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ERP in Government, Yet More Bad News

 

July 25, 2012

Doug Hadden, VP Products

The Inspector General for the United States Department of Defense published “Enterprise Resource Planning Systems, Schedule Delays and Reengineering Weaknesses Increase Risk to DoD’s Auditability Goals” on July 13th. This comes on the heals of the Government Accountability Office “DOD Financial Management: Reported Status of Department of Defense’s Enterprise Resource Planning Systems” from March 30th. (And, the UK National Audit Office report and the Panorama survey that found ERP software project overruns ‘distressingly common‘.) The Inspector General report provides more financial details to five of the projects listed by the GAO and adds information for an additional two projects. Six projects were addressed by the GAO but not the Inspector General.

This new information requires an update from a previous blog posting.

Cost vs. Budget Statistics

  • The 13 projects have acronyms of: AF-IPPS, DAI, DEAMS, EBS-EC, EBS-Procurement, ECSS, GCSS-Army, GCSS-MC, GFEBS, IPPS-A, IPPS-Navy, LMP, Navy ERP
  • 4 of 13 ERP projects are expected to cost between 100% and 120% of original budget
  • 4 of 13 ERP projects are expected to cost more than twice the original budget
  • All 13 projects are using leading COTS ERP software from the 2 leading manufacturers including the leading HR package acquired by one of the leading ERP manufacturers
  • The 3 HR projects are using the same or similar configuration which may explain why the projects are roughly on-budget.
  • The average lifecycle estimated cost for the projects was $1.355B and the current estimated lifecycle costs (because most projects have not yet been completed) is $2.316B. That’s an average of almost $1B per project – although it should be fair to note that two projects
  • According to the Inspector General: “DoD experienced life-cycle cost increases of $8.0 billion and schedule delays ranging from 1.5 to 12.5 years during system development and implementation.”

Inspector General Conclusions

The inspector general recommended “the DoD DCMO and CMOs of the Army, Navy, and Air Force, develop procedures to review business processes and limit funding to programs that are not demonstrating adequate business process reengineering.” The report provides good evidence in the lack of articulating existing and future business processes and having these approved.

Blaming the Victim

There seems to be a general assumption in the market that there is nothing wrong with implementing Enterprise Resource Planning software designed for the private sector in the public sector. Project failure is chalked up to project management failure.

We really need to consider the real value and the real Total Cost of Ownership of using ERP in government. And, we need to stop blaming the victim for project failure. Of course, my viewpoint is biased as a provider of government-specific Government Resource Planning (GRP) software. Here are my takeaways:

  • ERP manufacturers, in projects in the 100s of Millions of Dollars ought to be part of the governance structure and actively adapt software to meet critical government needs. Systems integrators and government IT specialists should not be on the hook for significant customization.
  • So-called “best practices” for government are clearly not implemented in these ERP packages. If these practices were embedded in the software, (not to mention the supply chain and logistics “best practices” from the private sector), then “business process reengineering” would have been an exercise of tweaking existing templates. For all the marketing spin on “vertical markets”, it appears that ERP manufacturers have little interest in truly understanding the needs of the Department of Defense.
  • Transformational projects that attempt to change business processes and integrate multiple systems ought to be led by domain and change management experts rather than IT – that’s a big lesson learned in our public financial management practice
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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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