Report: Pentagon's IT funding skewed

Despite consistent pleas by the Defense Department's top brass for more money to beef up significant shortfalls in modernization and readiness, the department in its fiscal 2000 budget used $1.2 billion from its operations and maintenance account to fund information technology systems development.

Operations and maintenance funding is generally set aside for the purpose of operating and maintaining existing organizations and services, not for developing and testing new capabilities. New capabilities, including IT systems that require testing and evaluation, are supposed to be funded using Research, Development, Test and Evaluation (RDT&E) funds.

However, a report released Tuesday by the Pentagon's inspector general found that development and modernization costs for a total of 81 IT systems, including several high-profile systems such as the Standard Procurement System (SPS) and Global Command and Control System (GCCS), were being funded in whole or in part by money set aside for operations and maintenance purposes. Specific tasks that were paid for using operations and maintenance funds included software modifications made to commercial off-the-shelf IT systems, system solution definitions, software license acquisitions and program support.

As part of its study, the IG found that operations and maintenance appropriations funded 61 percent, or $355 million, of the budgeted development and modernization costs for 14 major IT systems. DOD requested a total of $4.5 billion in its fiscal 2000 budget for IT development and modernization.

DOD program managers planned to use the operations and maintenance funds for such things as commercial software modifications, supporting headquarters staff, contracting offices and project offices, engineering studies, and evaluations of organizational structures and policies, the IG report stated.

In light of the IG report, DOD has made changes to its policy governing the use of operations and maintenance and RDT&E funds, claiming that until now the policy had been unclear and in need of clarification. As a result of the changes, RDT&E appropriations will be used specifically for "development, test and evaluation costs, including designing prototypes...[and] also should be used to develop major upgrades increasing the performance envelope of existing systems," said DOD comptroller William Lynn, in his official response to the IG report.

Likewise, operations and maintenance funds are to be used for such things as "software releases categorized as iterations on the basic release and not involving significant performance improvements or extensive testing," Lynn said. operations and maintenance funds should also cover items purchased from a commercial source that can be used without modification, he said.

Sample of IT programs using operations and maintenance funding (dollars in millions)

Source: Defense Department Inspector General Report, "Information Technology Funding in the Department of Defense," Dec. 17