To determine whether DOD’s logistics migration efforts will meet its objectives for dramatic improvements in operational efficiency and effectiveness, we reviewed DOD’s policies and guidance for enterprise integration, corporate information management, and logistics migration system selection to ensure that information technologies are acquired, managed, and used in the most efficient and effective manner. Our assessment included analyzing DOD and prior GAO studies of the migration system strategy implementation and comparing DOD’s logistics information resources management practices to those followed by public and private organizations. We conducted our review from August 1995 through August 1996 in accordance with generally accepted government auditing standards. Details of our scope and methodology are contained in appendix I. The Deputy Under Secretary of Defense for Logistics provided written comments on a draft of this report. These comments are discussed at the end of this report and reprinted in appendix II. DOD has said that it must either improve effectiveness and efficiency dramatically or face real losses in capability to meet its mission objectives. As characterized by the Under Secretary of Defense for Acquisition and Technology (USD(A&T)), “Every logistics dollar expended on outdated systems, inefficient or excess capability and unneeded inventory is a dollar not available to build, modernize or maintain warfighting capability.” Defense logistics is the acquisition, management, distribution, and maintenance of the DOD materiel inventory used to provide replacement parts and other items for sustaining the readiness of ships, aircraft, tanks, and other weapon systems, as well as supporting military personnel. Logistics business operations include four major business activities—depot maintenance, distribution, materiel management, and transportation. DOD has reported that it spends over $44 billion annually maintaining, managing, distributing, and transporting a materiel inventory of $70 billion to support about $600 billion in mission assets. In October 1989, DOD established the CIM initiative to dramatically improve the way DOD conducts business, primarily by adopting best business practices used in the public and private sectors and building the automated information systems to support those improved practices. Originally, CIM focused on administrative areas such as civilian payroll, civilian personnel, and financial operations. DOD quickly broadened the initiative to encompass all DOD business areas, including the major logistics business activities. In January 1991, the Deputy Secretary of Defense endorsed a CIM implementation plan under which DOD would “reengineer,” that is thoroughly study and redesign, its business processes before it standardized its information systems. The Deputy Secretary believed this implementation strategy would emphasize the importance of improving the way DOD did business rather than merely standardizing old, inefficient business processes. In 1992, DOD projected that by focusing on business improvement, it could save as much as $36 billion by fiscal year 1997. DOD expected that improvements to its logistics operations would provide most—$28 billion—of these CIM savings. By early 1992, DOD had identified a number of process improvement projects. However, later in the year, the Acting DOD Comptroller, concerned that the current CIM implementation approach would not produce the cost savings needed to help offset significant budget reductions, recommended that focus be shifted from reengineering projects to the selection and implementation of standard information systems that could be used departmentwide. In November 1992, the Assistant Secretary of Defense for Production and Logistics—now called the Deputy Under Secretary of Defense for Logistics (DUSD(L))—issued the Logistics CIM Migration Master Plan. This plan established the selection of migration systems as the CIM implementation strategy within the logistics business activities. This “migration systems strategy” called for identifying the best operational logistics information systems and deploying them across all the services and defense agencies. This, DUSD(L) believed, would not only make logistics operations more efficient (areas would mirror the best in DOD) but these standard systems would also eliminate the cost of developing and supporting redundant systems designed to perform the same basic business functions. The strategy was designed to gradually migrate the military services and defense agencies from their multiple and often redundant information systems by (1) selecting and deploying migration systems—either single information systems or groups of information systems—in each logistics activity departmentwide, (2) improving current business processes and adding new functions to fill voids, and (3) combining the improved and new business processes with the new information systems to form a corporate logistics process. For example, Defense had identified over 200 large and numerous smaller depot maintenance and materiel management logistics systems with the goal of first reducing the number of these separate systems to as few as 32 and then using these systems to migrate toward a single logistics standard information system. DOD’s efforts to standardize and migrate information systems across the logistics areas of depot maintenance, materiel management, and transportation have not achieved expected results. Recently, DOD acknowledged that the deployment of standard information systems will not provide the dramatic improvements and cost reductions envisioned under the CIM initiative and is now emphasizing alternative ways for meeting these objectives. At the same time, however, it is continuing to deploy the information systems selected under the failed migration strategy. Our reviews of DOD migration system efforts for depot maintenance, materiel management, and transportation operations confirm that, to date, the strategy has failed to produce the dramatic gains in efficiency and effectiveness that DOD anticipated. More specifically: Our review of depot maintenance systems found that even if the migration effort was successfully implemented as envisioned, the planned depot maintenance standard system will not dramatically improve depot maintenance operations in DOD. First, under the CIM initiative, DOD planned to invest more than $1 billion to develop a depot maintenance standard system. However this would achieve less than 2.3 percent in reduced operational costs over a 10-year period. Such incremental improvement is significantly less than the order-of-magnitude improvements DOD has said could be achieved through the reengineering of business processes. Second, by postponing reengineering efforts until after developing the standard system, DOD may make it more difficult to reengineer in the future by increasing the risks of entrenching inefficient and ineffective work processes. Our review of DOD’s materiel management systems effort showed that the Department itself abandoned the migration strategy for this logistics area after it realized that the original goal for achieving a standard suite of integrated systems would require significantly more time and money than originally anticipated. For example, it would take as long as 2 years and as much as $100 million more than originally estimated to develop and deploy the Stock Control System—an application that would assist in requisition, receipt, and inventory processing. After spending over $700 million to migrate materiel management standard systems, there were no dramatic improvements in materiel management business processes; there were numerous development, scheduling, and contracting problems; and only one application of the Stock Control System had been deployed. That application was delivered basically untested, did not meet user functional requirements, and required much rework, debugging, and testing on the user’s part. Our review of Defense’s transportation migration efforts found that the current migration strategy in the transportation area will not ensure improvements are made that Defense recognizes are critical to the transportation function. A number of studies since 1950 have found that Defense traffic management processes are fragmented and inefficient, reflecting the conflicts and duplication inherent in a traffic management organizational structure consisting of multiple transportation agencies, each with separate service and modal responsibilities. In a 1994 DOD report, Reengineering the Defense Transportation System: The “Ought To Be” Defense Transportation System of the Year 2010, Defense officials maintained that nothing less than fundamental change would be required to achieve the quantum gains in savings and productivity needed to improve transportation business processes. We recently reported that it will be difficult for Defense to realize the benefits of its current reengineering efforts because these efforts do not concurrently focus on how the transportation organization structure should be redesigned. Moreover, we have also recently reported that even though reengineering efforts for transportation are underway, in making its migration system selections, Defense did not assess the impact that these operational changes would have on its system selections. DOD’s own studies have acknowledged that the implementation of the migration strategy has not worked. In May 1994, for example, DUSD(L) chartered a team with representatives from the services and Defense Logistics Agency to identify ways to improve the business practices of DOD inventory control points. The team, with industry assistance, found that the migration approach to standardizing and upgrading materiel management information systems was not workable and recommended that efforts to develop the Materiel Management Standard System be discontinued. Similarly, the Commission on Roles and Missions of the Armed Forces, in its logistics case studies, concluded that DOD’s efforts to standardize its management information systems under its CIM initiative would merely result in more compact, standardized versions of DOD’s traditional business operations. In late 1994, the Assistant Secretary of Defense for Command, Control, Communications, and Intelligence (ASD(C3I)) acknowledged that DOD’s logistics migration systems strategy was seriously flawed. The Assistant Secretary said that, as opposed to the private sector which uses a very different approach, “DOD has virtually no chance of making high impact/quantum changes using the current approach.” In October 1995, the Under Secretary of Defense for Acquisition and Technology called for a revision to the standard migration systems strategy. Currently, for all business areas, DOD is trying alternative ways to achieve its CIM objectives of dramatic business improvement and cost reductions while, at the same time, continuing to deploy migration systems. To improve logistics operations, DOD is now emphasizing systems interoperability—the ability to exchange information between and among business activities—as a critical means for achieving dramatic improvements. To reduce operational costs, DOD is seeking to privatize and outsource certain functions—relying on the private sector to provide services that need not be performed by the Department. These three efforts make up a de facto DOD strategy for improving logistics systems. Each of the current efforts is discussed in more detail below.