How the Unraveling of Two Pentagon Projects May Result In a Costly Do-Over

The Pentagon is poised to cancel two nearly finished Navy and Air Force HR software projects worth over $800 million so new contracts can be awarded to other vendors, including Salesforce, Palantir, and Workday. 'The reason for the unusual move: officials at those departments, who have so far put the existing projects on hold, want other firms, including Salesforce and billionaire Peter Thiel's Palantir, to have a chance to win similar projects, which could amount to a costly do-over,' reports Reuters. From the report: In 2019, Accenture said it had won a contract to expand an HR platform to modernize the payroll, absence management, and other HR functions for the Air Force with Oracle software. The project, which includes other vendors and was later expanded to include Space Force, grew to cost $368 million and was scheduled for its first deployment this summer at the Air Force Academy. An April 'status update' on the project conducted by the Air Force and obtained by Reuters described the project as 'on track,' with initial deployment scheduled for June, noting that it would end up saving the Air Force $39 million annually by allowing it to stop using an older system. But on May 30, Darlene Costello, then-Acting assistant Secretary of the Air Force, sent out a memo placing a 'strategic pause' on the project for ninety days and calling for the study of alternate technical solutions, according to a copy of the memo seen by Reuters that was previously unreported. Costello, who has since retired, was reacting to pressure from other Air Force officials who wanted to steer a new HR project to SalesForce and Palantir, three sources said. The Air Force said in a statement that it 'is committed to reforming acquisition practices, assessing the acquisition workforce, and identifying opportunities to improve major defense acquisition programs.'

Space Force, which operates within the Air Force, was set to receive the Air Force's new payroll system in the coming months. But it is also pulling out of the project because officials there want to launch yet another HR platform project to be led by Workday, according to three people familiar with the matter. The service put out a small business tender on May 7 for firms to research HR platform alternatives, with the goal of selecting a company that will recommend Workday as the best option, the people said. Now the Air Force and Space Force 'want to start over with vendors that do not meet their requirements, leading to significant duplication and massive costs,' said John Weiler, director of the Information Technology Acquisition Advisory Council, a government-chartered nonprofit group that makes recommendations to improve federal IT contracting.

In 2022, the Honolulu-based Nakupuna Companies took over a 2019 project with other firms to integrate the Navy's payroll and personnel systems into one platform using Oracle software and known as 'NP2'. The project, which has cost about $425 million since 2023, according to the Government Accountability Office, was set to be rolled out earlier this year after receiving a positive review by independent reviewer and consulting firm Guidehouse in January, according to a copy obtained by Reuters. But the head of Navy's human resources, now retired Admiral Rick Cheeseman, sought to cancel the project according to a June 5 memo seen by Reuters, directing another official to 'take appropriate contractual actions' to cancel the project. Navy leaders instead mandated yet another assessment of project, according to a memo seen by Reuters, leaving it in limbo, two sources said.

Cheeseman's reason for trying to kill the project was his anger over a decision by DOGE earlier this year to cancel a $171 million contract for data services provider Pantheon Data that essentially duplicated parts of the HR project. In an email obtained by Reuters, he threatened to withhold funding from the Nakupuna-led project unless the Pantheon contract was restored. 'I am beyond exasperated with how this happened,' Cheeseman wrote in a May 7 email to Chief Information Officer Jane Rathbun about the contract cancellation, arguing the Pantheon contract was not 'duplicative of any effort.' 'From where I sit, I'm content taking every dime away from NP2 in order to continue this effort,' he added in the email. The pausing of NP2 was 'unexpected, especially given that multiple comprehensive reviews validated the technical solution as the fastest and most affordable approach,' Nakupuna said in a statement, adding it was disappointed by the change because the project was ready to deploy. The Navy said it 'continues to prioritize essential personnel resources in support of efforts to strengthen military readiness through fiscal responsibility and departmental efficiency.'

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