Defense halts procurement system

The Defense Department has halted further development of its troubled Standard Procurement System, the $326 million initiative to streamline DOD's complex procurement process, to allow the program to focus on perfecting the current version of the system.

The action comes in response to last year's unusually harsh review by the General Accounting Office, two independent reviews and a cut in fiscal 2002 funding for the program.

"The department has shifted the program strategy to focus squarely on fielding this next version to fix many of the problems our users are experiencing with the current fielded system," said Deidre Lee, DOD director of defense procurement, in written testimony to the House Government Reform Committee's National Security, Veterans Affairs and International Relations Subcommittee.

The system's future will be determined later this year, after its current version is in place, DOD officials said. At that time, procurement executives from DOD will assess the options for meeting SPS' goal of creating a standardized contracting system.

SPS is DOD's effort to replace some 76 legacy procurement systems with a single system that would give agency managers greater access to contract data, interoperate with DOD financial systems, eliminate antiquated paper-based processes and provide better service to warfighters. To date, DOD has only fully replaced two systems and partially replaced two others, GAO told lawmakers.

Awarded in 1997, SPS is designed to automate the often-complex process that Pentagon procurement shops use to buy $130 billion in goods and services yearly. The new system was originally slated to be fully operational by March 31, 2000 but has repeatedly missed target deadlines and is over budget.

SPS managers notified DOD recently that the program was not on target to meet its revised cost, schedule and performance guidelines, said Margaret Myers, DOD's deputy assistant chief information officer. Therefore, DOD decided to stop further development of the next version of SPS, referred to as Version 5.0, and is refocusing on ironing out the problems with SPS' current software, Version 4.2, Myers added.

SPS has already been deployed to 21,000 procurement personnel at 777 sites — or more than half of all the system's intended users and more than two-thirds of its intended sites — said Army Col. Jake Haynes, program director for the SPS program office in DOD's Defense Contract Management Agency.

Lawmakers, however, questioned why the system appears to be off track when it has already been rolled out. "This is not the way to go about managing a multimillion-dollar information technology system," said Joel Willemssen, GAO's managing director of information technology issues, in a Feb. 7 hearing.

"It's going to have to be restructured," said Robert Lieberman, DOD's deputy inspector general. "That restructuring is under way."

Haynes said he has revamped SPS' management with an emphasis on disciplined processes. Furthermore, SPS is focusing on customer satisfaction, which has been one of its perennial problems.

The freeze on future development — called a strategic pause — was instituted when it became clear that SPS would not meet its most recent deadline of March 2003 for being fully operational, officials said.

The freeze was further necessitated by a cut in funding for the project. The fiscal 2002 DOD spending bill, approved by lawmakers late last year, sliced funding for SPS because of concerns about the program, allocating $39.2 million, some $7.6 million less than had been requested. The Bush administration seeks $28 million for SPS in fiscal 2003, a spokesman for the Defense Contract Management Agency said.

The SPS contract with American Management Systems Inc. has also been modified to fit the new scope of the proj.ect, DOD officials said.

SPS and AMS have improved the process used to detail system requirements, Haynes said. Previously, that process was unclear and often left room for interpretation, but now the process is much more disciplined, he said. User requirements are reviewed and then prioritized by the SPS Joint Requirements Board, which includes 14 representatives from DOD and AMS' SPS personnel.

Furthermore, the requirements then must be approved by a Joint Requirements Oversight Council and, finally, by the Executive Steering Group, made up of 10 senior procurement executives from DOD. "We're leaving no room for interpretation," Haynes said.

SPS officials said they are now focusing intently on user satisfaction, something that has been a significant hurdle. Part of the issue has been educating users about the new system, said Gino Magnifico, SPS deputy program manager.

The legacy systems were tailor-made for specific user groups, Magnifico said. SPS is a departmentwide system that will enable DOD to share data across the organization. Once users understand the need for collecting data that they did not have to provide previously, they often are more willing to work with the system.

AMS.officials said they remain committed to making SPS fully operational and noted that it is the first DOD system to function enterprisewide.

During the strategic pause, SPS officials are also analyzing options for the system's future. So far, SPS has met all but 32 of the 299 functions laid out for it, Haynes said. The analysis of alternatives will be presented to the Executive Steering Group later this year, which will make a recommendation on the future of the program.

One underlying and unresolved issue that goes beyond SPS itself is how agencies assess costs. Although DOD puts the system cost at about $326 million, GAO officials argue that DOD has spent nearly $3 billion over 10 years.

Willemssen said DOD failed to economically justify SPS and that the cost of the program so far has failed to prove a return on that investment.

Myers, however, said GAO's cost calculation includes information technology infrastructure costs, something DOD does not include because they are not SPS-specific costs. DOD and GAO representatives are working to resolve this issue, officials said.