Most commonly used in the military, "clusterfuck" is the 2nd level of group incompetence. Level 1 being a "Circle Jerk", Level 2 being a "Cluster Fuck" and Level 3 being a "Goat Screw".
Specifically, a "clusterfuck" is a situation where a group of individuals are gathered in the same general location and know "what-to-do", but are enaged in activities that are counter-productive to the mission.
"The platoon was supposed to attack the building from the top, the sides, the front and back but everyone converged trying to attack the same location causing a clusterfuck at the front door of the building.