Navy could run two years late on business systems upgrade, GAO finds

Cost overruns could reach 31 percent

The Navy's  Enterprise Resource Planning (ERP) project, designed to modernize Navy business systems, is struggling with program management, according to a new Government Accountability Office report.

GAO predicts the project will be at least two years behind schedule and at least $570 million over budget. GAO had previously warned of the schedule slippage and  cost overruns a year ago.

The service started the project in 2003 and originally planned for it to be completed in 2011 and to cost $1.87 billion. GAO now estimates a completion date in 2013 at a cost of $2.4 billion -- 31 percent above the original projection, the report said. Navy officials recently said the system is ready for full deployment.

The program is part of a larger Defense Department program to modernize business systems, and a second leg of the program would also eliminate the need for sailors to carry cash on ships by issuing smart cards for monetary transactions.

Problems with properly estimating, managing and comparing contractor costs have contributed to the overrun, the watchdog agency reported, indicating a failure to create an effective master schedule for the overhaul and to adhere to earned value management and economic justification.

Also, the Navy has failed to mitigate risks from converting data from the Naval Air System Command’s legacy computer systems to ERP, GAO found in the report published Sept. 15.

“We concluded that by not effectively implementing these [information technology] management controls, the program was at risk of not delivering a system solution that optimally supports corporate mission needs, maximizes capability mission performance, and is delivered on time and within budget,” the report said.

Weaknesses in controls “will likely contribute to future delays and overruns if they are not corrected,” GAO said.

GAO called on the secretary of defense to direct the navy secretary to take steps to rectify the program by implementing and ensuring adherence to appropriate earned value management standards, and to assign an independent agency to oversee the process. The report also called for risk mitigation in converting data from legacy systems, and for frequent progress reports.

The report said the Navy agreed with GAO's recommendations and would implement them in seven months.

About the Author

Amber Corrin is a former staff writer for FCW and Defense Systems.

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Reader Comments

Sun, Jul 4, 2010

Navy ERP made 3 strategic mistakes: (a) assuming a manufacturing-centric system would work in an asset-intensive domain - Gartner has some good material on this, (b) not starting with financials - if the goal was to replace STARS and then build modeules from this, e.g. HR, Logistics, then, there was a fighting chance. However, Navy ERP went into "massive parallel" without getting financials right. Moreover, why would the Navy take this on when DFAS already did this? Interfacing to dozens of financial systems was a killer and (c) Not conducting a real BCA - the right solution was to integrate existing/mandated financial (STARS), contract (SPS) and HR (DCPDS) systems with functional systems (maintenance, program mgmt...). The previous posters that talk about "Big Boys", e.g. large firms billing out armies at $180 per hour is spot on - smart inhouse and 3rd tier contractors can handle an integration solution set.

Thu, Oct 1, 2009

As a PM of an interfacing system and data conversions, I stated 2 years ago that ERP is scheduled for failure and large cost overruns. Bottom line is that most costs are hidden in the command budgets and not directly attributed to the ERP project, thus GAO only captured about 60% of the costs in their report. They need to ask the experts. Also when do contractors know the needs of the government? ERP has used SMEs that do not know government systems or processes to give the requirements to a new Off the Shelf German system, what ever happenned to the good USA developments. Replacing a 30 year mature system with off the shelf is a plan for problems. It doesn't take an arm of Government Accounting to forcast the problems, ask the IT developers within the NAVY and not the "Big Boys" who never tell the truth

Tue, Sep 22, 2009 ET

NavyERP has been in development at least 7 years, and has been extended multiple times, plus way, way over budget. Massive SAP, single-COT system that do everything is not-doable... Thus, it's been a waste of taypayer $$$, to the tune of billions...

Fri, Sep 18, 2009 has related information.

Thu, Sep 17, 2009 ERP Expert San Diego, CA

It would be more helpful if the DoD would leverage the right expertise to get the job done instead of having these SI's use the government as a cash machine.

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