DOD is one of the largest and most complex organizations in the world to manage effectively. While DOD maintains military forces with unparalleled capabilities, it continues to confront pervasive, decades-old management problems related to its business operations—which include outdated systems and processes—that support these forces. These management weaknesses cut across all of DOD’s major business areas, such as human capital management; the personnel security clearance program; support infrastructure management; financial management; weapon systems acquisition; contract management; supply chain management; and last, but not least, business systems modernization. All of these DOD areas are on our high-risk list. For years, DOD has attempted to modernize its business systems, and we have provided numerous recommendations to help guide its efforts, including a set of recommendations to help DOD develop and implement an enterprise architecture (or modernization blueprint) and establish effective management controls. To achieve successful transformation, we have also recommended the need for a CMO, and a strategic integrated action plan for the overall business transformation effort. Effective use of an enterprise architecture, or modernization blueprint, is a hallmark of successful public and private organizations. For more than a decade, we have promoted the use of architectures to guide and constrain systems modernization, recognizing them as a crucial means to a challenging goal: agency operational structures that are optimally defined in both the business and technological environments. The Congress has also recognized the importance of an architecture-centric approach to modernization: the E-Government Act of 2002, for example, requires OMB to oversee the development of enterprise architectures within and across agencies. In brief, an enterprise architecture provides a clear and comprehensive picture of an entity, whether it is an organization (e.g., a federal department) or a functional or mission area that cuts across more than one organization (e.g., financial management). This picture consists of snapshots of both the enterprise’s current or “As Is” environment and its target or “To Be” environment. These snapshots consist of “views,” which are one or more architecture products (models, diagrams, matrices, text, etc.) that provide logical or technical representations of the enterprise. The architecture also includes a transition or sequencing plan, based on an analysis of the gaps between the “As Is” and “To Be” environments; this plan provides a temporal roadmap for moving between the two that incorporates such considerations as technology opportunities, marketplace trends, fiscal and budgetary constraints, institutional system development and acquisition capabilities, the dependencies and life expectancies of both new and “legacy” (existing) systems, and the projected value of competing investments. Our experience with federal agencies has shown that investing in information technology (IT) without defining these investments in the context of an architecture often results in systems that are duplicative, not well integrated, and unnecessarily costly to maintain and interface. A corporate approach to IT investment management is also characteristic of successful public and private organizations. Recognizing this, the Congress developed and enacted the Clinger- Cohen Act in 1996, which requires OMB to establish processes to analyze, track, and evaluate the risks and results of major capital investments in information systems made by executive agencies. In response to the Clinger-Cohen Act and other statutes, OMB developed policy for planning, budgeting, acquisition, and management of federal capital assets and issued guidance. We have also issued guidance in this area, in the form of a framework that lays out a coherent collection of key practices that, when implemented in a coordinated manner, can lead an agency through a robust set of analyses and decision points that support effective IT investment management. This framework defines institutional structures, such as investment review boards, and associated processes, such as common investment criteria. Further, our investment management framework recognizes the importance of an enterprise architecture as a critical frame of reference for organizations making IT investment decisions: specifically, it states that only investments that move the organization toward its target architecture, as defined by its sequencing plan, should be approved (unless a waiver is provided or a decision is made to modify the architecture). Moreover, it states that an organization’s policies and procedures should describe the relationship between its architecture and its investment decision-making authority. Our experience has shown that mature and effective management of IT investments can vastly improve government performance and accountability, and can help to avoid wasteful IT spending and lost opportunities for improvements. Since 2001, we have regularly reported on DOD’s efforts to (among other things) develop an architecture and to establish and implement effective investment management structures and processes. Our reports have continued to raise concerns about the department’s architecture program, the quality of the architecture and the transition plan, and the lack of an investment management structure and controls to implement the architecture. Our most recent reports, which were issued in the third and fourth quarters of fiscal year 2005, made the following points: ● DOD had not established effective structures and processes for managing the development of its architecture. ● DOD had not developed a well-defined architecture. The products that it had produced did not provide sufficient content and utility to effectively guide and constrain ongoing and planned system investments. ● DOD had not developed a plan for transitioning from the “As Is” to the “To Be” architectures. ● DOD did not have an effective departmentwide management structure for controlling its business investments. ● DOD had not established common investment criteria for system reviews. ● DOD had not included all reported systems in its fiscal year 2005 IT budget request. ● The Under Secretary of Defense (Comptroller) had not certified all systems investments with reported obligations exceeding $1 million, as required by the fiscal year 2003 National Defense Authorization Act. Our recommendations to DOD provide a comprehensive roadmap for addressing these problems. DOD has largely agreed with the recommendations and as we recently reported, has defined a framework intended to do so. In testimony before this Subcommittee earlier this year, Comptroller General Walker emphasized that there are three key elements that DOD must incorporate into its business transformation efforts to successfully address its systemic business challenges. First, these efforts must include an integrated strategic business transformation plan, including an enterprise architecture to guide and constrain implementation of such a plan. Second, control of system investments is crucial for successful business transformation. Finally, a CMO is essential for providing the sustained leadership needed to achieve a successful and lasting transformation effort. The CMO would not assume the day-to-day management responsibilities of other DOD officials nor represent an additional hierarchical layer of management but would lead DOD’s overall business transformation efforts. Additionally, a 7-year term would also enable the CMO to work with DOD leadership across administrations to sustain the overall business transformation effort. As defined in Section 332 of the defense authorization act for fiscal year 2005, DOD is required to satisfy several conditions relative to its approach to managing its business systems modernization program. Generally speaking, DOD is required to do the following: 1. By September 30, 2005, develop a business enterprise architecture that meets certain requirements. 2. By September 30, 2005, develop a transition plan for implementing the architecture that meets certain requirements. 3. Identify each defense business system proposed for funding in the budget submissions for fiscal year 2006 and subsequent years, and for each system, among other things, identify whether funding is for current services or business systems modernization. 4. Take a number of actions regarding the review and approval of investments, including delegating responsibility for business system review and decision making to designated approval authorities, establishing investment review boards and supporting process that employ common steps and criteria, and obligating funds for Defense Business System Modernizations after October 1, 2005, only for systems that have been certified and approved. The act also requires us to assess DOD’s efforts to comply with the act within 60 days after approval of the business enterprise architecture and transition plan. On September 28, 2005, the Acting Deputy Secretary of Defense approved Version 3.0 of the business enterprise architecture and approved the associated enterprise transition plan. Accordingly, we are currently in the process of conducting our assessment, and we plan by November 25, 2005, to issue a report containing the results of our assessment to defense congressional committees, as specified in the act. As agreed, this statement contains only preliminary observations based on our ongoing work, meaning that these observations may change as we conclude our ongoing assessment. For purposes of this statement, we have grouped the act’s requirements, and our preliminary observations, into four categories: business enterprise architecture, enterprise transition plan, fiscal year 2006 budget submission, and investment review and approval. The act requires that DOD develop, by September 30, 2005, a business enterprise architecture. According to the act, this architecture must satisfy three major requirements: 1. Include an information infrastructure that, at a minimum, would ● comply with all federal accounting, financial management, and reporting requirements; ● routinely produce timely, accurate, and reliable financial information for management purposes; integrate budget, accounting, and program information and systems; and ● provide for the systematic measurement of performance, including the ability to produce timely, relevant, and reliable cost information. 2. Include policies, procedures, data standards, and system interface requirements that are to be applied uniformly throughout the department. 3. Be consistent with OMB policies and procedures. According to DOD, this version is intended to provide a blueprint to help ensure near-term delivery of needed capabilities, resources, and materiel to the warfighter. To do so, this version focused on six Business Enterprise Priorities (see table 1), which DOD states are short-term objectives to achieve immediate results. According to the department, these priorities will evolve and expand in future versions of the architecture. In addition to focusing version 3.0 on these priorities, according to DOD, the department also limited the extent to which the architecture was to address each priority, focusing on four questions: ● Who are our people, what are their skills, and where are they located?