support ongoing DLA operations as well as the BSM program, are funded separately. The infrastructure investments in fiscal year 2001 amount to about 45 percent of DLA’s approximately $680 million IT budget. BSM is expected to take 6 years to acquire and implement for materiel management (fiscal years 2000 through 2005). DLA has structured the BSM life cycle to comply with DOD 5000.2 milestone phases for major systems acquisitions. Figure 1 summarizes the BSM development timeline. The first milestone phase (phase 0, December 1999 through July 2000) of the BSM program focused on evaluation of alternative concepts and potential system integrators. The second and current milestone phase (phase I/IIA) covers program definition (design), risk reduction, and concept demonstration. The current phase includes implementation and testing/evaluation of the system solution for certain commodities, as well as such implementation activities as training and site preparation. This phase is scheduled to run from September 2000 through September 2002.