The GAO said in a September report to Congress that the installations were redundant and incompatible and that they failed to meet Navy requirements because of their limited scope. "In short, the efforts were failures, and $1 billion was largely wasted," the GAO report concluded.
The Navy is now in the midst of an $800 million project to consolidate the pilot efforts and create a mammoth ERP system that is slated to go live in 2011. That project, started two years ago, is also in jeopardy unless best practices are adopted and followed, the GAO report said.
The Navy vigorously disagrees with the GAO's conclusions, said Capt. Tim Hollande, deputy director of Navy ERP programming. "Both the [U.S. Department of Defense] and the Department of the Navy are quite happy with how the pilots have gone," Hollande said. "We've gotten a tremendous amount of knowledge in how to do an enterprise solution in a military environment."
Hollande said that prior to the pilot projects, Navy officials were uncertain whether such implementations were feasible. Now, he said, the Navy is confident that it can do them. "We think we got a lot of value," Hollande said.
The pilot implementations involved separate Navy system commands and a number of systems integrators, including IBM, Electronic Data Systems Corp. and Deloitte & Touche LLP.
The pilot projects were intended to help modernize the Navy's acquisition and financial management, supply chain and other operations. One system was retired after it served its educational purposes, while the others continue to have limited deployment, Hollande said. The pilot systems still in use will ultimately be retired in favor of the single SAP system, a project now under way that will incorporate the best-of-breed functions from the pilots.
Once it goes live, the converged application will operate in a single data center designed for easy upgrades and cost-effectiveness, said Hollande. The new system will support some 90,000 users globally and extend to nearly every facet of Naval operations. It will replace 280 legacy mainframe and minicomputer-based applications, some of which are 20 years old, Hollande said.
Still, the GAO said the overarching ERP system won't provide an "all-inclusive, end-to-end corporate solution for the Navy," noting that it faces several risks and doesn't include aviation and shipyard operations. The GAO also said the Navy must craft 44 separate software interfaces with other Navy and Defense Department systems and convert data for use in the new software.
As a result, the report calls on the Navy to create metrics to assess project performance and risks. There must also be independent oversight to verify and validate system performance and provide the Navy with unbiased reports. Semiannual reviews of the program should also be implemented, the GAO report said.
Overall, the Navy agreed with the recommendations and is already carrying out some of them, according to Hollande. He said the Navy completed its first validation with SAP AG in September. It's also in discussions with shipyard and aviation operations officials to ensure that they are eventually included in the system, he said.
"Trying to implement ERP on the scale required by the U.S. Navy is . . . orders of magnitude harder and more expensive than the largest of corporate giants would encounter," said Michael Taffe, an analyst at Boston-based AMR Research Inc.
For its part, in a statement, SAP contended that the pilot projects "prove" that off-the-shelf software is a viable ERP solution for the Navy.