IBM to fix DOD bookkeeping

The Defense Department last week took a significant step in what its comptroller calls a "mammoth undertaking" to get the department's financial systems under control by awarding a contract to IBM Corp. to develop a financial management architecture that will guide all of the department's systems development and spending.

Creating the architecture is a critical first step toward fixing DOD's tangle of more than 976 financial management systems.

The effort to reform DOD's financial mess is part of Defense Secretary Donald Rumsfeld's overall transformation effort, DOD Comptroller Dov Zakheim said. "In general, transformation has been viewed as new weapons systems or communications or even culture. And those are all important," he said during an April 10 Pentagon briefing. "But there is another one, too, and that's transforming the way we do business."

The eventual goal is to provide decision-makers with the accurate, reliable and timely financial data necessary to make decisions, Zakheim said.

The cost of the project, estimated at $100 million for this year and another $96 million for next year, is dwarfed by the complexity of the task: creating a blueprint architecture that will guide the development of those 976 financial systems, not to mention the thousands that feed data into them.

If deployed, the initiative will have an impact across the department because financial systems affect everything DOD does. According to a DOD description of the program, "The scope of this initiative encompasses those defense policies, processes, people and systems [that] guide, perform or support all aspects of financial management within the department."

The initiative also represents an enormous change in thinking for the department. DOD has never had a top-down view of how to handle financial data, said Karen Alderman, executive director of the Joint Financial Management Improvement Program, which reviews financial management software for compliance with federal requirements.

Because of this, scores of financial systems have cropped up that focus on their own needs and requirements, said Randolph Hite, the General Accounting Office's director of information technology systems issues. "What the architecture makes you do is start viewing the enterprise with the view of the optimization of the enterprise as the goal as opposed to [an individual] part of the enterprise," he said.

As an illustration of the lack of clear and reliable financial data, DOD cannot even estimate the cost of fixing its systems. That's the conclusion of a group appointed by Rumsfeld last year to propose ways to fix DOD's financial woes.

"We believe the department taking action to implement and maintain an enterprise architecture for financial and other management systems is a positive step," said Gregory Kutz, GAO's director of financial management and assurance. "It is obviously a small step forward given the magnitude of the challenge they have in front of them."

Anne Altman, managing director of IBM's federal division, said DOD chose IBM because of the company's experience with such transformations, including its own. IBM's team includes American Management Systems Inc., KPMG LLP, DynCorp, Science Applications International Corp. and Accenture.

In a somewhat unusual move, DOD awarded the contract as a blanket purchase agreement through the Defense Finance and Accounting Service's contracting office. By having contractors work through individual task orders, each awarded under the BPA, Pentagon officials will be able to keep tabs on the team's progress, officials said.

The first task will be for the IBM-led team to present its plan for the coming year, said Tina Jonas, deputy undersecretary of Defense for financial management. DOD officials aim to have the financial management architecture in place by March 2003.

Auditors warn that it will take discipline for the project to succeed. DOD's deputy inspector general, Robert Lieberman, compared the effort to the depth and breadth of the department's Year 2000 computer fixes.

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Milestones for development and deployment of a Defense Department financial management enterprise architecture:

Develop "to be" architecture March 2003

Validate architecture at representative business areas November 2003

Acquire software March 2004

Deploy solution to prototype sites March 2005

Conduct operational tests June 2005

Perform compliance assessments June 2005

Deploy across DOD September 2007