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VA cancels financial management system in wake of federal IT freeze

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By Marjorie Censer
Monday, July 26, 2010

The Department of Veterans Affairs has canceled its financial management system just weeks after the Office of Management and Budget froze the program as part of a larger review of federal information technology programs.

OMB announced earlier this summer that it would halt new spending on selected federal agencies' financial management systems, requiring reviews before the projects can move forward. The agencies were given 60 days to prepare their plans, which OMB will have 60 days to assess.

The news has meant government contractors who hoped to work on the programs are now facing delays and, in some cases, cancellation.

Roger Baker, chief information officer at the Department of Veterans Affairs, said the agency had already been struggling to get one piece of its Financial and Logistics Integrated Technology Enterprise (FLITE) program up and running.

"I was looking at the number of large projects we were doing and getting concerned about our ability to do all of them successfully," Baker said of the decision to cancel FLITE. Now, the VA is "not going to start an [information technology] project unless we have a high degree of confidence that we will succeed."

The FLITE system was slated to cost between $300 and $400 million; Baker estimated that terminating the program -- but preserving one of its pieces -- will save the VA $200 to $300 million.

Though Baker knew of the OMB directive, he said it didn't force the cancellation.

However, "it certainly didn't hurt the ability to make the decision to know that OMB was reaching the same conclusions we were," he said.

OMB's announcement also coincided with the expected July 1 award date for a Department of Homeland Security financial management system, one of the ones that were frozen, leaving competing contractors in limbo.

The contract for DHS's Transformation and Systems Consolidation (TASC) program, meant to merge the department's financial systems to reduce redundancies, is worth up to $450 million.

DHS spokesman Larry Orluskie said the agency is continuing with the award process and working closely with OMB but declined to say exactly how the department is continuing or whether there is an anticipated award date.

In the meantime, the DHS inspector general has released a new report on the program, questioning whether the agency is adequately prepared to manage it.

TASC is just the most recent effort by the agency to establish a new financial management system. Technical challenges killed off the first try in 2005 and no bids were submitted for a second shot in 2007. The third effort ended in a 2008 court decision that found the department did not properly put the contract up for competition.

In a July 8 report, the IG criticized DHS preparations for the program, arguing the department does not have the right planning documents in place and its cost estimates fail to take into account all costs.

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