The Navy has managed two major business system modernization efforts poorly, leading to cost overruns, schedule delays and potential information security risks, the Government Accountability Office concluded in new reports.

Comment on this article in The Forum.The two efforts - the Enterprise Resource Planning program initiated in 2003 to standardize business processes, and the Navy Cash program started in 2001 to eliminate the need for currency on ships by issuing sailors smart cards for retail purchases and banking transactions - are part of a broader ongoing business systems modernization initiative at the Defense Department. GAO has designated the initiative as high risk, largely due to a lack of key information technology management controls.

Enterprise Resource Planning

The first stage of the ERP program is expected to cost about $2.4 billion and be completed in fiscal 2013. Despite some progress in justifying investments in the effort, and managing risks and system requirements, GAO said, weaknesses in controls have contributed to a more than two-year schedule delay and almost $600 million in cost overruns. They “will likely contribute to future delays and overruns if they are not corrected,” the watchdog agency said in a report (GAO-08-896) released on Monday.

GAO pointed to problems implementing earned value management, a tool that allows contracting officers to compare actual cost, planned cost and tangible return over the duration of a project to ensure efficiency. The Navy did not develop an effective master schedule for meeting program milestones and failed to perform a baseline review of the first stage’s system releases, the report said.

Also, program administrators have not established acceptable processes for mitigating risks associated with converting data from the Naval Air Systems Command’s legacy computer systems to ERP and positioning NAVAIR for adopting the new business processes embedded in ERP software.

GAO recommended that Defense officials ensure the Navy follow proper earned value management standards and assign an independent organization to oversee progress. It also recommended that the secretary of Defense direct the secretary of the Navy on plans for mitigating risks associated with converting data from legacy systems to Navy ERP and moving business processes to the new system, and that the secretary of the Navy provide frequent progress reports.

"The department has already taken steps to address some of GAO's recommendations and the Navy [ERP] program office is committed to implementing recommendations that will contribute to the program's success," wrote Paul Brinkley, deputy undersecretary of Defense for business transformation, in response to the report.

Navy Cash

Navy Cash is expected to cost about $320 million, with $220 funded by Navy and $100 million by the Treasury Department’s Financial Management Service. The Navy is responsible for managing the acquisition of the system components, while FMS develops and maintains the system and manages its funding.

GAO found that a number of key IT management controls to ensure that system investments and processes for deployment are cost effective have not been implemented fully. "As a result, investment in the system has not been justified," the agency said in a separate report published on Monday.