The Department of Defense (DOD), faced with constraints on its budget, is seeking ways to improve operations and manage resources more efficiently. The Corporate Information Management (CIM) initiative is a major part of that effort. DOD launched CIM in 1989 as a way to improve business practices, make better use of information technology, and eliminate duplicative information systems across seven administrative areas, including civilian payroll, materiel management, and medical. Initial DOD efforts to implement CIM focused on eliminating separate service systems and providing integrated systems across DOD. Since that time, the CIM scope has broadened dramatically to include all DOD functional areas, including procurement, logistics, finance, and command and control. Today, its primary objective is to significantly improve business processes of all functional areas through such techniques as business process reengineering and continuous process improvements. Nevertheless, standardization and improvement of DOD’s supporting information systems remains a major CIM objective. CIM has its origins in the recommendations of the President’s Blue Ribbon Commission on Defense Management (the Packard Commission). The Commission’s overall objectives were to identify ways to streamline and restructure DOD business operations. In July 1989, the Secretary of Defense issued the Defense Management Report (DMR) to implement the Commission’s recommendations. DMR estimated that DOD could save about $70 billion by improving its management and organization. In October 1989, DOD initiated CIM as a management method for achieving DMR objectives. In November 1989, the Deputy Secretary of Defense issued the DMR Decision 925, which announced the initiative. He said, “Corporate Information Management (CIM) will enhance the availability and standardization of information in common areas and provide for the development of integrated management information systems.” He characterized CIM activities as a unique opportunity to capture savings while at the same time dramatically improving efficiency and effectiveness of operations. By eliminating separate service information systems and providing integrated systems across DOD, it expected to avoid the cost of developing and supporting redundant systems designed to perform the same basic functions. For example, each service had developed its own process and system for paying active military personnel. While there were procedural differences that had evolved among the services, there was no justification for the multiple systems that perform the same function. On February 26, 1990, the Deputy Secretary of Defense convened the Executive Level Group of high-level industry and DOD officials to evaluate DOD’s business practices and suggest an overall direction for the DOD. The group noted that government agencies had traditionally viewed information management as merely automating existing business methods in order to cut costs. Little effort was made to improve the methods, themselves. The group recommended that DOD adopt a management philosophy that emphasized continuous improvement of business methods before identifying specific computing and communication technologies. It stated, “Forward-looking organizations took a path which put primary emphasis on continuously improved business methods. Computing and communication technology played a subordinate role, and only now is being applied to the superior business methods that have evolved.” In January 1991, the Deputy Secretary of Defense endorsed a plan where DOD would “reengineer,” or thoroughly study and redesign, its business processes before it standardized its information systems. DOD believed this CIM implementation concept would emphasize the importance of improving the way it does business rather than merely standardizing old, inefficient business processes. DOD expected this new focus on business improvement to offer opportunities for substantial savings. In April 1992, DOD projected that these efficiency and productivity improvements would account for $36 billion of the more than $70 billion in anticipated DMR savings. A number of studies have since found that these DMR and CIM projections were overly optimistic. DOD now acknowledges that this $36 billion estimate is obsolete and no longer projects CIM savings. There is agreement, however, that CIM improvements can save DOD tens of billions of dollars over the next 10 years. In November 1992, DOD shifted CIM’s implementation emphasis back to information systems. Looking for ways to offset significant defense budget reductions, the DOD Comptroller recommended that CIM implementation efforts in the logistics functional area focus on selecting standard, or “migrating,” information systems that could be used departmentwide. Under this new implementation strategy, business process improvements would be done concurrently with the selection and implementation of the migration systems. DOD has since implemented this CIM migration strategy across all CIM efforts. The Assistant Secretary of Defense for Command, Control, Communication, and Intelligence (C3I) is responsible for providing overall technical direction for the CIM effort. Principal Staff Assistants (PSA) are responsible for providing guidance and oversight for implementing the initiative within their assigned functional areas. PSAs are to develop a “corporate” view of their areas and identify major changes to improve business processes. DOD believes that this top-down review offers the best opportunity for innovative improvements that have the greatest potential for significant cost savings. Meanwhile, under the DOD enterprise model, service and Defense Logistics Agency (DLA) managers are taking a bottom-up look at their organizations to identify and implement business process improvements that have service or agencywide application. While such improvements have smaller cost savings potential, they usually can be achieved sooner. They also help achieve acceptance of CIM changes by actively involving more managers and staff in the change process. In November 1991, the PSA for logistics established the Joint Logistics System Center (JLSC) to achieve CIM goals for the materiel management and depot maintenance business areas. Simply stated, JLSC’s charter is to work with the services and DLA to identify business process improvements and the appropriate application of information systems. Under this concept, JLSC serves primarily as a facilitator; the services and DLA design, develop, integrate, and implement the new corporate logistics systems. Recognizing the importance of active participation by the services and DLA in the CIM process, the PSA staffed JLSC with about 250 personnel from all four military services and DLA. In addition, the services and DLA provide experts to ensure JLSC fully addresses mission requirements. JLSC expects that improvements to DOD’s logistics functions will provide most of the CIM-related cost savings. Logistics is the acquisition, management, movement, and maintenance of the material in the DOD inventory. This report focuses on two logistics functions: materiel management and depot maintenance. Materiel management includes deciding what supply items to stock, determining how many of each are needed, purchasing needed items from private vendors or manufacturing agencies within DOD, storing the items, and tracking them from the time they are ordered until they are used. Depot maintenance includes manufacturing, overhauling, and repairing parts, assemblies, subassemblies, and end items such as aircraft, ships, and tanks. The Chairman of the Senate Committee on Governmental Affairs asked us to review DOD’s implementation of the CIM initiative. In response to his request, we focused our review on the logistics functions of materiel management and depot maintenance because the Committee had expressed particular interest in materiel management and because one organization, JLSC, had been established to oversee the implementation of CIM in these two areas. Our specific objectives were to identify (1) CIM improvements made to business processes and supporting information systems and (2) impediments, if any, to achieving expected CIM results. To identify CIM improvements in materiel management and depot maintenance, we analyzed implementation plans, project information maintained by JLSC managers, and progress briefings given to senior DOD officials. Further, we interviewed DOD officials who are implementing CIM across DOD, officials who are managing CIM efforts in the logistics areas, and project managers responsible for specific efforts under the initiative. We also examined analyses that JLSC used to establish cost and benefit projections, budget documents, and updates of cost and benefit estimates. We did not independently validate JLSC’s savings estimates for its initiatives. To identify major impediments to achieving expected CIM results, we reviewed guidance provided by the Deputy Under Secretary of Defense (Logistics), including DOD’s logistics objectives, strategic business plans, the Logistics CIM Migration Master Plan, and DOD memorandums establishing and implementing the initiative. Also, we interviewed JLSC officials responsible for the overall progress of the implementation and reviewed correspondence and briefings concerning delays. We also reviewed independent studies and prior audits and held discussions with DOD officials responsible for overall CIM implementation, as well as those responsible for logistics processes. We performed our work at the Office of the Assistant Secretary of Defense for C3I, Washington, D.C.; the Office of the Assistant Secretary of Defense for Production and Logistics, Alexandria, Virginia; and the Joint Logistics Systems Center, Wright-Patterson Air Force Base, Ohio. We conducted our work between October 1992 and July 1994 in accordance with generally accepted government auditing standards. When activated, JLSC took actions to achieve quick, identifiable cost savings through CIM, primarily by facilitating the deployment of business processes and supporting information systems from one of the services or DLA—where they had been successfully implemented—to the others. JLSC identified 20 of these near-term projects during late 1992 and early 1993 and had begun implementing 7 of them before it was directed by DOD to refocus its efforts. As directed by DOD, JLSC focused its CIM implementation efforts on selecting and testing migration information systems for materiel management and depot maintenance. This strategy runs counter to expert advice received by DOD concerning how to best improve its business practices. DOD believes the selection and implementation of migration systems is necessary to achieve quick cost savings and critical to forming a foundation upon which major business process improvements can be made.