U.S. Defense Software Upgrades $6.9 Billion Over Estimates, GAO Reports

At least six of nine software systems the Pentagon is installing to improve longstanding financial management deficiencies are running as much as 12 years late and $6.9 billion over their original cost estimates, according to congressional investigators.

The estimated cost for the six Pentagon, Air Force and Navy “enterprise resource planning” systems is now at least $13.7 billion, compared with original estimates of about $6.8 billion, according to the U.S. Government Accountability Office.

The final price tags could be higher because the GAO said it wasn’t able to estimate the current cost of a $2.6 billion Army project that’s six years behind schedule, according to testimony prepared for release today before a Senate subcommittee.

The Pentagon has been criticized by the GAO, the Defense Department’s Inspector General and lawmakers for chronic shortcomings in accounting and financial management systems that can’t pass a federal audit.

Improved financial systems are designed to track savings and costs, and manage contracts, finances, and infrastructure.

The Pentagon has a “reasonable approach” to improving systems and “is headed in the right direction,” GAO Director of Financial Management Asif Khan said in testimony prepared for Senator Tom Carper, a Delaware Democrat who leads a Senate subcommittee on federal financial management.

‘Longstanding Weaknesses’

So far, though, the “improvement efforts have not resulted in the fundamental transformation of the Defense Department’s financial management operations necessary to resolve the longstanding weaknesses,” Khan said.

Congress has required the Pentagon to able to pass an audit by 2017 -- an objective that’s clearly in doubt, Carper said in a statement.

“This is a critical goal and considering the amount of time and money that’s gone into this effort, it’s one that should have been met years ago,” he said. The audit when it occurs will help ensure “that billions of tax dollars are spent properly.”

Khan said GAO can’t currently predict when the Pentagon will succeed in efforts to satisfy auditors.

The delays and rising costs involve new enterprise resource planning systems, which are widely used automated commercial software tools that perform tasks such as general accounting, payroll and supply-chain management.

The changes are “critical” to improving the Pentagon’s programs because they promise to replace as many as 500 systems that have been in use, the GAO reported.

‘Oversight Challenges’

“Significant leadership and oversight challenges have hindered the department’s efforts to implement these systems on schedule, within cost and with intended capabilities,” the GAO said.

The Pentagon and the military services had spent $5.8 billion as of December to develop and field 10 enterprise resource planning programs. Only one Army system is on schedule.

A standardized personnel and pay system for the military services was supposed to be in place by 2006. Its cost has grown to at least $2.4 billion from $577 million, the GAO said.

The cost of an Air Force combat support system has grown to $5.2 billion from $3 billion, and the price of a Navy combat support system for the Marine Corps is estimated to have risen to $934 million from $126 million, GAO said.

Pentagon contractors that manage enterprise resource planning contracts include International Business Machines Corp., based in Armonk, New York; Computer Sciences Corp., of Falls Church, Virginia; Northrop Grumman Corp., of Los Angeles; and Falls Church-based General Dynamics Corp.’s Information Technologies unit. The GAO’s testimony didn’t identify which contractors were working on the projects experiencing rising costs and delays.

To contact the reporter on this story: Tony Capaccio at at acapaccio@bloomnberg.net.

To contact the editor responsible for this story: Mark Silva at msilva@bloomberg.net

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