VA scales back $500 million IT revamp

Change dictated by cost concerns, department says

The U.S. Department of Veterans Affairs has dropped a large portion of its work on a four-year, $500 million project to modernize its financial and asset management systems, citing cost concerns.

Under a new, sharply scaled-back plan, the VA will continue with development work on the strategic asset management part of the program, but it will stop work on the much larger financial system, an agency spokeswoman said today.

Canceling the financial component will result in savings of $80 million in the federal government's 2010-2011 fiscal year alone. (The government's fiscal year starts Oct. 1.) So far, the VA estimates it has spent about $16 million on planning the financial management system. Nearly 40 VA employees working on the project have been reassigned to other tasks.

The VA project, known as the Financial and Logistics Integrated Technology Enterprise (FLITE) program, was launched in 2008; its purpose was to overhaul the department's aging financial and asset management systems. It was meant as a replacement for another VA project called the Core Financial and Logistics System, which the agency launched in 1998 but discontinued in 2004 after spending more than $305 million on the effort.

The original goal of the FLITE program was to develop a strategic asset management (SAM) system for managing physical assets and inventories, and to set up a separate financial management component referred to as the Integrated Financial Accounting System (IFAS).

VA CIO Roger Baker and federal CIO Vivek Kundra decided to discontinue work on the financial system because of cost concerns and the fact that it was not aligned with the VA's business priorities, the spokeswoman said. "The huge amount of money needed for a financial management system did not compare favorably with other more pressing needs for IT dollars," within the department, she said. One example of a higher-priority project is a new system for processing disability claims, she said.

Under the newly scaled-back plans for FLITE, the VA will continue to work on "shorter-term, lower-cost fixes" designed to bolster the capabilities of its existing financial management system, the spokeswoman added.

The VA's decision comes just a few days after the White House Office of Management and Budget (OMB) ordered a governmentwide review of agency efforts to modernize their financial IT systems.

The memorandum ordered all civilian federal agencies to clearly define the scope of their financial system modernization efforts to reduce project costs, align projects more closely with business needs and to accelerate deployment schedules. It also asked federal agencies to avoid new projects and investments in financial management systems until the OMB completes its review.

The VA's decision to trim the FLITE program, however, was not a direct result of the OMB directive, the spokeswoman said, Even before the OMB memo was sent, the VA's Baker had been reviewing work on the IFAS program through the VA's Performance Management and Accountability System and had decided to shelve the effort, she said. "They were already seeing some problems with IFAS when OMB came out with their directive," she said.

The OMB directive is likely to result in other agencies following the VA's lead. The OMB said that it is seeking reviews on as many as 30 financial systems governmentwide. The review includes systems at the Departments of Treasury, Defense, Transportation, Energy, Justice, Homeland Security and Health and Human Services.

Jaikumar Vijayan covers data security and privacy issues, financial services security and e-voting for Computerworld. Follow Jaikumar on Twitter at @jaivijayan, or subscribe to Jaikumar's RSS feed . His e-mail address is jvijayan@computerworld.com.

Copyright © 2010 IDG Communications, Inc.

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