Author: Lou

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One Olympics Ends, Another Begins

The Defense world is all atwitter at the upcoming peek at the DoD 2015 budget that Secretary Hagel will be giving today and thus kicking off a new round of olympic games, the Budget Olympithon (let’s just call it the Bolympics), which will most likely last until at least Christmas.  After two weeks of the NBC olympi-blitz I was growing just a bit weary of yet another human interest story.  Unfortunately never-ceasing “breaking news” about the olympics will be replaced with never-ceasing “breaking news” about the DoD budget for the next 8 months .  I know I sound a bit cynical, but after scanning the copious quantities of DoD budget-related news this morning I had to sigh.  I am always fascinated at the obsession of the press with the “Winners and Losers” angle.  Given the huge barrel of bucks residing in the Pentagon coffers it’s hard to picture a loser.  My experience is that there are big winners and some not so big winners and then the rest of the pack.  Ironically the winners are generally the ones who deserve to win the least, while the solid performers wind up paying the bills.  It’s the ultimate penally for being good–they take your money to reward another program for being bad.  Particularly interesting given the recent “focus” on ethics and truth-telling at DoD.  Let me see…”Rob the poor to pay the rich?”  Did I get that right?

Anyway, there is huge swirl around the DoD budget this year and SECDEF Hagel will increase the vorticity today at 1PM EST as he divulges the worst kept secret in DC-The DoD Budget.  Already we know it will basically ignore sequestration and come in around $496 Billion with $30 Billion or so in war costs, plus another $26 Billion in “unfounded”….. oooppsss,  I mean “unfunded” requirements (see Kids in the Grocery Store Checkout Aisle).  Your losers: Less Army, less Marines, less ships, less airplanes, less ground vehicles, less commissary subsidies, more TRICARE premiums, less compensation, fewer overseas bases, less of this and less of that.  Your winners: Less JSFs but at higher cost (odd how that is considered a winner isn’t it?), more ethics, more readiness, more American-made flags flying over our bases and more technology investments.  There are a few that I have a hard time placing in a category: Like a pay freeze for top brass (already the most richly compensated group in DoD, especially considering the fact that many of the top guys will actually make 10-15%  or more more in retirement than on active duty). But alas, we all have to make sacrifices, don’t we? Or how about the National Defense Strategy itself?  It’s hard to see where the money for the shift to Asia-Pacific region ( a major part of the strategy) resides in the budget. Are they winners or losers? Only our panel of Bolympic judges (sometime known as Congress) can tell.

I also am fascinated  by the disconnect between the concern by leadership to be ethical and the budget submission.  The happy talk is that people are DoD’s most important resource, yet that’s where a big chunk of cuts are placed.  I’m not talking about reducing the number of people, but all the other promises that were, oh so easy to make,  when we were at war…like Tricare benefits, commissary subsidies, robust training funds, and a few more.  Compared to the waste in the procurement system, the money spent on those programs is not significant, yet that’s where the focus goes.  What’s ethical about that?    So in my mind,  when the smoke clears here’s the message I hear:  The outstanding day-to-day performance of our people is DoD’s most important asset, so let’s cut that funding so we will have money to pay for our poorly performing programs like JSF or Enterprise Resource Planning IT systems.

So get ready for the thrill of victory and the agony of defeat!  I predict there’s going to be a lot more agony that thrill in the Bolympics this year.

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Cyber: Too Big Not To Fail

I admit that I am not much of a cyber-techie.  I do know a little about computers though. When Microsoft announced they were  not supporting Windows XT a while back, I had a bit of a cyber-rebellion because I refuse to spend anymore money on Mircrosoft Operating Systems, which I assume, much like the NSA, report your every keystroke and video back to some central repository for “troubleshooting.”  Right….But I instead elected to move to linux.  I’ve not noticed a degradation in what I can do, don’t have to worry about virus checkers and internet security programs that slow my system down….and all for FREE!  Sometimes the simpler solutions are the best.  I think we have so many problems with IT implementations and cyberattacks because they are so complicated and intricately interwoven that it is impossible for those who make decisions to understand what they are deciding.  Unlike my previous post on the JSF (Too Big to Fail), the cybersecurity and IT world is just the opposite: Too big not to Fail!” It’s just too complicated and the consequences are too dire to trust decisions in the Information and Communications Technology (ICT) world.  (See, you are already behind, it’s no longer IT and Cyber, it’s ICT) Come on, get with it!

I received a briefing yesterday  on a report recently completed by the GSA and DoD entitled, Improving Cybersecurity and Resilience through Acquisition.” It’s signed by Frank Kendall from DoD and Dan Tangherlini of GSA. I’ve read through it a few times and I swear I still can’t make heads of tails out of it, and I very much doubt that the signees did either. The report is about increasing the use of cybersecurity standards in Federal acquisitions. Keep in mind there are similar standards for National Security Systems, so I assume they are so unique that they need their own (there’s always an exception isn’t it?) They make six recommendations in no particular order of priority:

  1. Institute Baseline Cybersecurity Requirements as a Condition of Contract Award for Appropriate Acquisitions
  2. Address Cybersecurity in Relevant Training
  3. Develop Common Cybersecurity Definitions for Federal Acquisitions
  4. Institute a Federal Acquisition Cyber Risk Management Strategy
  5. Include a Requirement to Purchase from Original Equipment Manufacturers, Their Authorized Resellers,  or Other “Trusted Sources” Whenever Available, in Appropriate Acquisitions
  6. Increase Government Accountability for Cyber Risk Management

I don’t know about you, but I don’t feel any better after reading them than before!  Heck, the wording is so complicated and full of Pentagon-speak I can’t figure out what they mean.  To be fair there are explanatory paragraphs written in the same cyber-jargon that most decision makers in the Pentagon are not likely to understand. It’s fine for the techies to toss all those words around, but wouldn’t it be better when stuff like this is released to the public it would be in the Cybersecurity for Dummies format? At least have the techies who wrote it sign it.

This all flows from the Cyber Stone Tablet, “Framework for Improving Critical Infrastructure Cybersecurity” , done by NIST and released last week. Like most bureaucratic products it’s steeped in organization, tiers, overlays, constructs, phases and interrelated touch-points.  I dare you to understand it!  I’ve seen this before.  Remember the Office of Business Transformation?  They spent so much time developing papers and frameworks and touching those interrelated points that they forgot to do anything.  It was all about organization not about doing.  I see this cyber mess going  down the same path..lots of organization and logical interrelationships with countless coordination meetings between Governing Councils.

How would I do it?

  1. Put one person in charge-the Cyber Czar (even though we don’t like Putin very much)
  2. Listen to the techies, but not be controlled by them
  3. Get buy-in from top leadership that no one is exempt from our policies and regulations
  4. Stop admiring the problem and start doing visible, effective steps to fix the problem
  5. Insist that the Cyber Czar has the authority and the money to reward the stars and punish the evildoers. (nothing gets done without control of the money in this town)
  6. Make it mandatory for all!

 I cringe when I see words like  “this is a living document” and “Use of this voluntary Framework is the next step to improve the cybersecurity of our Nation’s critical infrastructure.” We need action verbs and Proper nouns in this framework

Without those steps, the whole schmegegge will flop because It’s Too Big Not To Fail. 

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David and Goliath

Over the past few weeks there has been a lot in the press about the larger defense contractors worries about “shrinking” (see DoD Budget Cuts: Less of More) defense budgets and the effects on their profitability.  Bloomberg News had a piece today about deals dropping for Pentagon contractors.  While it doesn’t appear any of the big guys will be going out of business any time soon, they are indeed under pressure to deliver the goods to their shareholders.  I would guess that most everyone who has a 401(k) has some amount of money invested in the large  defense-related corporations, although they may not realize it.  We all want them to grow and prosper, but sometimes fail to realize that their “growing and prospering” all too often means ever increasing defense spending.  But what about the small and medium-sized businesses that are in the defense industrial complex?  How have they been affected by a slowdown in defense spending?  To answer that question, consider how companies  control their profits.  In this non-MBA’s mind, there are two ways to ensure that profitability stays rosy: 1. Make more revenue and if that’s not possible then, 2.Cut overhead and costs.  Alternative One doesn’t seem so probable if spending is down, so Number Two seems to be in vogue right now.  The large companies generally have fairly large cash reserves and can weather the downturns in spending without having to do much of Number Two (Maybe slash an executive or two’s compensation by few million).  They have the ability to spin off unprofitable business units, refocus defense units onto other areas and lay people off.  The options are more limited for the small and medium-sized businesses.  They tend to have much less in cash reserves and less flexibility to spin off unprofitable units (in fact, they probably don’t have but one business unit).  So the smaller guys have to rely on reducing overhead by letting people go, cutting operating costs (generally seen in people-related programs).  I liken it to flying an airplane.  You can maintain altitude (profit) as you slow down by increasing your angle of attack (reducing costs).  But you can only pull the nose back so far, and then you stall-often with very bad consequences.  I think many small businesses are getting to that point.  Over the last several years they have been cutting corners, letting their more expensive employees go and cutting back on people-related programs to the point that they have now where to go but down.  They have no margin for error and when there are spending freezes (like during the government shutdown) they can’t recover.   And when spending finally increases, they don’t have enough people to generate needed revenue.  It’s a vicious circle for sure.  The big guys muddle through, eat into reserves a little and go right on producing profits.

So what, you say?  Just that I think that too often the press focuses on large defense contractors and their troubles to the detriment of those who are impacted the most: small and medium-sized businesses.  They tend to be either veteran-owned or have large numbers of veterans employed in the aggregate.  It seems to me that the Administration and Congress should be spending more time taking care of those problems than worrying so much about “the industrial base” (meaning big corporations).  I just don’t see it coming out of DoD, the VA or the SBA.  What’s up with that?

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Too Big To Fail

If you saw the Sixty Minutes piece on the JSF last night, you probably not a happy camper.  The opening salvo was pretty staggering: The program is costing $400B for 2400 airplanes, or about twice as much as the US spent to put men on the moon!  So how did we get here?  When I was a squadron Commanding Officer in the 1991 timeframe I witnessed a rare occurrence at the Pentagon, The cancellation of the A-12 Avenger program by then Secretary of Defense Cheney.  The A-12,intended to be the next generation aircraft for the US military, was scheduled for a buy of about 850 jets.  But it was 18 months behind and already $1 Billion over budget, so SECDEF axed it! The JSF didn’t just wind up 7 years behind and $163 Billion over budget overnight, so one wonders why subsequent SECDEFs let it get this far.  I think we got here in much the same way that the DoD ethics problem evolved……just a little at a time.  Despite all the warning signs and poor performance,  leadership allowed it to continue with the “hope” that with the proper amount of money and leadership, the problems would go away.  They didn’t.  All successful military officers and corporate executives know one fundamental tenet of leadership: Hope is not a good strategy.  Yet it appears that was the main strategy at work with the JSF.  I am reminded of the classic The Screwtape Letters, by C.S. Lewis in which a senior executive devil, Screwtape, provides advice to his nephew, Wormwood, an apprentice devil.  When asked by Wormwood what big event he should use to cause his assigned mortal to turn to the dark side, Screwtape replies, “Indeed the safest road to Hell is the gradual one–the gentle slope, soft underfoot, without sudden turnings, without milestones, without signposts,…” Sound familiar?

Now the program has a gun to our heads.  It’s the only TACAIR replacement on the books, not withstanding the excellent and under-rated F-18E/F, which, by the way, is a perfectly acceptable alternative well into the 21st century.  It’s ironic that in order to pay for the ever increasing JSF price tag, DoD wound up taking money highly successful programs, like the F/A-18 .  We now must resort to a strategy of hope to deliver the JSF.  There’s a lot of similarity here with ERPs, don’t you think?

There’s a lesson to be learned here.  Be vigilant early in procurement programs. Don’t let the little things get by without correction, lest one finds oneself on “the gentle slope, soft underfoot” of Too Big To Fail.

 

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Q•D•arrrrrrgh!

I saw a nice article in Politico’s Morning Defense this morning about the upcoming DoD Quadrennial Defense Review, commonly referred to as the QDR.  I fondly remember my days in the Pentagon wrestling with the QDR gurus, the best and brightest thinkers of all the Services, getting together to figure out how their Service was going to get more money.  The knives were out as the behind-the-scenes point papers on the vulnerability of aircraft carriers, the shear madness of fleets of supersonic, stealth airplanes, and the end of the need for “Boots on the Ground”  proliferated like rabbits in a viagra factory.  I suppose it was a useful exercise because it is good to sit back and evaluate future threats and the capabilities needed to counter them.  The QDR overseen by Secretary Gates was a bit different in that the QDR was essentially written before the whole process began.  The result was a QDR which didn’t make too much of a wake, maintained the status quo for the most part, and kept most everybody happy.  For those interested in the upcoming QDR issues I recommend  an outstanding report by CSIS on the results of a recent conference on the subject.

I predict this next QDR is likely to be more of the same.  The biggest reason is that while the QDR is not supposed to be constrained by budgets and the taxpayers ability to continue to fund DoD at ever increasing levels, it is impossible to de-link strategy and money.  The cute buzz word which gets around this issue is “informed.”  We say that while the QDR is not budget constrained, it is “informed” by it.  Informed is one of those words or phrases I call Pentagonisms.  They emerge from time to time in an attempt to “be truthful without telling the truth.”  Those of you who have spent anytime in the Pentagon can probably come up with several Pentagonisms.  Some that come to mind are robust, littoral,operationalize, detainees, etc.  There is a nice article by Kate Bateman in USNI Proceedings on this subject that I commend to your reading.

Back to QDR.  The big debate is rather or not to be constrained by budgets.  I’m not quite sure what difference there is between a QDR that “fiscally informed” and one that’s constrained by budgets.  It’s all the same in my book.  DoD should admit that and get on with it.  But in developing a strategy that is either “constrained” or “informed” by  budgetary realities, DoD must be careful to not develop a strategy against an unconstrained future.  By that I mean that there has to be a dose of reality in the vision of the future security environment.  There is a tendency to make the enemy ten feet tall, to give more credit than is due and generally overestimate the threat.  Given the uncertainty of the future, that’s understandable and perhaps even necessary in some cases.  But the Congress and American public should realize that in many cases our strategy is based on the worst case scenario.  That’s good business in some areas, cyber security of instance, but not in all areas.  In order to make the budgetary compromises necessary to adequately defend America there must be some wiggle room.  If everything is important and absolutely critical to national defense how can one make compromises?  So I hope the QDR avoids the  end-fighting and back biting  of past QDRs and focuses on a realistic threat environment with capabilities best suited to meet the threats.  Given the past history however, I can’t help but thinking…… Q•D• arrrgh. I’ll be glad when it’s over!

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Mini Cooper or Lamborghini: What should you drive?

I feel compelled to react to acting Deputy Secretary of Defense Christine Fox’s remarks yesterday regarding the questionable combat capability of the Navy’s controversial Littoral Combat Ship (LCS). Her views are that the threats to surface ships are so great that we ought not invest in them, especially the less capable LCS. Instead we should put our bucks in submarines (to the tune of about $2 Billion apiece) and other “enablers” like Electronic Warfare capabilities. She’s obviously been bitten by the Sub Bug! The facts are that we simply can’t afford the high-end “Lamborghinis” in the quantity necessary to make a difference in an uncertain peace or war. The idea behind the LCS was not to be a part of a “Main Battle Force” going toe-to-toe with some imagined foe of the future (The Chinese I assume), but instead the LCS was part of an “engagement” fleet, capable of operating in areas where US presence makes a difference. Frankly I’m as much surprised by her remarks in their timing as in their substance.
Ask yourself if you think we are likely to become involved in some sort of major world conflict between superpowers anytime in the next few decades. That’s where we need high-end ships like carriers and submarines, and frankly they are so potent that we don’t’ need that many of them. I think a rational person would say that our future, at least in this century, is  building relationships in key areas, South America, Africa and the Asian Pacific. This is exactly what the LCS was designed for. They too, are the enablers that Ms. Fox stresses the need for.
And then there’s the question of numbers. Imagine yourself standing on the beach of an emerging democracy somewhere in the littoral. What’s going to give you a better sense that America is supporting you, a black SSN sail and a rudder sticking our of the water  a couple of thousand yards off the coast or an LCS, a couple of hundred yards off the coast?
The latest flights of Arleigh Burke destroyers cost north of $1 Billion; Zumwalt destroyers well above $3 Billion, Virginia Class submarines around $2 Billion and the granddaddy of them all, $10-12 Billion for an aircraft carrier. While I love the capability, they just aren’t focused on what we need and can afford. We are likely to become a Navy of 100 ships if we focus our investments on the high-end. LCS is compromise between capability and cost. We have to think about both.
So I’m confused. DEPSECDEF says surface ships are vulnerable, but supports the biggest of them all, an aircraft carrier. She says enablers are important, but fails to support a key enabler, the LCS. The sad fact is that while we all want lots of submarines and other high-end capabilities, we can’t afford them all.  It’s too easy to get enamored of the high-end when one sits in the Pentagon day after day where the predisposition is to go BIG and fancy.  It’s where the money is, but money for whom?  We need a reasonable balance, focused on likely threats. It is indeed a balance between capability on cost.

There’s nothing wrong with buying a Mini when your goal is to zip around, parking in unlikely places and have a little fun while doing it.  That’s why you get it.  When you have a Lamborghini, you park it in a deserted area of the parking lot, if you drive it at all.  You impress the rich who can afford one, but insult the poor who can not.  A wise person keeps both in the garage, and drives the one appropriate for the situation.

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Kids and the Grocery Store Checkout Aisle

There was an article in the news this morning that reminded of the days when I would go to the grocery store with the kids ( and now grandkids). It was a Defense News article on the White house pushing for higher DoD budget numbers- about $36 Billion higher than the sequester cap and just about in line with the Murray-Ryan budget deal.  But they are also crafting at least $26 Billion in the “unfunded” wish list (See my previous comments about wish lists).  It’s like getting to the checkout aisle at the grocery store with your kids in tow and they start picking up all the “kid-friendly” stuff strategically displayed there and explaining how they “NEED IT.”  The stores know that you are more likely to give in when you are standing in line, with many other impatient shoppers behind you and have no time to deal with needy kids.  As we know the President’s Budget is now in the checkout aisle, already overdue to Congress, but soon to be released in early March.  And the “kids” are now trying to grab what they can before the groceries are scanned.  What’s really interesting about this budget is that while they were in the shopping aisles, the Services (kids) and their parents (OSD) tried to put some of the stuff back on the shelf (an aircraft carrier battle group for example) but they weren’t allowed to do so by their grandparents (Congress).  By the way, it’s always a bad idea to carry the grandparents along while shopping…We all know the kids get what they want when that happens, even if it’s not so good for them.  A $26 Billion Wish List while standing in the checkout line is a pretty big pill to swallow.  Logically one would assume that if it was really needed the Services would find a way to fund it, not wish for it, especially if they have received substantial relief from sequestration. So why the need for a list? Remember also that the $ 495 Billion budget request will be supplemented by another slug of $30 Billion or so to finance Afghanistan, so it can’t be for costs of war.  It’s hard to imagine a wish list that nearly as large as the Supplemental request.  I salute the DoD for attempting to make what they perceive to be “tough” decisions, but are they really the type of tough decisions that really need to be made?  The article has a great quote from Gordon Adams, “You don’t take the pet rocks or big systems.  It’s just not doable.”  I agree with Gordon, but especially when the grandparents are along.  By the way, when I was in charge of the Navy budget, it became obvious to me that in the end, everything turned out to be someone’s pet rock!  I am not suggesting that the Congress should rubber stamp DoD budgets and blindly accept their funding requirements. One of our Nation’s fundamental founding principles is the civilian oversight of the military.  What I am suggesting is that we need to take a step back and examine the entire process, so that wish lists are not necessary.  Giving DoD a budget cap to deal with is tough enough, but then allowing no flexibility and discretion in where to absorb the cuts  puts DoD in a position where they have to make wish lists in order to compensate for the senseless cuts demanded by sequestration. Take for instance the example of cutting a carrier battle group (CVBG).   A CVBG consisting of roughly a dozen ships and submarines represents a capital investment of well over $50 Billion.  At the end of the day, cutting that CVBG represents a  real savings of maybe $1 Billion a year.  That’s not good business, but given the constraints, it may be the only way for DoD to make up the budget deficit given the current process.  I know this: Time spent developing, vetting and justifying wish lists is better spent focused on making the base budget reflect the real needs of DoD.

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Hall of Heroes and Auditors

USMC_Audit_AwardIt’s like pushing a heavy block across sandpaper.”  That’s what DoD Comptroller Bob Hale said yesterday in the Pentagon’s Hall of Heroes  at a ceremony celebrating a significant milestone– the USMC’s clean audit opinion on the current year Statement of Budgetary Resources.  For those in the federal financial world, that is BIG news!  In typical USMC “Out in Front” style, the Corps took on the task of being the first Service to declare audit readiness  and complete the process to prove they are ready.  It was an effort like no other seen in DoD financial management.  I’m hoping that over the next two years there will be three more ceremonies celebrating audit completion of the remaining Services.  The DoD IG is skeptical given the wording in their recent report to Congress for good reason. These audits are complex, large and little understood by most in the DoD.  The USMC audit involved hundreds, if not thousands, of Marines, civilians and auditors from Grant Thornton LLP (GT)  (lead by audit partner Tracy Greene) and its subcontractors and involved combing through terabytes of data and tons of paperwork around the globe!  One can imagine how much more complex it will be to audit the Army, Navy and Air Force.

So what can the Services learn from the USMC accomplishment?  As the Partner at GT responsible for the DoD account when this journey began I have a few observations from a non-CPA:

  • All senior leaders need to be united in their support of the audit and not just those in  financial management.  In other words, this has to be a priority for the Service Secretary, the  Service chief and every commander in the field.  Most of the transactions take place in individual commands, far removed from the Pentagon. They have far more impact on a successful audit that those in the Pentagon.
  • Don’t let the audit become a bill payer.  Given that there’s well over a trillion dollars  involved, the costs of an audit are immaterial.
  • Fix problems as they arise.  Don’t play “Stump the Monkey” and protect rice bowls. Make it a cooperative effort.
  • Have a dedicated team devoted to accomplishing the audit (a Task Force AUDIT) whose sole purpose is audit.  You can’t be successful by dumping yet another task on an already stressed workforce.
  • Don’t rely on IT systems.  In the end, most problems are people-related.

When I was in uniform I thought audits were just “science projects for the green eyeshades.”  After all, the Congress continued giving us money and rarely questioned our accounting.  If we told Congress we spent $800 for a toilet seat, they believed us!  No one ever said, “Surely there was just a bookkeeping error.”  They believed us.  But I was wrong then because I have come to realize that audits are not about making sure the credits and debits balance.  They are about ensuring the DoD can manage its money, not by figuring out how much money they have after the fiscal year is over, but knowing how much they have today and every day.  DoD is so unsure about balances that it maintains huge cushions of cash in many accounts just to make sure they do not violate the Anti Deficiency Act.  Imagine not looking at your checkbook for six months and writing checks anyway because you know you have put way more money in your account than you could ever spend.  That’s basically what happens.  But the budget environment has changed and money is getting tight.  That cushion is not likely to be around for long.  In order to still accomplish their missions, the Services must have an accurate accounting of their money day-by-day.  Audits allow the services to have confidence in their accounting procedures and thereby allow them the ability to efficiently obligate and track money.

Let’s stop planning and start doing the Service audits and in doing so become even better stewards of the nation’s treasure.

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DoD Budget Cuts {n.} 1. Less of more

I saw an article in Defense News this morning that said that the DoD is safe for now from budget cuts.  For those outside the Beltway (and unfortunately many inside as well) that translates into the notion that the Defense Department will skate by again by avoiding the “cuts” threatened by the Budget Control Act of 2011 ( commonly referred to as Sequestration).  But for those in the know, that just means the DoD can look for  more  of an increase in money than currently scheduled.  For all of the hubbub about “cuts”, one must understand that in DoD budget parlance, cuts just means “less of more.”  When I did the Navy budget, if we were expecting a $6 Billion increase in real spending dollars in the next year and we only got $4 Billion increase, we would say the Navy’s budget was “cut” by $2 Billion.  It’s not the way Mr. and Mrs. America think about cuts…It’s simply less of more.

Look at this chart from a 2013 CBO report showing the FY 14 DoD budget.  Notice that even with sequestration cuts in place, the  DoD budget is more in 2014 dollars than it was in 2006.  And that’s not counting Supplemental money intended to lessen the effect of the war in Afghanistan on the base budget.  I think any reasonable person would conclude that there’s plenty of money in the DoD budget….and now there’s even more.  Why  does DoD say they need “more of more?”  There are many reasons; increased costs of procurement, disproportionate growth in operating costs, too much infrastructure, etc.

There are two ways to get more spending power; 1. Get more money (not within DoD control), and 2. Spend what you have more efficiently (within DoD control).  I contend that DoD should focus more on number 2.  The country simply can’t afford giving DoD “more of more!”

Here are just a few examples:

  • Harvest the return on massive investments in ERPs (see DoD IG Report to Congress)
  • Make some hard decisions on expensive weapons programs where costs are out of control (yes, there will be winners and losers)
  • Convince the Congress that another BRAC round is needed
  • Spend more executive time on managing the big budget problems and less micro-managing the little problems
  • Know where every dollar is and what it’s doing (The real reason for auditability).

So beware “Crocodile Tears” of those who opine that DoD needs more money and instead ask them what are they doing to ensure the treasure they already have is being spent wisely.

 

 

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DoD IG Report to Congress

DOD_IG_REPORTThe DoD Inspector General released the semi-annual required report to Congress on its activities from April through September 2013.  There are plenty of reports with bad news and some not-as-bad news (I don’t think IG reports ever are better than the not-as-bad category, hence the need for an IG, I suppose).  I focused on  the Financial Management section of the report.  The first thing I found interesting is that in the introductory narrative, while acknowledging “some” progress towards audit readiness is being made by the Department, there was no mention of the audit readiness shining star, the US Marine Corps.  Granted, the report doesn’t cover the period in which the announcement of a clean opinion on the 2012 USMC Statement of Budgetary Resources was made, but they were certainly “breathing heavy” and should have been acknowledged in the report.  I guess it will be in the next report to Congress next September, almost a full year after it happened!

Enough of that! The other items mentioned in the financial section related to the Defense Agency Initiative (DAI), Navy Enterprise Resources Planning (ERP) system, Army General Fund Enterprise Business System (GFEBS), excess motor pool vehicles in the DC area, the DISA audit opinion and a few other cats and dogs.  It’s interesting that the most significant problems all involve ERP systems: DAI, Navy ERP and GFEBS.

The costs of these three systems alone is pretty staggering: $426 Million for DAI, at least $2.4 Billion for first increment of Navy ERP and $1.4 Billion for GFEBS.  That doesn’t count all the false starts, legacy phase-out costs, legacy sustainment costs, and the unknown costs of fixing all the problems being identified by the DoD IG and others.  The upcoming audits of the Services Statements of Budgetary Resources (supposedly to be complete by 2014) will identify more problems and throw more costs onto the burgeoning price tag of these expensive systems.

One wonders if DoD will ever see a real return on the investments being made in ERP systems.  Why not?  I think there a several key reasons:

1.  It is taking way too long to implement them.  Navy ERP has been in implementation since 2003  and still has a way to go.  That sort of snail’s pace exacerbates implementation issues, creates software refresh issues, increases reliance on legacy systems, and tends to make them a continually target for budget reductions.  And with long implementation schedules,  the systems will become obsolete before they reach FOC.

2.  Failure to eliminate legacy systems.  We all know they exist and individual fiefdoms throughout the DoD continue to fund them to the detriment of other, needed capabilities.

3. The leadership outside the Financial Management Community doesn’t understand ERPs and they are the ones who make the real budget decisions.  Without a full understanding of what ERPs are and how, properly implemented, they will make more money available for people and weapons, the leadership is likely to defer funding, further compounding problem 1.

So what to do?

  • Make sure the leadership understands ERPs and what they can do for them. Unified support at the top is essential.
  • Don’t use ERPs as bill payers.
  • Be ruthless in the elimination of legacy systems, forcing users to rely on ERPs.  Do it sooner rather than later. No excuses!
  • Put a priority on implementation with deadlines and make program offices accountable.

I admit DoD ERPs are complex.  But no more so than those of major US companies.  We should learn from them.