POGO Urges Navy to Study Utility Cost Program
The Honorable Dr. Donald C. Winter
Secretary of the Navy
1000 Navy Pentagon
Washington, DC 20350-1000
Dear Dr. Winter:
The Project On Government Oversight (POGO) is an independent nonprofit organization that investigates and exposes corruption and other misconduct in order to achieve a more accountable federal government. Since 1981, POGO has promoted systemic good government initiatives by exposing fraud, waste, and abuse in government spending.
POGO recently learned about the shut down of a Navy program, the Centralized and Integrated Reporting for the Comprehensive Utilities Information Tracking System (CIRCUITS). CIRCUITS is a Navy-wide consolidated resource that will collect utility data for all Navy shore and Marine Corps activities that deliver, produce, purchase, or sell utility services. CIRCUITS would manage the dollars associated with each utility and automate the invoice and accrual processes while capturing utility procurement data. Simply stated, if brought back online, CIRCUITS would allow the Navy to gather utility information to better manage its budgeting and spending on electricity, water, and gas utilities.
Prior to the shutdown of CIRCUITS, data showed that the Navy paid approximately $591,000 in unnecessary late charges in FY 2007. Two Field Engineering Commands (FEC) that use manual payment processes paid 82% of those late charges, totaling over $482,000. In comparison, the remaining five FECs that operate with fully implemented accounts payable systems only accounted for the remaining $108,000 in late charges. Sources close to the CIRCUITS program estimate that the Navy could be paying as much as $5 to $10 million each year in late fees as well as an additional $5 to $10 million in overcharges and duplicate utility payments. Although there is an initial cost for implementing the CIRCUITS program, the long-term savings would more than offset any initial outlays.
Implementation costs aside, sources have informed POGO that Naval Facilities Engineering Command (NAVFAC) and some personnel within the chain of command were concerned that the CIRCUITS program would expose long-term waste and mismanagement in its utility planning and spending program. In fact, it appears that the initial phases of the CIRCUITS program were highlighting the Navy's inability to manage and control its utility costs.
Currently, the Navy does not have a true cost model. As a result, it has no true understanding of its utility usage, spending, or controls. Simultaneous operation of multiple utility systems results in duplication of data entry, data errors, labor-intensive calls to vendors, gaps in functionality, and wasteful spending (i.e., duplicate payments, overbilling, and late charges).
In addition to saving money, CIRCUITS reduced bill processing times from several weeks to an average of less than five days. Reductions in the bill processing time remind me of the old adage "time is money" and it appears that CIRCUITS provided many benefits to the Navy.
CIRCUITS also provided security benefits. The Navy's Energy and Utilities Information Technology Program Manager has highlighted the lack of physical security of Navy utility systems. After reviews of systems and processes, security weaknesses that could be exploited by terrorist or military opponents have been identified, but no appropriate responses have occurred to date to harden these systems. If successfully exploited, these security weaknesses could render a Navy facility inoperable prior to an attack at, or inside, the fence line.
At one point, CIRCUITS was going to be moved and operated under the Navy Marine Corps Intranet (NMCI) system. Despite that plan, NAVFAC shut down the CIRCUITS program in December 2007. Scheduled meetings to relocate and restart CIRCUITS have been placed on hold; however, a July meeting might be scheduled.
POGO urges you to conduct an investigation into the discontinued CIRCUITS program. POGO believes that the implementation of automated systems will save money, provide insights about physical security at Navy facilities, and operate as a utility data model that could create savings throughout the entire federal government. Additionally, POGO urges you to conduct an investigation into the inactions of identifying and hardening Navy utility systems.
Thank you for your time and consideration. If you have any questions, please contact me at (202) 347-1122.
Scott H. Amey
cc: Office of the Naval Inspector General
Attn: Navy Hotline
1254 Ninth Street, S.E.
Washington Navy Yard, DC
1 The Energy Policy Act of 2005 ( Pub. Law 109-58, Sec. 103, Aug. 8, 2005) requires federal agencies to implement an energy use measurement and accountability program.
2 CIRCUITS is funded by CNON46 and is currently being managed by the Naval Facilities Engineering Command.
3 Late fees appear to be a problem for other governments as well. Recently, The Associated P ress reported that the D.C. government has paid utility late fees totaling as much as $700,000. Examiner.com, "D.C. pays utility up to $700K in late fees," June 23, 2008. Available at http://www.examiner.com/a-1454384~DC_pays_utility_up_to__700_000_in_late_fees.html.
4 Estimates showed that the difference in bill processing times was as great as 8.38 days when comparing manual versus automated systems.
For further information:
POGO urges the DOD IG to investigate CIRCUITS and an apparent employee retaliation action.