Audit finds big concerns within DoD’s management of smaller weapons systems

When the Pentagon’s big, multi-billion dollar acquisition programs run into trouble, they tend to make headlines. But a new examination by DoD’s inspector general says the department faces pervasive problems in accounting for the smaller systems that dominate its budget.

Among other problems, according to auditors, DoD literally does not know how many of those it has in its portfolio.

The findings are part of a 150-page review of what are known as Acquisition Category (ACAT) 2 and 3 programs — those that are expected to cost less than $480 million in R&D or $2.8 billion in procurement dollars over their lifecycles. DoD’s inspector general pointed to widespread IT and management weaknesses that, taken together, leave top-level acquisition officials with bad or incomplete information about how their full portfolio of acquisition projects is performing.

The programs in question are relatively small by the standards of a new fighter jet or capital ship. But added together, ACAT 2 and 3 programs account for $144 billion in annual spending — 61 percent of DoD’s total acquisition budget. The IG looked at a sample of 160 of them, and found the Army, Navy and Air Force can’t account for how many they have underway, how much each one costs and whether or not each one is hitting their schedule milestones.

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“We determined that 33 out of our sample of 55 Air Force programs were not appropriately identified, monitored, or both. Sixteen of these programs were valued at $9.7 billion,” according to the report. “Air Force acquisition officials did not provide any program cost estimates for the other 17 programs.”

Auditors found similar problems in the other services: in the sample, 21 of 65 Army programs and 24 out of 40 Navy programs saw the same sorts of challenges.

To help speed programs through the acquisition system, Congress has allowed the military services to delegate key decisions about those smaller programs to lower-level program executive offices (PEOs). But each military’s department’s acquisition executive is supposed to keep tabs on the programs’ status on a quarterly basis, ideally, by combing through the acquisition databases each of the three departments maintain.

However, those systems are riddled with inaccuracies and missing documentation, the IG found — leaving top decisionmakers without the information they need to prioritize their service’s programs during each year’s budgeting and planning process.

For instance, in the case of the Navy, auditors found three different programs whose status had gone for as long as six years without an update.

When asked for documentation about one of them — the Integrated Condition Assessment System — the most recent paperwork the Navy could pull together was from 1996, even though the service had asked for and received nearly $4 million to keep the program running in its 2019 budget. After several more months, Navy officials eventually tracked down more budget documents to support the $31 million it had spent on ICAS in previous years.

“If [Navy headquarters] officials had been performing thorough reviews of the authoritative source for Navy program information, they should have been able to provide accurate information on the Integrated Condition Assessment System prior to September 2019,” the IG said.

Meanwhile, the Army’s central database has serious internal control weaknesses that let individual PEOs delete programs from the system without the knowledge or approval of officials at the Pentagon. The IG said that weakness makes it impossible for acquisition officials at Army headquarters to have full confidence that they know what’s in their procurement portfolios and how each system is doing.

And in an example from the Air Force, the IG said officials weren’t able to supply documentation to show the approved baseline costs for six of their programs. That service’s database also included at least two programs that no longer existed, and one that was another federal agency’s responsibility.

“Including programs incorrectly on the acquisition master list makes the data unreliable for acquisition decision makers and indicates that the Air Force does not hold program offices accountable for correct reporting and validation of the master list data,” auditors wrote.

In some cases, the slipshod accounting over ACAT 2 and 3 programs also meant the military services ran afoul of laws and regulations that should have forced them to reclassify them as “ACAT 1” systems — a step that triggers more oversight and higher-level approval for each milestone in a program, as well as more notifications to Congress. That happened at least once in the Army and three times in the Navy.

The inspector general made 42 separate recommendations. Based on a draft version of the report, DoD and the military services agreed with many of them, and the IG says 28 have now been resolved.

But service officials pushed back strongly on several of the findings.

Army officials said many of the IG conclusions amounted to “inflammatory language with a sweeping inference.” They contended, for example, that Army headquarters officials get monthly updates on all of the service’s programs in other ways, and that its acquisition database was not designed to be used in the way the IG’s auditors tried to.

Similarly, Navy officials said that a lack of documentation in their central database does not mean their senior acquisition leaders are flying blind.

“The report makes assumptions that data quality, technical data and document repository challenges are equal to a lack of oversight and poor management of the Navy’s acquisition portfolio,” wrote Allison Stiller, the Navy’s second-ranking civilian for acquisition issues. “The Navy takes exception to the statement that [its database] is not properly used.”

Meanwhile, DoD and military service acquisition officials are hopeful that many of the database problems the IG pointed to will soon be rendered moot. That’s because the Pentagon is in the process of expanding a DoD-wide database called the Defense Acquisition Visibility Environment, which goes by the acronym “DAVE.”

DAVE already serves as DoD’s authoritative data source for ACAT 1 programs — the ones that require more intrusive oversight at the level of the Office of the Secretary of Defense.

“While originally established to align data for ACAT 1 programs, the services have acknowledged that this provides for a common standard for adoption within their databases,” wrote Kevin Fahey, the assistant secretary of Defense for acquisition. “The Office of the Undersecretary of Defense for Acquisition and Sustainment continues to monitor the services as they modernize their acquisition databases to the extent agreed upon regarding core program information for ACAT 2 and 3 acquisition programs.”