Defense Business Process Engineering Spending, FY 2010-2013

Published: August 07, 2013

USAFARMYDEFENSEERPNational Defense Authorization Act

The Defense Department Office of the Inspector General recently released an updated report on some of the DoD’s largest Enterprise Resource Planning (ERP) system implementations. This report showed that the DoD continues to require assistance effectively using Business Process Re-engineering (BPR) to derive cost and efficiency benefits from these ERPs. This requirement may provide an area of opportunity for vendors offering BPR expertise.

The Defense Department Inspector General (DoDIG) recently released an update on the status of changes it recommended in summer 2012 to ensure the integrity of business process re-engineering assessments for some of the DoD’s largest Enterprise Resource Planning (ERP) system implementations.  According to this report, the six project management offices queried for the assessment reported that in the past year four of the tracked ERP projects experienced cost decreases of $681 million.  These projects included the Army’s Logistics Modernization Program (LMP), the Navy’s enterprise ERP, the Air Forces Defense Enterprise Accounting and Management System (DEAMS), and the Defense Logistics Agency’s Enterprise Business System (EBS) eProcurement module.  The remaining two projects – Army’s General Fund Enterprise Business System (GFEBS) and the DoD’s Defense Agencies Initiative (DAI) experienced $299 million in cost increases.  Of this total, the increases connected to DAI amounted to $213.6 million, due largely to maintenance and other support services related to the implementation of Oracle Release 12.

I have written previously about the Defense Agencies Initiative, pointing out at the time that $52 million of the DAI’s projected $99 million FY 2014 budget was slated for development, modernization, and enhancement (DME).  Given the numbers reported by the DoDIG, it appears that vendors providing support for DAI will continue to benefit from being in the right place at the right time.  Spending on the DAI reinforces my belief that vendors should continue to seek opportunity in DoD business systems efforts because they are expensive, complex, long-term, and, in some cases, mandated.  In today’s tightening market following the money means looking for the priorities set out by Congress and then positioning oneself accordingly.

This brings me to another subject in the DoDIG’s report – business process re-engineering.  The National Defense Authorization Act for FY 2012 directed the DoD to streamline ERP business processes to derive program and cost efficiencies.  This got me thinking about IT services because the government relies heavily on vendor support for services like BPR.  If Congress mandated that the DoD increase/improve its use of BPR, I thought it might be worth digging up whatever data I could find on BPR spending.  Because not all BPR spending is clearly reported as such, there are limitations to the ability to parse spending on BPR-related work from other IT services.  This in mind, a search of the database did provide some data that could prove instructive.

For example, the total value of BPR-related contracts awarded by the DoD from FY 2010 to FY 2013 was $112.2 million.  This spending breaks down by fiscal year as follows:
Spending on business process training and education, as well as on formal BPR services, is included in this dataset.  As we can see, the overall trajectory of spending is down significantly from FY 2010.  This trend is consistent with overall IT services spending at the DoD.  Yet the data also shows a “recovery” of sorts in FY 2012, suggesting a kind of “cyclicality” to BPR services spending.  So far, reported spending in FY 2013 has been miniscule, but we should keep in mind the fact that the DoD has only reported spending through Q2.  As the following chart of spending by quarter from FY 2010 - FY 2013 shows, the majority of spending always occurs in Q4.  Therefore, if spending in FY 2013 is in keeping with historical norms, we should see a flood of obligations in August and September.
Finally, I’ll wrap up by providing a look at the same spending data by top 10 most used Product Service Codes.  This perspective illustrates that BPR activity at DoD is common in areas other than just IT, suggesting a greater breadth of business opportunity for professional services vendors than those with offerings purely in the IT space.