Buyers Beware

A gencies considering purchasing commercial, off-the-shelf, enterprise human resources applications should take a lesson from the Defense Department. DoD got spanked by the General Accounting Office in January over its purchase of an Oracle Corp. system to handle personnel actions and payroll processing for all civilian employees (AIMD-99-20). GAO found Defense:
  • Failed to carefully consider all the possible alternatives for improving personnel management,
  • Made its decision too quickly and without needed cost and performance data,
  • Committed to buying the Oracle system before the commercial software was modified to meet Defense-specific requirements,
  • Did not fully mitigate system security risks nor those associated with the year 2000 problems.

Buying the Oracle system was part of a larger effort to reduce personnel management costs. Between 1994 and 1998, Defense cut 1,400 personnel jobs, increasing the number of employees served by each personnel staffer from 67 to 77. DoD automated and improved processes for developing, tracking and monitoring personnel actions, handling injury compensation claims and estimating retirement eligibility and benefits. The department also bought an automated tool to analyze resumes and is developing an interactive phone system to enable employees to update their personnel records. DoD acquired the Oracle system to replace an outdated legacy mainframe system that was expensive to maintain and modify and was accessible only to personnel offices. But the system DoD bought
couldn't process standard personnel actions (Form 52s). It was unable to handle the General Schedule pay system, Defense pay-banding experiments and DoD's unique salary system for foreign nationals. The system also lacked a direct interface with the department's existing payroll system. According to GAO, Defense will spend $177 million developing and deploying the Oracle system and $621 million operating, upgrading, maintaining and running it from 1995 through 2009. Through 1998, Defense had spent $142 million on development and deployment. GAO's recommendations to Defense sound cautionary notes for other agencies, as well:

  • Before considering HR improvements, rigorously evaluate all business and system alternatives as directed by the 1996 Clinger-Cohen information technology management reform law.
  • Use data generated during this evaluation to select the most cost-beneficial business and system alternatives.
  • Develop a transition plan to the alternative selected.
  • In analyzing commercial products, consider costs, benefits and return on investment for all personnel management products. Also consider technical risks, including whether each product can support agency needs and can be modified at reasonable cost.
  • In analyzing commercial products, consider the amount invested in any existing system.
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