VA Halts $500 Million Financial System Overhaul

The move follows an OMB freeze on contracts for new financial systems and other steps aimed at fixing long-standing problems with IT project management.
The Department of Veterans Affairs is scaling back plans to upgrade its core financial management system, eliminating the two most costly components of a project that was budgeted at nearly $500 million.

VA CIO Roger Baker and federal CIO Vivek Kundra disclosed the reversal in a July 13 conference call with InformationWeek Government and other media. The move comes two weeks after the White House, in an effort to review and identify potentially troubled projects, ordered a temporary stop to financial system upgrades at more than two dozen government agencies.

The changes represent a major downsizing to the VA's multi-year Financial and Logistics Technology Enterprise (FLITE) program, which Baker estimated to be worth $400 million to $500 million. In particular, the VA is putting the brakes on FLITE's Integrated Financial Accounting System and Financial Reporting Data Warehouse. The agency will proceed with implementation of its Strategic Asset Management System, which Baker described as a "small piece" of the FLITE program.

The decision to eliminate the two most costly components of FLITE was attributed to the VA's use of a program management accountability system that gives the agency increased control over IT projects. In addition, CFO Todd Grams determined that FLITE was not among the agency's top priorities. "It's in recognition that we can't do everything. We have limited resources," said Baker.

In lieu of the financial system overhaul, the VA will pursue improvements to the "feeder systems" that provide data to its core financial system, which has been in place since the 1990's, Baker said. Those smaller scale upgrades are expected be cheaper and lower risk, though Baker did not have a cost estimate on the required work.

The VA has already spent $16 million in planning FLITE's Integrated Financial Accounting System, though a contact for that system has not been awarded. On VA's FLITE Web site, General Dynamics and Mythics, an Oracle reseller, are listed as contractors for the Strategic Asset Management System.

Baker has been aggressively scrutinizing the VA's IT projects since his Senate confirmation as the agency's assistant secretary for information and technology in May 2009. A year ago, the VA placed 45 IT projects under review. (See "Veterans Affairs CIO Explains IT Overhaul.")

The Office of Management and Budget on June 28 announced three steps aimed at identifying and reining in troubled IT projects. They include a review by federal CIO Kundra of Uncle Sam's "highest risk" IT projects; a moratorium on new contracts for financial management systems, pending review; and development of recommendations to address "root causes" of persistent problems that hamper federal IT performance.

In a June 28 memo, OMB said it anticipates that 30 financial system projects will be reviewed for consistency with new policies that emphasize faster deployment, lower overall costs, and improved performance. Agriculture, Commerce, Education, Energy, Homeland Security, Interior, Justice, and Transportation are among the departments where systems are targeted for review.

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