GAO questions further investment in Defense procurement system

A scathing General Accounting Office report released Tuesday questioned whether the Defense Department should continue investing in its multi-billion-dollar Standard Procurement System (SPS). Defense began its search for a procurement system that would replace hundreds of legacy systems across all the Defense services in 1994 and awarded a contract to American Management Systems Inc. in April 1997 for its commercial-off-the-shelf procurement software. The contract is three and a half years behind schedule and "is likely to slip further," GAO said in its report, "DoD Systems Modernization: Continued Investment in the Standard Procurement System Has Not Been Justified" (GAO-01-682). The new procurement system was initially slated for a March 31, 2000, completion. Now, Defense hopes to have the full system up and running by September 2003. GAO noted that even this target date is unlikely to be met because it does not take into account factors such as the testing practices of individual services. Defense initially pegged the system's cost over its 10-year life cycle at $3 billion. The contract is now estimated to come in with a $3.7 billion price tag, and costs could rise as the project falls further behind schedule. "DoD has not met key SPS program commitments and does not know whether it is meeting others," the report said. "The commercial…software required extensive modification to meet DoD's needs, meaning that SPS will be a custom-developed solution, and DoD will not accrue the benefits or reduced cost associated with using a commercial product." In their response to the report, Pentagon officials concurred with some of GAO's findings, but noted there was no Defense Department requirement to measure the contract's progress. GAO lambasted Defense over this assertion, saying the department's management of the SPS contract flew in the face of the 1996 Clinger-Cohen Act, Office of Management and Budget directives as well as the department's own contract management guidelines. "[Defense] does not know what progress, if any, has been made against return-on-investment goals," the report said. "Similarly, Defense is not capturing total expenditures, and thus does not know its progress against original cost projections." In its analysis, GAO found that the procurement system's costs heavily outweigh its benefits. By ignoring cost-benefit analyses, Defense chose to continue on with the contract in an "all or nothing" approach, GAO said. "Such a monolithic approach to investing in large system acquisitions, like SPS, is not consistent with current legislative requirements and federal guidance and has historically resulted in federal agencies investing huge sums of money in systems before they realize that the systems do not provide the commensurate benefits." The Defense Department has contracted with AMS for five of seven releases of the SPS product. Four have been implemented, while the fifth has been returned to AMS as result of "software deficiencies." Defense has not contracted for the sixth and seventh releases of the system.
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