Pentagon wants to use its biggest IT program to test ‘colorless’ software appropriation

The Defense Department is still in the early stages of an experiment to change how it funds software development, but it’s already planning to put that test on rocket fuel, owing mostly to the addition of a huge Navy program.

As part of its 2022 budget proposal, the Pentagon is asking Congress to dramatically expand the number of dollars it’s allowed to expend through a pilot effort to test a new “color of money” for software, including by using it for the single biggest IT program in the federal government.

The idea, first recommended by outside advisory groups including the Defense Innovation Board and the Section 809 Panel, is to let DoD fund information technology through a single appropriations category, rather than various R&D, operations and maintenance (O&M) and procurement accounts — a military hardware-centric funding construct that’s almost antithetical to agile software development and continuous delivery.

In 2022, the Software and Digital Technology Pilot Program would include 10 programs, boosting it from $663 million in spending this year to $2.3 billion. But the overwhelming majority of the increase comes from the addition of a single program: The Navy’s Next Generation Enterprise Network (NGEN), which accounts for $955 million all by itself.

Via two new contracts to Leidos and HP, worth nearly $10 billion over their full lifecycles, the Navy is using the NGEN program to consolidate the Navy-Marine Corps Intranet with its overseas counterpart, ONENet. Funding will also go toward modernizing that newly-unified Naval Enterprise Network, including through physical infrastructure upgrades and rearchitecting it to interface more seamlessly with commercial clouds.

But Navy officials said trying to take on an endeavor that complicated using three different colors of federal funding will only slow it down.

“If I’m in a DevSecOps cycle, I’m developing today, I’m deploying tomorrow,” Jane Rathbun, the Navy’s chief technology officer said last week during the Department of the Navy’s annual East Coast IT conference. “If I’m developing today, I’m using RDT&E dollars, if I’m deploying tomorrow, I’m using O&M dollars — and we can’t work that fast with different colors of money. That slows us down. And so the pilot is to demonstrate that we can go faster.”

Last year, Congress approved nine programs for the first-ever software appropriations pilot and told the department to report back with regular updates on financial and performance metrics for each of them. Thus far, each of the programs has been much smaller than NGEN.

Another addition in 2022 would be $186 million for DoD’s Joint Intelligence Operations Center. Top-line documents appeared to indicate the department intended to funnel all of the JAIC’s funding through the new software appropriation, but detailed budget justifications for that office weren’t yet published as of last Friday’s budget submission.

The budget request would also continue eight other programs that were funded through the “colorless” appropriation in 2021:

  • Army software prototypes for defensive cyber operations: $119 million, up from $57 million in 2021
  • The Navy’s Risk Management Information initiative: $14 million — no change
  • The Navy’s Maritime Tactical Command and Control (MTC2) system: $15 million, up from $11 million in 2021
  • The Space Force’s Kobayashi Maru program: $154 million, up from $150 million in 2021
  • The Defense Security and Counterintelligence Agency’s National Background Investigation System: $124 million, up from $110 million in 2021
  • The DoD Acquisition and Sustainment Acquisition Visibility program: $18 million, up from $17 million in 2021
  • The Defense Information Systems Agency’s Global Command and Control System-Joint: $33 million, down from $76 million in 2021
  • DoD’s Project Maven: $247 million, up from $230 million in 2021

Rathbun said her service wanted to move even more programs into the software appropriation pilot in 2022, but Navy budget officials were nervous about doing so, considering the magnitude of the NGEN program they’re already requesting.

Apart from its size, another reason the NGEN request might raise eyebrows on Capitol Hill is that the Navy is asking for permission to use the colorless software appropriation for the entirety of the NGEN program — not just for the software development work the DIB and the 809 Panel had in mind when they made their recommendations.

For example, of the $955 million, almost half — $439 million — would go toward day-to-day management of the network, including functions like helpdesks, buying desktops and laptops and managing data centers and cloud services. And from a color-of-money standpoint, that part of NGEN is already relatively straightforward: Absent the new colorless appropriation, the Navy said $409 million of its spending in that “network management” category would have been funded through O&M dollars.

Another $244 million would go toward purchasing and managing software licenses. Without the software account, that entire amount would also be paid for through an uncomplicated O&M appropriation.

And at least some of the software appropriation would be used for purchases that are not, strictly speaking, information technology at all, let alone software. Six million would go toward items like HVAC systems and UPS batteries in Navy data centers, emergency generators, and diesel tanks to fuel those generators.

But in its budget submission on Friday, the Navy argued the entire NGEN program demands a flexible and agile funding approach. Recent evidence of that, officials said, is the huge and sudden spike in demand for VPN connections and internet bandwidth driven by the COVID-19 pandemic, and the Navy’s subsequent move to transition its entire workforce to a cloud-hosted instantiation of Microsoft 365 much sooner than it had planned.

The funding will be used to “transform” the Navy’s intranet-based architecture into a new construct, termed the Navy Digital Platform, officials wrote.

“The [NGEN portfolio] represents a flexible and agile IT approach, using an architecture and service strategy aligned with commercial best practices. The new service delivery approach features diverse sourcing, leveraging of cloud/web-scale infrastructure and software-defined flexibility,” according to budget documents. “In FY 2022, NEN will implement a technical enterprise architecture that replaces obsolete technologies associated with NMCI and ONE-Net platforms, integrate rationalized users and services, implement enabling business processes and service management frameworks and provide guidance for future investment areas across all classification levels and operating environments. This includes network modeling and simulation, performance-based prototypes and applied research in future technologies affecting network architectures to advance the state of networks across all domains.”

In the first volume of its findings on how to improve the Defense acquisition system, the Section 809 panel adopted a similar view: In essence, the larger and more complex IT systems are, the more likely they are to be tripped up by the traditional model of separate funding buckets for development, procurement and sustainment.

“No meaningful distinction exists among RDT&E, procurement, or O&M for software systems developed according to modular, agile principles,” the panel wrote. “These funding constraints lock Defense business systems development into rigid, predetermined pathways fundamentally at odds with widely accepted best practices for commercial software development.”

One reason to believe that thesis is the panel’s analysis also found that when Defense components funded their IT projects via the traditional weapons system model, money was spent in an all-too-familiar way. About 10% of their funding was binged during the final seven days of the fiscal year.

“Much of the data … are likely not DBS-related, but simply represent the purchase of computers and other equipment for day-to-day office use. This analysis, however, quantifies one of the most clearly visible ways in which the appropriation system produces skewed incentives for IT acquisition.”

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