Of the $79 billion federal agencies budgeted for information technology (IT) in fiscal year 2011, $54 billion (about 69 percent) was reported to have been spent on the operations and maintenance of existing legacy IT systemscommonly referred to as steady state investments. Given the magnitude of these investments, it is important that agencies effectively manage them to ensure the investments (1) continue to meet agency needs, (2) deliver value, and (3) do not unnecessarily duplicate or overlap with other investments. Accordingly, the Office of Management and Budget (OMB) developed guidance that calls for agencies to analyze (via operational analysis) whether such investments are continuing to meet business and customer needs and are contributing to meeting the agencys strategic goals. More specifically, this guidance calls for agencies to perform operational analyses annually on each steady state investment and requires that each operational analysis address 17 key factors, including cost, schedule, customer satisfaction, strategic and business results, financial goals, and whether the investment overlaps with other systems.
OMB, Capital Programming Guide, Supplement to OMB Circular A-11, Part 7 (Washington, D.C.: July 2012).
In October 2012, GAO reported that the five agencies it reviewedthe Departments of Defense (DOD), Health and Human Services (HHS), Homeland Security (DHS), the Treasury, and Veterans Affairs (VA)varied in the extent to which they performed operational analyses as called for by OMB guidance. Specifically, DHS and HHS conducted operational analyses, but in doing so, excluded key investments. DOD, Treasury, and VA did not conduct operational analyses. These five agencies investments accounted for approximately $37 billion annually or about 70 percent of all reported federal operations and maintenance spending in fiscal year 2011. GAO focused on these agencies 75 major IT investments valued at $4.6 billion annually that were strictly in the operations and maintenance phase and excluded mixed life-cycle investments that are in both development and operations and maintenance, which account for about $32 billion. The following table shows the total number of steady state investments for each agency, and provides the number and budgeted amount for those investments that underwent an operational analysis and those that did not.
Total Steady State IT Investments, and Number of Investments for Five Agencies That Had Operational Analyses and Did Not Have Operational Analyses with Cost
Agency (total investments in steady state)
Total investments with an operational analysis
Total investments without an operational analysis
HHS ( 8)
Source: GAO analysis based on OMB data.
Note: Costs by agency may not add to total due to rounding.
As shown in the table above, of DHSs 44 steady state investments, the department conducted operational analyses on 16 of them, which have a combined annual budget of almost $1.2 billion; it did not perform analyses on the other 28, which have an annual budget of about $1 billion. HHS conducted analyses on 7 of its 8 steady state investments, which have an annual budget of $207 million; it did not perform an operational analysis on the remaining investment, which has an annual budget of $77 million. In addition, although DHS and HHS performed analyses, the agencies did not address all 17 key factorssuch as those on identifying lessons learned and reviewing the status of risk versus cost, schedule, and performancein conducting them. DOD, Treasury, and VA did not conduct operational analyses for any of their 23 steady state investments that have combined annual budgets of $2.1 billion.
The following illustrates how factors were fully addressed, partially addressed, or not addressed by component agencies within DHS and HHS.
Regarding why DOD and VA had not developed policies and were not performing analyses, officials from those agencies stated that in lieu of conducting operational analyses, they assessed the performance of steady state investments as part of developing their annual plans and business cases submitted to OMB (called exhibit 300s). While GAO previously reported that using the exhibit 300 process can be a tool to manage investment performance, GAOs analysis showed that the process does not fully address 11 of the 17 factors. Treasury officials from the departments office of the Chief Information Officer said they decided not to perform operational analyses in 2011 and instead decided to use the time to develop a policy for conducting operational analyses. However, the officials stated that they did not anticipate the policy to be completed until the end of the calendar year.
Until these agencies perform operational analyses on all their steady state investments and ensure they address all factors in doing so, there is increased potential for these multibillion dollar investments to result in waste and unnecessary duplication. To this point, there is evidence showing that duplication of such IT investments is occurring at two of these agencies. For example, within DOD, GAO reported in February 2012 there were 31 potentially duplicative investments totaling approximately $1.2 billion. In particular, GAO identified four Navy personnel assignment investmentsone system for officers, one for enlisted personnel, one for reservists, and a general assignment systemeach of which is responsible for managing similar functions. In addition, at DHS, GAO reported that the department independently identified duplicative functionality in four investmentsincluding a personnel security investment, time and attendance investment, human resources investment, and an information network investment. These two agencies are taking steps to implement recommendations GAO made to identify and address such duplicative investments. While this is a positive development, it is important to note that these two agencies and the other three GAO reviewed reportedly spent over $4.6 billion in fiscal year 2011 on steady state investments and $32 billion on mixed life-cycle investments so the potential for identifying and avoiding costs associated with duplicative functionality across investments is significant.
To ensure that major steady state IT investments are being adequately analyzed, GAO recommended in October 2012 that the Secretaries of Defense, Homeland Security, Health and Human Services, Veterans Affairs, and the Treasury take the following action:
In addition, to ensure these annual assessments are conducted, GAO recommended in October 2012 that the Director of OMB take the following action:
Implementation of these recommendations could help agencies achieve cost savings by strengthening the oversight of their steady state investments in operations and maintenance, including identifying and terminating investments that no longer meet agency needs or unnecessarily overlap and duplicate other investments, thus resulting in the potential for savings on billions of dollars in IT investments.
The information contained in this analysis is based on findings from the report in the related GAO products section. As part of that report, GAO selected the five agencies with the largest budgets for major steady state IT investments; these agencies report spending $37 billion annually (or about 70 percent) of the $54 billion reportedly spent by all federal agencies on operations and maintenance of legacy systems in fiscal year 2011. In doing this, GAO focused on these agencies 75 major IT investments valued at $4.6 billion in fiscal year 2011 that were strictly in the operations and maintenance phase (i.e., excluded systems that are in both development and operations and maintenance which account for about $32 billion). GAO reviewed all operational analyses performed on these agencies major IT investments during fiscal year 2011 and compared them to OMB and related criteria. Table 21 in appendix IV lists the programs GAO identified that might have opportunities for cost savings or revenue enhancement.
In commenting on a draft of the October 2012 report on which this submission is based, OMB and the five agencies agreed with the findings and recommendations.
GAO provided a draft of this report section to OMB and the five agencies for review and comment. Overall, OMB and two agencies (DOD and Treasury) agreed with the report section, one agency (DHS) had technical comments, and the two remaining agencies (HHS and VA) either had no comments or had no objections. Specifically, in an e-mail received on January 23, 2013, OMB officials stated that they concurred with GAOs recommendations and reiterated the actions it had taken to address them. In an e-mail received on January 23, 2013, DOD reaffirmed concurrence with GAOs recommendation and added that it is in the process of drafting operational analysis guidance which the department plans to coordinate with the services and other departmental components before finalizing and implementing the guidance. In addition, in an e-mail received on January 28, 2013, Treasury officials stated that they agreed with GAOs recommendations and that the department had issued a revised operational analysis policy (dated November 5, 2012). The officials also noted that Treasury has directed that operational analyses be performed for all major investments that have production elements. Treasury anticipates receiving operational analyses for all of these investments in calendar year 2013 and plans to share the results with OMB. Further, in its technical comments provided on January 23, 2013, DHS noted that after receiving a draft of our October 2012 report, the department identified and provided to GAO OAs that it had performed on 3 additional investments in fiscal year 2011. Finally, in an e-mail received on January 24, 2013, HHS officials stated they had no comment on the report section and in an e-mail received on January 22, 2013, VA officials stated they had no objection to the report section.
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