STREAMLINING 

GOVERNMENT

Questions to Consider 

When Evaluating 

Proposals to 

Consolidate Physical 

Infrastructure and 

Management 

Functions 

Report to Congressional Requesters

May 2012

GAO-12-542

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-542, a report to 

congressional requesters 

May 2012

STREAMLINING GOVERNMENT

Questions to Consider When Evaluating Proposals to 

Consolidate Physical Infrastructure and 

Management Functions 

Why GAO Did This Study 

GAO has previously reported on many 

areas that appear to be duplicative, 

overlapping, or fragmented and has 

suggested that agencies could 

increase their efficiency and 

effectiveness by consolidating their 

physical infrastructure, such as 

research facilities, or consolidating

their management functions, such as 

information technology. Such 

consolidation, however, involves 

weighing costs as well as benefits and 

can be complex and challenging to 

implement.

Given the potential benefits and costs 

of consolidation, it is imperative that 

Congress and the executive branch 

have the information needed to help 

effectively evaluate consolidation 

proposals. In this report, GAO 

identifies key questions that agencies 

should consider when evaluating 

whether to consolidate physical 

infrastructure and management 

functions and illustrates the questions 

with agency consolidation examples. 

GAO reviewed the consolidation 

literature; selected seven consolidation 

initiatives at the federal level in various 

stages of completion and one 

recommended consolidation; reviewed 

documentation and interviewed agency 

officials with responsibility for the 

initiatives; and interviewed publicmanagement and government-reform

experts with consolidation experience. 

GAO provided the draft for review and 

comment to the five agencies with 

consolidation initiatives that were not 

covered by prior GAO work and made 

technical changes as appropriate. 

GAO does not make recommendations 

in this report. 

What GAO Found

The following fundamental questions should be answered while considering a 

physical infrastructure or management function consolidation initiative.

Key Questions to Consider When Evaluating Consolidation Proposals

What are the goals of the consolidation? What opportunities will be addressed through the 

consolidation and what problems will be solved? What problems, if any, will be created? 

What will be the likely costs and benefits of the consolidation? Are sufficiently reliable data available 

to support a business-case analysis or cost-benefit analysis?

How can the up-front costs associated with the consolidation be funded?

Who are the consolidation stakeholders, and how will they be affected? How have the stakeholders 

been involved in the decision, and how have their views been considered? On balance, do 

stakeholders understand the rationale for consolidation?

To what extent do plans show that change management practices will be used to implement the 

consolidation?

Source: GAO.

• The key to any consolidation initiative is the identification of and agreement 

on specific goals, with the consolidation goals being evaluated against a 

realistic expectation of how they can be achieved. Consolidation goals, for 

example, can be compromised and new problems introduced when an 

initiative is delayed or halted, with agencies running the risk of increased 

costs. 

• The initiative needs to be based on a clearly presented business-case or 

cost-benefit analysis and grounded in accurate and reliable data, both of 

which can show stakeholders why a particular initiative is being considered 

and the range of alternatives considered. 

• Physical infrastructure and management function consolidations often have 

up-front costs, such as paying for equipment and furniture moves and 

funding employee transfers, and agencies find it challenging to pay for these 

upfront costs. 

• Since stakeholders often view consolidation as working against their own 

interests, it is critical that agencies identify who the relevant stakeholders are 

and develop a two-way communication strategy that both addresses their

concerns and conveys the rationale for and overarching benefits associated

with the consolidation. 

• Finally, implementing a large-scale organizational transformation, such as a 

consolidation, requires the concentrated efforts of both leadership and 

employees to accomplish new organizational goals. Agencies should have

an implementation plan for the consolidation that includes essential change 

management practices such as active, engaged leadership of executives at 

the highest possible levels; a dedicated implementation team that can be 

held accountable for change; and a strategy for capturing best practices, 

measuring progress toward the established goals of the consolidation, 

retaining key talent, and assessing and mitigating risk, among others.

View GAO-12-542. For more information, 

contact J. Christopher Mihm at (202) 512-6806 

or mihmj@gao.gov. 
Page i GAO-12-542 Consolidation Proposals 

Letter 1 

Background 5

Key Questions to Consider When Evaluating Physical 

Infrastructure and Management Function Consolidation 

Proposals 7

Agency Comments 39

Appendix I Scope and Methodology 41

Appendix II Additional Questions Related to Physical Infrastructure and 

Management Function Consolidation Initiatives 44

Appendix III Key Change Management Practices 48

Appendix IV GAO Contact and Staff Acknowledgments 50

Tables

Table 1: Descriptions of a Recommended Federal Agency 

Consolidation and Other Consolidation Initiatives in 

Various Stages of Implementation 4

Table 2: Key Questions to Consider When Evaluating Consolidation 

Proposals 7

Table 3: The Census Bureau’s Eight Consolidation Goals 9

Table 4: Federal Agency Consolidation Examples in Various Stages 

of Implementation 43

Figures

Figure 1: Timeline for Census Bureau Consolidation Plan 

Announcement 25

Figure 2: Identification Form Census Managers Use to Monitor 

Risks 38

Contents
Page ii GAO-12-542 Consolidation Proposals 

Abbreviations

BRAC Base Realignment and Closure

COBRA Cost of Base Realignment Actions

DOD Department of Defense

EPA Environmental Protection Agency

FDCCI Federal Data Center Consolidation Initiative 

FHCC Federal Health Care Center

HUD Department of Housing and Urban Development

ICASS International Cooperative Administrative Support Services

IRS Internal Revenue Service

OMB Office of Management and Budget

OPM Office of Personnel Management

State Department of State

TIGTA Treasury Inspector General for Tax Administration

USAID U.S. Agency for International Development

VA Department of Veterans Affairs

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Page 1 GAO-12-542 Consolidation Proposals 

United States Government Accountability Office 

Washington, DC 20548

May 23, 2012

The Honorable Daniel K. Akaka

Chairman

Subcommittee on Oversight of Government Management, the Federal

 Workforce, and the District of Columbia

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Thomas R. Carper

Chairman

Subcommittee on Federal Financial Management, Government

 Information, Federal Services, and International Security

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Mark R. Warner

Chairman

Task Force on Government Performance

Committee on the Budget

United States Senate

The current fiscal crisis offers a window of opportunity for the federal 

government to examine how consolidating its operations can contribute to 

cost savings or effectiveness gains. With our nation facing serious, longterm fiscal challenges, a reevaluation of federal agencies’ operations has 

never been more important than it is today, and over the past 2 years, we 

have reported on many areas that appear to be duplicative, overlapping, 

or fragmented. The first report, issued in March 2011, presented 81 

opportunities to reduce potential government duplication, achieve cost 

savings, or enhance revenues, and the 2012 report presented 51 areas 

where programs may be able to achieve greater efficiencies or become 

more effective in providing government services. For example, the Army 

and Navy are planning to spend approximately $1.6 billion to acquire 

separate unmanned aircraft systems that are likely to have similar 

capabilities. In addition, landholding agencies have over 45,000 

underused buildings, and individual agencies have hundreds of 

incompatible information-technology networks and systems that were built 

over time and hinder governmentwide information sharing. This 

 
 

Page 2 GAO-12-542 Consolidation Proposals 

duplication of effort and the maintenance of these buildings and legacy 

systems are costly propositions for the federal government.1

In our past reports, we have suggested that federal agencies could 

increase their efficiency and effectiveness by consolidating their physical 

infrastructure, such as closing offices or other facilities like military bases, 

storage depots, and research facilities, or consolidating their 

management functions, such as information-technology or administrativesupport services.2

Consolidation is beneficial in some situations and not in others, and so a 

case-by-case analysis is necessary, evaluating the goals of the 

consolidation against the realistic possibility of the extent to which those 

goals would be achieved. Consolidation initiatives can be immensely 

complex, politically charged, and costly and are not quick, easy, or 

automatic ways of producing desired change. Decision makers need to 

balance the benefits of consolidation against the physical, up-front 

financial, bureaucratic, and political costs, while considering alternatives 

such as increased cooperation or collaboration that may provide other 

At your request, in this report we are examining key 

questions to consider when evaluating physical infrastructure and 

management function consolidation initiatives, with physical infrastructure 

consolidation defined as the combining of systems, equipment, and 

people into fewer buildings or facilities than they previously occupied and 

management function consolidation as the combining of formerly distinct 

systems, processes, and people in areas such as information technology, 

financial management, human resources management, and procurement. 

Both types of consolidation are intended to support improved customer 

service, increased efficiency and effectiveness, or cost avoidances and 

cost savings, or a mix of those goals.

 

1

GAO, 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and 

Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP (Washington, 

D.C.: Feb. 28, 2012) and Opportunities to Reduce Potential Duplication in Government 

Programs, Save Tax Dollars, and Enhance Revenue, GAO-11-318SP (Washington, D.C.: 

Mar. 1, 2011). 

2

See, for example, GAO, Opportunities for Oversight and Improved Use of Taxpayer 

Funds, GAO-03-1006 (Washington, D.C.: Aug. 1, 2003); Best Practices: Elements Critical 

to Successfully Reducing Unneeded RDT&E Infrastructure, GAO/NSIAD/RCED-98-23

(Washington, D.C.: Jan. 8, 1998); and Embassy Management: Actions Are Needed to 

Increase Efficiency and Improve Delivery of Administrative Support Services, GAO-04-511 

(Washington, D.C.: Sept. 7, 2004).
 

Page 3 GAO-12-542 Consolidation Proposals 

paths to efficiency.3

Given the potential benefits and challenges of consolidation, it is 

imperative that Congress and the executive branch have the tools and 

information needed to help effectively evaluate consolidation proposals 

and activities. In response to your request, the specific objective of this 

report was to identify key questions that federal agencies should consider 

when evaluating whether to consolidate physical infrastructure or 

management functions and illustrate the questions with agency 

consolidation examples. To address this objective, we identified and 

reviewed our reports on specific consolidation initiatives that have been 

undertaken.

In addition, consolidation initiatives may, but do not 

inevitably, save money and often require significant up-front costs to yield 

long-term benefits. There are, however, situations with clear potential for 

cost savings and operational efficiencies through physical infrastructure 

and management function consolidations.

4

 

3

See, for example, GAO, Results-Oriented Government: Practices That Can Help 

Enhance and Sustain Collaboration among Federal Agencies, 

We used this to complement information gathered through a 

review of the relevant literature on public-sector consolidations produced 

by academic institutions, professional associations, think tanks, news 

outlets, and various other organizations. In addition, as illustrative 

examples, we reviewed selected consolidation initiatives at the federal 

agency level. These examples provided insights into how agencies 

addressed the key questions. The examples were selected from physical 

infrastructure and management function consolidations from a range of 

agencies in different stages of completion, including one that has been 

recommended but not acted upon. The examples represented both interand intra-agency activity. We obtained documentation on these initiatives 

and interviewed agency officials with responsibility for implementing the 

initiatives. We did not verify the estimated cost savings associated with 

the consolidation initiatives. Table 1 provides a description of the 

illustrative examples we included in the report. We also interviewed a 

GAO-06-15 (Washington, 

D.C.: Oct. 21, 2005). We are also in the process of assessing interagency collaboration 

mechanisms with a report scheduled for release in fall 2012.

4

See, for example, GAO, Data Center Consolidation: Agencies Need to Complete 

Inventories and Plans to Achieve Expected Savings, GAO-11-565 (Washington, D.C.: July 

19, 2011); Embassy Management: State Department and Other Agencies Should Further 

Explore Opportunities to Save Administrative Costs Overseas, GAO-12-317 (Washington, 

D.C.: Jan. 31, 2012); and Military Bases: Analysis of DOD’s 2005 Selection Process and 

Recommendations for Base Closures and Realignments, GAO-05-785 (Washington, D.C.: 

July 1, 2005).
 

Page 4 GAO-12-542 Consolidation Proposals 

number of individuals selected for their expertise in public management 

and government reform. We conducted some of these interviews 

individually and met with a panel of Fellows from the National Academy of 

Public Administration, where participants shared their thoughts on the 

basis of their consolidation experiences.5

Table 1: Descriptions of a Recommended Federal Agency Consolidation and Other Consolidation Initiatives in Various Stages 

of Implementation

Consolidation initiative Type of consolidation Description

Department of Commerce 

Census Bureau Regional 

Offices

Intra-agency / physical 

infrastructure 

The Census Bureau in 2011 announced plans to close 6 out of 12 

regional offices by 2013 to reduce the cost and improve the quality of 

the hundreds of surveys the Census Bureau conducts annually. The 

Census Bureau estimates the initiative will save between $15 million 

and $18 million annually beginning in fiscal year 2014.

Department of Defense 

(DOD) Base Realignment 

and Closure (BRAC)

Intra-agency / physical 

infrastructure 

BRAC recommendations are intended to generate savings, reduce 

excess property, and realign DOD’s workload and workforce to 

achieve efficiencies through consolidating bases and military functions. 

The BRAC 2005 round, the fifth such round undertaken by DOD since 

1988, is the biggest, most complex, and costliest BRAC round to date. 

DOD reported that as a result of prior BRAC rounds, billions of dollars 

had been saved annually that could be applied to higher priority 

defense needs.

Department of the Treasury 

Internal Revenue Service 

(IRS) Processing Centers

Intra-agency / physical 

infrastructure 

Beginning in 2000, IRS consolidated the total number of individual 

paper processing centers from eight to three sites to reduce overhead 

and real-estate costs and improve efficiency in response to the 

increase in electronic filing and subsequent decrease in paper filing. 

IRS estimates the initiative has saved $175 million through 2011. 

Environmental Protection 

Agency (EPA) Laboratories

Recommended intra-agency / 

physical infrastructure

Multiple independent evaluations over the past 20 years have 

recommended that EPA address planning, coordination, and 

leadership issues associated with EPA’s science activities. EPA has 

also not fully addressed recommendations from a 1994 independent 

evaluation to consolidate and realign its laboratory facilities and 

workforce—even though this evaluation found that the geographic 

separation of laboratories hampered their efficiency and technical 

operations and that consolidation and realignment could improve 

planning and coordination issues that have disadvantaged its science 

and technical community for decades. 

 

5

Established in 1967 and chartered by Congress, the National Academy of Public 

Administration is a non-profit, independent coalition of public management and 

organizational leaders. For more information, go to www.napawash.org.
 

Page 5 GAO-12-542 Consolidation Proposals 

Consolidation initiative Type of consolidation Description

Office of Management and 

Budget (OMB) Federal Data 

Center Consolidation 

Initiative (FDCCI)

Intra-agency / physical 

infrastructure and management 

function

The FDCCI is intended to improve the efficiency, performance, and 

environmental footprint of federal data center activities through the 

consolidation of centers that support data transmissions. The initiative 

was announced in 2010 and is planned to continue through 2015. 

OMB estimated that the federal government will save approximately $3 

billion between 2011 and 2015.

Office of Personnel 

Management (OPM) Payroll 

Systems 

Interagency / management 

function

The payroll consolidation initiative consolidated 26 payroll systems to 

four shared-service centers, standardized payroll policies and 

procedures, and simplified and better integrated payroll, human 

resources, and finance functions between its announcement in 2001 

and its completion in 2009. OPM estimated the initiative would save 

the federal government $1.1 billion over 10 years.

Department of State (State) 

International Cooperative 

Administrative Support 

Services (ICASS) system

Interagency / management

function

ICASS is an interagency system established in 1997 for distributing the 

costs of administrative services at overseas posts and is intended to 

ensure that each agency bears the cost of its overseas presence. 

State has the primary responsibility for operating the system, and over 

40 agencies share the costs of ICASS services, which totaled over $2 

billion in fiscal year 2011. State estimated that the U.S. government 

saved millions of dollars per year by reducing staff and eliminating 

warehouses. However, there has been no quantitative study on cost 

savings because the necessary data are not available. 

Department of Veterans 

Affairs (VA) and DOD 

Federal Health Care Center 

(FHCC)

Interagency / physical 

infrastructure and management 

function

The FHCC is an ongoing 5-year demonstration project running from 

2010 to 2015 to integrate VA and DOD medical care into a first-of-itskind joint facility that will provide health care services to approximately 

118,000 VA and DOD patients per year. VA and DOD officials 

estimated that the first two phases of the initiative saved $11.2 million.

Source: GAO.

We conducted our work from June 2011 to May 2012 in accordance with 

all sections of GAO’s Quality Assurance Framework that are relevant to 

our objective. The framework requires that we plan and perform the 

engagement to obtain sufficient and appropriate evidence to meet our 

stated objectives and to discuss any limitations in our work. We believe 

that the information and data obtained, and the analysis conducted, 

provide a reasonable basis for any findings and conclusions in this report. 

More detailed information on our scope and methodology appears in 

appendix I.

Physical infrastructure and management function consolidations can be 

strategies to help improve the efficiency of federal agencies, an area with 

increased focus given our current fiscal challenges. In the 2013 budget, 

for example, the administration reported that it is proposing cuts,

Background
 

Page 6 GAO-12-542 Consolidation Proposals 

consolidations, and savings across the government totaling more than 

$24 billion in the upcoming fiscal year and $520 billion through 2022.6

The White House also posted an interactive map of excess federal 

properties on its website, noting that the map illustrates a sampling of 

over 7,000 buildings and structures designated as excess. To help 

address this problem, an executive order, signed by the President in 

February 2004, promotes efficient and economical use of the federal 

government’s real property assets by requiring each agency to determine 

what it owns, what it needs, and what it costs to manage its real 

properties. The agencies then are required to develop and implement 

asset-management plans, develop and monitor real-property performance 

measures, and dispose of properties that are not needed.7

A recent effort underway to address the need for reexamining 

government is the consideration of the Reforming and Consolidating 

Government Act of 2012 (S. 2129), first proposed by the President and 

introduced in the Senate by Senators Lieberman and Warner.

Another major 

approach that agencies can take to improve their cost effectiveness is to 

consolidate management or operational processes and functions to make 

them more efficient. This approach often involves examining 

administrative or operational processes to make them faster or to use 

fewer resources. While agency efficiency efforts will not resolve the longterm fiscal imbalance because of the size of that imbalance, they remain 

important to the federal government’s ability to operate with fewer 

resources while maintaining or improving the critical services and 

functions that it provides.

8

 

6

Executive Office of the President of the United States, Building a 21st Century 

Government by Cutting Duplication, Fragmentation, and Waste (Washington, D.C.: Feb. 

28, 2012).

Under S. 

2129, the President would be permitted to propose the creation of a new 

department (or renaming of an existing department), the abolishment or 

transfer of an executive department, or the consolidation of two or more 

7

Exec. Order No. 13,327, Federal Real Property Asset Management, 69 Fed. Reg. 5897 

(Feb. 4, 2004). 

8

S. 2129 112th Cong. (2012). On April 19, 2012, a companion bill was introduced in the 

House of Representatives, H.R. 4409 112th Cong. (2012).
 

Page 7 GAO-12-542 Consolidation Proposals 

departments.9 However, it should be noted that none of the consolidation 

initiatives discussed in this report required this type of broad 

reorganization authority to be implemented, although some had 

specifically related legislation.

The key questions we identified that federal agencies should consider 

when evaluating a physical infrastructure or management function 

consolidation initiative are presented in table 2.

Table 2: Key Questions to Consider When Evaluating Consolidation Proposals

What are the goals of the consolidation? What opportunities will be addressed through 

the consolidation and what problems will be solved? What problems, if any, will be 

created? 

What will be the likely costs and benefits of the consolidation? Are sufficiently reliable 

data available to support a business-case analysis or cost-benefit analysis?

How can the up-front costs associated with the consolidation be funded?

Who are the consolidation stakeholders, and how will they be affected? How have the 

stakeholders been involved in the decision, and how have their views been considered? 

On balance, do stakeholders understand the rationale for consolidation? 

To what extent do plans show that change management practices will be used to 

implement the consolidation?

Source: GAO analysis.

a

a

For these practices, we drew from our prior reports: Highlights of a GAO Forum, Mergers and 

Transformation: Lessons Learned for a Department of Homeland Security and Other Federal 

Agencies, GAO-03-293SP (Washington, D.C.: Nov. 14, 2002) and Results-Oriented Cultures: 

Implementation Steps to Assist Mergers and Organizational Transformations, GAO-03-669, 

(Washington, D.C.: July 23, 2003). 

Appendix II has additional questions grouped by these five fundamental 

questions that are related to the ideas, strategies, and leading practices 

that may help facilitate physical infrastructure and management function 

consolidations.

 

9

For our testimony on the legislation before the Senate Committee on Homeland Security 

and Governmental Affairs, see GAO, Government Efficiency and Effectiveness: 

Opportunities for Improvement and Considerations for Restructuring, GAO-12-454T 

(Washington, D.C.: Mar. 21, 2010). 

Key Questions to 

Consider When 

Evaluating Physical 

Infrastructure and 

Management Function 

Consolidation 

Proposals
 

Page 8 GAO-12-542 Consolidation Proposals 

We have previously reported and several experts we interviewed 

suggested that the key to any consolidation initiative is the identification of 

and agreement on specific goals, with the goals of the consolidation being 

evaluated against a realistic assessment of how the consolidation can 

achieve them. The process of defining goals can help decision makers 

reach a shared understanding of what problems genuinely need to be 

fixed, how to balance differing objectives, and what steps need to be 

taken to create not just short-term advantages but long-term gains.10

• For example, in 2000, Congress and IRS realized that some IRS 

paper processing site consolidation would be necessary to ensure 

efficient operations, while avoiding the expense of excess capacity. 

On the basis of the prior decreases in individual paper filings and the 

projected decreases that would become more dramatic in the future, 

IRS determined that it could process individual returns and satisfy 

customer needs at three sites, leading to the decision to close five 

other sites.11

• In fiscal year 2011, the Census Bureau decided to consolidate a field 

structure that had remained substantially unchanged for 50 years by 

closing 6 of 12 regional offices. The Census Bureau’s overall goal for 

its regional office consolidation was creating a structure that would 

yield the highest quality data at the lowest possible cost. Census 

officials concluded that its current structure did not reflect advances in 

survey methodology and technology made in recent decades, such as 

the ability for home-based workers to have access to confidential data 

in full compliance with information technology security and legal 

restrictions. As a consequence, the bureau’s method for conducting 

surveys was too costly, and survey sponsors, primarily other federal 

agencies, were demanding improved efficiency and increased 

responsiveness. Census established eight consolidation goals, shown 

in Table 3, each weighted by relative importance, and evaluated 

potential regional structures against these goals. According to Census 

officials, its consolidation will enable the bureau to save $15 million to 

 

10GAO, Executive Reorganization Authority: Balancing Executive and Congressional 

Roles in Shaping the Federal Government’s Structure, GAO-03-624T (Washington, D.C.: 

Apr. 3, 2003). 

11Congress passed the Internal Revenue Service Restructuring and Reform Act of 1998, 

which established a performance goal of having 80 percent of individual tax returns e-filed 

by 2007, among other requirements. Pub. L. No. 105-206, 112 Stat. 685 (1998).

What Are the Goals of the 

Consolidation? What

Opportunities Will Be 

Addressed through the 

Consolidation and What 

Problems Will Be Solved? 

What Problems, If Any, 

Will Be Created?
 

Page 9 GAO-12-542 Consolidation Proposals 

$18 million starting in fiscal year 2014 and improve the agency’s 

ability to conduct surveys. The new design will also use improved 

management information systems and tools to maintain high-quality 

data collection.

Table 3: The Census Bureau’s Eight Consolidation Goals

Goals

1. Minimize cost of survey operations

2. Improve data quality

3. Create a real-time information-rich management environment to enhance 

employee performance and management efficiencies

4. Create a more flexible management environment capable of adapting to 

changing conditions

5. Support multiple response modes more flexibly, involving the use of mailed 

paper questionnaires, Internet collection, computer-assisted telephone 

interviewing, and computer-assisted personal interviewing

6. Leverage local knowledge and facilitate outreach

7. Build a tested and reliable infrastructure upon which to scale up for the 2020 

decennial census

8. Minimize vulnerability to natural disasters and unplanned events

Source: Census Bureau.

• In the late 1980s, changes in the national security environment 

resulted in a defense infrastructure with more bases than DOD 

needed. To address the problem of excess capacity and to realize 

cost savings, the Base Closure and Realignment Commission made a 

series of recommendations to close or consolidate DOD bases and 

military functions.12

 

12The BRAC Commission for the 2005 round was a nine-member bipartisan commission, 

appointed by the President, which made recommendations on the basis of a review and 

analysis of recommendations from the Secretary of Defense, on base closures and 

realignments. The President and Congress had to accept or reject the commission’s 

report in its entirety. National Defense Authorization Act for Fiscal Year 1990, Pub. L No. 

101-510, title XXIX, Defense Base Closure and Realignment Act of 1990, 104 Stat. 1485, 

as amended by the National Defense Authorization Act for Fiscal Year 2002, Pub. L. No. 

107-107, title XXX, 115 Stat. 1012, 1342-1353 (2001).

DOD has undergone five BRAC rounds beginning 

in 1988. Generally, the goals of the first four BRAC rounds were to 

generate savings to apply to other priorities, reduce property deemed 

excess to needs, and realign DOD’s workload and workforce to 

achieve efficiencies in property management. As a result of prior 

BRAC rounds in 1988, 1991, 1993, and 1995, DOD reported that it 
 

Page 10 GAO-12-542 Consolidation Proposals 

had reduced its domestic infrastructure, transferred hundreds of 

thousands of acres of unneeded property to other federal and 

nonfederal entities, and saved billions of dollars annually that could be 

applied to other higher priority defense needs.13 For the BRAC 2005 

round, the goals included transforming the military, fostering joint 

actions, and reducing excess infrastructure to produce savings. An 

example would be the BRAC recommendation to consolidate the 

supply, storage, and distribution function within the Defense Logistics 

Agency. As such, many of the BRAC 2005 recommendations involve 

complex realignments. Both DOD and the BRAC Commission 

reported that their primary consideration in making recommendations 

for the BRAC 2005 round was military value, which includes 

considerations such as an installation’s current and future mission 

capabilities.14

• A central goal of the federal payroll consolidation initiative was 

achieving cost effectiveness through economies of scale and the 

elimination of duplicative systems. Other consolidation goals included 

standardizing payroll policies and procedures and simplifying and 

better integrating payroll, human resources, and finance functions. 

Cross-servicing and administrative consolidation initiatives began in 

the 1980s as part of the Reagan administration, and payroll was an 

early target of opportunity. In 2000, the Bush administration mandated 

e-government initiatives where common information technology 

solutions were identified. These were areas in which agencies 

historically had made significant individual investments to address 

needs that were common and duplicative. For example, OPM officials 

noted that many of the payroll systems were homegrown and on 

average about 20 years old, and many of the payroll service providers 

were considering capital investments in payroll-systems infrastructure. 

To avoid having individual agencies investing in new payroll systems, 

the administration selected 4 agency providers to serve as payroll 

providers in 2003; by 2009 these providers consolidated the payroll 

operations of the non-continuing agencies, absorbing their processing 

into existing systems. According to OPM officials, payroll 

consolidation was something that had been discussed for 30 years, 

 

13GAO, Federal Real Property: Progress Made on Planning and Data, but Unneeded 

Owned and Leased Facilities Remain, GAO-11-520T (Washington, D.C.: Apr. 6, 2011).

14GAO, Streamlining Government: Opportunities Exist to Strengthen OMB’s Approach to 

Improving Efficiency, GAO-10-394 (Washington, D.C.: May 7, 2010).
 

Page 11 GAO-12-542 Consolidation Proposals 

but the e-government mandate from the Bush administration finally 

gave OPM the power to make the consolidation happen.

Consolidation goals can be compromised and new problems introduced 

when an initiative is delayed, halted, or does not attract enough users to 

produce the economies of scale needed to generate cost savings. Under 

these fairly common conditions, participating agencies run the risk of 

seeing their costs increase.

• For example, State developed the ICASS system to streamline the 

provision of administrative services and cut costs for agencies located 

at overseas posts. However, we recently reported that many agencies 

continue to obtain services independently rather than through the 

ICASS system, which limits ICASS’s ability to achieve greater 

economies of scale and deliver services efficiently.15 To the extent 

that agencies do not participate in ICASS, and provide these services 

themselves, they are creating potentially duplicative administrative 

systems that may not be cost effective for the U.S. government as a 

whole. For example, we reported that several agencies procured their 

own appliances and shipped their own furniture rather than participate 

in the ICASS-managed collective pools. At one post, ICASS service 

providers had to remove and reinstall furniture at embassy-managed 

residences 67 times over a 6-month period as a result of agency 

officials being replaced in a home by officials from a different agency. 

Such additional work would not have been necessary if all agencies 

participated in the furniture and appliance pool.

 

15GAO-12-317. 
 

Page 12 GAO-12-542 Consolidation Proposals 

A business-case analysis or cost-benefit analysis can help agencies 

ensure they are using public funds most effectively and preparing to meet 

future performance goals.16 The National Research Council, in a 2004 

report on federal facilities investments, maintained that a business-case 

analysis of investments can make clear underlying assumptions, 

alternatives considered, the full range of costs and benefits, and the 

potential consequences for an organization and its missions.17

Additionally, we have noted in prior work that a cost-benefit analysis can 

be a useful tool to inform decision making. It can provide an analytic 

framework that decision makers can use to consider factors in a 

systematic manner and clarify what is and is not known about effects.18

OMB, similarly, has issued guidelines for agencies to consider when 

conducting a cost-benefit analysis of federal programs.19

Consolidation initiatives based on a clearly presented business-case or 

cost-benefit analysis, grounded in accurate and reliable data, can provide 

a data-driven rationale for why an agency is undertaking a particular 

initiative and show stakeholders that a range of alternatives has been 

considered. However, agencies may find it difficult to obtain sufficiently 

accurate data necessary to calculate the full potential costs and benefits 

associated with a consolidation initiative. We have previously reported, for 

instance, that agencies across the federal government have faced 

These 

guidelines are intended to promote efficient resource allocation through 

well-informed decision making, and in them OMB recommends that 

agencies conduct a sound cost-benefit analysis before initiating any longterm project that extends 3 or more years into the future. According to 

OMB’s guidance, such analysis should include a policy rationale, explicit 

assumptions, an evaluation of the alternatives, and a plan to verify 

program results.

 

16A business-case analysis or cost-benefit analysis is a comparative analysis that 

presents facts and supporting details among competing alternatives. See GAO, Cost 

Estimating and Assessment Guide: Best Practices for Developing and Managing Capital 

Program Costs, GAO-09-3SP (Washington, D.C.: March 2009).

17National Research Council, Investments in Federal Facilities: Asset Management 

Strategies for the 21st Century (Washington, D.C., National Academies Press, 2004). 

18GAO, Highlights of an Expert Panel: The Benefits and Costs of Highway and Transit 

Investments, GAO-05-423SP (Washington, D.C.: May 6, 2005). 

19OMB, Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs, 

OMB Circular A-94 (Washington, D.C.: Oct. 29, 1992). 

What Will Be the Likely 

Costs and Benefits of the 

Consolidation? Are 

Sufficiently Reliable Data 

Available to Support a 

Business-Case Analysis or 

Cost-Benefit Analysis?
 

Page 13 GAO-12-542 Consolidation Proposals 

challenges employing systematic cost-accounting practices in their 

operations.20

A lack of accurate data should not, however, necessarily preclude 

agencies from considering the costs and benefits of consolidation. 

Agencies can work to analyze the information they have at hand on likely 

costs and benefits, as an analysis of this information can reasonably 

indicate the likelihood that a consolidation will offer more benefits than 

costs. Agencies can also use sensitivity analysis to determine whether 

costs and benefits within certain error ranges will result in net benefits. 

Sensitivity analysis examines the effect of changing assumptions and 

ground rules on estimated costs and benefits and helps decision makers 

choose between alternatives. On the other hand, if agencies cannot 

definitely conclude that benefits will outweigh costs, or an analysis of the 

sensitivity to error of key data used to calculate costs and benefits 

suggests that a consolidation initiative faces considerable risks, they may 

need to consider alternatives other than consolidation.

A lack of these practices within agencies makes it more 

difficult for them to collect the data necessary to calculate precisely the 

costs and benefits of a consolidation. This limitation can increase a 

consolidation’s risk and an agency’s vulnerability to unintended 

consequences, such as increased costs or heightened stakeholder 

skepticism.

• For example, we have previously reported that DOD established a 

structured process for obtaining and analyzing data during the BRAC 

2005 round. DOD used its Cost of Base Realignment Actions 

(COBRA) model to provide consistency in potential cost, savings, and 

return-on-investment estimates for closure and realignment options.21

 

20For example, see GAO, Human Capital: DOD Needs Better Internal Controls and 

Visibility over Costs for Implementing Its National Security Personnel System, 

COBRA provides for several key outputs that may influence the 

decision-making process, including (1) estimated costs for such 

factors as personnel severance, moving costs, or military construction 

over the implementation period; (2) estimated savings for personnel 

position eliminations, or reduced operations and maintenance costs 

over that same period; (3) the “payback” time required for estimated 

GAO-07-851 (Washington, D.C.: July 16, 2007) and Financial Management: NOAA Needs 

to Better Document Its Policies and Procedures for Providing Management and 

Administration Services, GAO-11-226 (Washington, D.C.: Jan. 31, 2011).

21GAO-11-520T. 
 

Page 14 GAO-12-542 Consolidation Proposals 

cumulative savings to outweigh cumulative costs for the actions; (4) 

net annual recurring savings; and (5) the net present value of BRAC 

actions, calculated over a 20-year time frame. We examined the 

model as part of our review of the 2005 and prior BRAC rounds and 

found it to be a generally reasonable estimator for comparing potential 

costs and savings among alternatives. The model provides important 

input into the selection process as decision makers weigh the financial 

implications of decisions regarding the suitability of various closure 

and realignment options. However, COBRA does not represent 

budget-quality estimates that are developed once BRAC decisions are 

made and detailed implementation plans are developed. On the basis 

of our assessment of the BRAC 2005 round, actual costs and savings 

were different from the BRAC Commission’s initial estimates. As we 

testified in March 2012, BRAC onetime implementation costs rose to 

about $35.1 billion using DOD’s fiscal year 2011 budget data 

compared with the Commission’s initial estimate of $21 billion in fiscal 

year 2005. Also, we testified in 2012 that DOD expects to realize 

annual net recurring savings of $3.8 billion, a decrease of 9.5 percent 

compared to the Commission’s estimate in 2005. We further testified 

that our analysis shows that the 20-year net present value is about 

$9.9 billion, a decrease of 73 percent, compared to the Commission’s 

estimate of $36 billion in 2005.22

• VA and DOD officials told us that the departments’ decision to 

consolidate their two health care facilities in North Chicago, Illinois, 

was based on a variety of factors, ranging from the facilities’ proximity 

to each other to the opportunity created by the VA’s having upgraded 

hospital infrastructure and identified clinical space with excess 

 

22GAO, Military Base Realignments and Closures: Key Factors Contributing to BRAC 

2005 Results, GAO-12-513T (Washington, D.C.: Mar. 8, 2012). As we have previously 

reported, we and the BRAC Commission believe that DOD’s net annual recurring savings 

estimates are overstated because they include savings from eliminating military personnel 

positions without corresponding decreases in end-strength. DOD disagrees with our 

position. See also, GAO, Military Base Realignments and Closures: Estimated Costs Have 

Increased While Savings Estimates Have Decreased Since Fiscal Year 2009, 

GAO-10-98R (Washington, D.C.: Nov. 13, 2009).
 

Page 15 GAO-12-542 Consolidation Proposals 

capacity, and the Navy’s need to replace its aging facility.23 The two 

departments had earlier noted in a February 2009 analysis that the 

decision to consolidate the two facilities into the Captain James A. 

Lovell Federal Health Care Center (FHCC) in North Chicago was 

based on a sequential decision making process whereby each 

decision and cost-benefit analysis led to the next set of questions and 

options. In the analysis, they also laid out the consolidation’s three 

sequential phases. In the first phase, the two departments developed 

a sharing relationship that included the consolidation of select medical 

services and the establishment of common administrative functions 

such as reimbursement methodology. In the second phase, they 

forged a network relationship that included VA’s construction of new 

facilities, the consolidation of more medical services, and the 

development of additional reimbursement methodology. VA and DOD 

officials determined that the reduction of operating costs and full-time 

equivalents in the first two phases saved a total of $11.2 million, while 

allowing the two hospitals to maintain a high quality of care based on 

established metrics. VA and DOD also estimated that phase three, 

which includes the Navy’s construction of new facilities and the 

opening of the fully-integrated FHCC, will lead to onetime construction 

avoidance savings of $67 million and annual recurring savings of 

$19.7 million.

• Census officials told us that as the bureau was weighing alternatives 

for consolidating its field office structure, it developed costs and 

benefits for each alternative. Census officials told us that they had 

some difficulty identifying the consolidation’s costs, but ultimately 

compiled a list of costs for the selected alternative. Costs ranged from 

relocation expenses for employees who would remain with the 

agency, to separation incentives and severance pay for those who 

could not or would not remain with the agency, to training costs for 

 

23DOD and VA integrated the Naval Health Clinic Great Lakes and the North Chicago VA 

Medical Center and are operating a system of healthcare known as the DOD/VA Medical 

Facility Demonstration Project, Federal Health Care Center (FHCC) from 2010 to 2015 

pursuant to statutory authority. 10 U.S.C. § 1104; 38 U.S.C. § 8111; Duncan Hunter 

National Defense Authorization Act for Fiscal Year 2009, Pub. L. No. 110-417, § 706, 122 

Stat. 4356, 4500 (2008); National Defense Authorization Act for Fiscal Year 2010, Pub. L. 

No. 111-84, §§ 1701-1706, 123 Stat 2190, 2567–2574 (2009). These provisions authorize 

the FHCC to provide health care services to VA and DOD beneficiaries, consistent with 

applicable policies of both departments. To accomplish the missions of both departments 

in this VA/DOD integration, the FHCC will support both VA/DOD Healthcare and DOD 

Operational readiness missions. 
 

Page 16 GAO-12-542 Consolidation Proposals 

new positions. These costs totaled approximately $30 million over 3 

fiscal years. Census also identified $15 million to $18 million in 

potentially recurring savings, which it attributed to the closure of six 

offices and the net reduction of 186 full-time equivalent positions 

across the field structure. A Census official said that such data helped 

to persuade stakeholders of the consolidation’s value.

• Sufficiently reliable data, however, are hindering OMB’s efforts to 

create an inventory of data centers and estimate cost savings as 

agencies consolidate their data centers and move from housing data 

on site to cloud-computing solutions.24 Such a move to cloud 

computing can allow agencies to obtain computing services while 

freeing themselves from the burdens and costs of maintaining 

computing infrastructure. To help agencies improve their use of data 

centers, OMB is leading an effort to create a shared-services 

marketplace as part of a data center consolidation initiative. According 

to OMB, this initiative could lead to $3 billion in savings by 2015 as 

well as improve the efficiency, performance, and environmental 

footprint of federal data center activities.25

 

24Cloud computing is location-independent computing, whereby shared servers provide 

resources, software, and data to computers and other devices on demand, as with the 

electricity grid. In May 2010, GAO issued a report on federal cloud computing efforts. See

Information Security: Federal Guidance Needed to Address Control Issues with

Implementing Cloud Computing, 

To help agencies plan for 

their data center consolidations, OMB directed them to first complete 

a data center inventory and a consolidation plan. Specifically, the 

inventories were to include descriptions of the assets present within 

individual data centers, as well as information about the physical data 

center. The consolidation plans were to address key elements, 

including goals, approaches, schedules, cost-benefit calculations, and 

risk management plans. However, we found that the majority of the 

agencies did not complete their inventories or consolidation plans, 

due in part to a lack of available data. For example, 19 of the 24 

agencies we reviewed reported that it was challenging to obtain 

power-usage data. Certain agency facilities do not have powermetering capabilities, making estimations of power use necessary. 

We concluded that moving forward to consolidate obviously redundant 

or underused centers is nonetheless warranted and should result in 

GAO-10-513 (Washington, D.C.: May 27, 2010). 

25In GAO-11-565, we reported that 14 agencies initially reported savings between 2011 

and 2015 from the data center consolidation initiative of $700 million, but actual savings 

may be even higher because 12 of those agencies’ estimates were incomplete. 
 

Page 17 GAO-12-542 Consolidation Proposals 

immediate cost savings and increased efficiency. However, these 

data gaps place agencies at an increased risk of being ill prepared to 

manage such a significant transformation. We raised concerns that 

OMB cannot be assured that agencies are providing a sound baseline 

for estimating consolidation savings or accurately measuring their 

progress until those inventories and plans are complete and there is a 

better understanding of the validity of the agencies’ data, and we 

recommended that OMB require agencies to complete the missing 

elements in their respective consolidation plans.26 OMB generally 

agreed with our report but did not comment on the recommendation. 

In July 2011, OMB directed agencies to complete all missing elements 

in their respective consolidation plans by the end of fiscal year 2011. 

In March 2012, OMB further established an annual requirement for 

agencies to complete missing elements from their plans and to submit 

an updated plan by the end of every fiscal year.

• A past independent evaluation by the MITRE Corporation 

recommended that EPA consolidate its laboratories as a means to 

improve the efficiency and effectiveness of its operations, and in 

2006, EPA’s Chief Financial Officer requested that EPA develop a 

plan for reducing laboratory costs through their consolidation.27 In 

prior work, we reported that EPA lacks sufficiently complete and 

reliable data on which to base decisions about the management of its 

laboratories. For example, we reported that EPA does not use public 

and commercial benchmarks to calculate usage rates for its 

laboratories. Instead, EPA measures laboratory usage on the basis of 

subjective interviews with local laboratory officials.28

 

26

We 

recommended that EPA improve the completeness and reliability of 

operating-cost and other data needed to manage its real property, and 

if it determined that another independent study of its laboratories’ 

management and operation was needed, include alternative options 

GAO-11-565. 

27EPA tasked the MITRE Corporation to perform an independent evaluation of its 

laboratories to be used by the agency as one of the inputs in developing a report to 

Congress. The MITRE Corporation is a not-for-profit organization chartered to work in the 

public interest with expertise in systems engineering, information technology, operational 

concepts, and enterprise modernization. 

28GAO, Environmental Protection Agency: To Better Fulfill Its Mission, EPA Needs a More 

Coordinated Approach to Managing Its Laboratories, GAO-11-347 (Washington, D.C.: July 

25, 2011).
 

Page 18 GAO-12-542 Consolidation Proposals 

for organizing its laboratories’ infrastructure, including consolidation. 

EPA said that it will work internally to upgrade and validate internal 

operating costs and other metrics, and that it is preparing a work 

assignment for the National Academy of Sciences to study EPA’s 

laboratories. EPA stated that the study will consider alternate 

approaches for organizing the laboratories’ infrastructure.

• We have reported that as more agencies join ICASS, State has 

realized savings through economies of scale. However, we have also 

reported that ICASS and its customer agencies generally have 

insufficient data to perform a meaningful cost analysis to quantify the 

potential cost savings to individual agencies or the government as a 

whole from consolidating services. Responses to a survey we 

conducted for our 2012 report showed that agencies that have opted 

out of ICASS services have frequently cited lower costs as a reason 

for their decision, but many indicated that they had no basis to judge 

the relative costs of ICASS and non-ICASS services or did not 

respond to a question on this issue. Furthermore, State’s ICASS cost 

data and other agencies’ non-ICASS cost data are generally not 

comparable, which renders the cost implications for an agency’s 

joining ICASS unclear. Without data that can help it quantify potential 

cost savings, ICASS management is poorly positioned to demonstrate 

to other agencies that greater participation in ICASS services is in 

their own interest or that of the U.S. government overall.29 We 

suggested that Congress may wish to consider requiring agencies to 

participate in ICASS services unless they provide a business case to 

show that they can obtain these services outside of ICASS without 

increasing overall costs to the U.S. government or they show that their 

mission cannot be achieved within ICASS. We also recommended 

that, where agencies are able to demonstrate, through a compelling 

business case, that they can provide a service more efficiently than 

the existing State ICASS provider without adverse effects on the 

overall government budget, the Secretary of State and the 

Administrator of the U.S. Agency for International Development 

(USAID) allow the creation of new ICASS service providers, in lieu of 

State, to provide administrative services to the other agencies at 

individual posts. State and USAID generally concurred with these 

recommendations.

 

29GAO-12-317. 
 

Page 19 GAO-12-542 Consolidation Proposals 

Physical infrastructure and management function consolidation initiatives 

often have up-front costs, and agencies must pay them before they can 

realize any intended gains or savings. For example, agencies may need 

to pay for equipment and furniture moves or fund employee transfers and 

buyouts, and agencies often find it challenging to obtain the funds 

necessary to pay for these up-front costs. A lack of up-front funding can 

prevent a potentially beneficial initiative from getting off the ground or 

derail an initiative already underway. In fact, our prior work on real 

property management has shown that a lack of funding for up-front costs 

is one of the most important reasons why many initiatives are never 

implemented.30

• In previous work on the BRAC process, we noted that the costs 

associated with closing bases can be significant. Congress has 

provided DOD with a dedicated mechanism to help meet the 

challenges of paying for BRAC’s significant up-front costs: the 

Department of Defense Base Closure Account was established to 

fund base closures in the 1988 round; the Department of Defense 

Closure Account 1990 was established to fund base closures in the 

1991, 1993, and 1995 rounds; and the Department of Defense Base 

Closure Account 2005 was established to fund base closures in the 

2005 round. Congress, recognizing the complexities of realigning and 

closing bases, allowed DOD the flexibility to allocate funds by military 

service, budget function, and installation. Additionally, other revenues, 

including revenues generated from land sales, were required to be 

deposited into these accounts to offset closure and realignment costs.

• As previously mentioned, Census collected data on costs and benefits 

as it weighed alternatives for consolidating its field office structure. 

The bureau’s Chief Financial Officer noted that the bureau is finding it 

challenging to pay for the up-front costs, as it plans to absorb them 

and not pass them on to customers by charging higher fees for survey 

administration. He said that Census is planning to pay for the 

consolidation’s up-front costs with money from Census’s working 

 

30See, for example, GAO, Federal Real Property: Overreliance on Leasing Contributed to 

High-Risk Designation, GAO-11-879T (Washington, D.C.: Aug. 4, 2011). 

How Can the Up-Front 

Costs Associated with the 

Consolidation Be Funded?
 

Page 20 GAO-12-542 Consolidation Proposals 

capital fund.31 Census said that, as there will be no additional charges 

to customers, Census will use balances from its working capital fund 

collections while simultaneously conserving resources and finding 

efficiencies within the fund to pay for the consolidation’s up-front 

costs. Another Census official noted that Census expects to realize 

cost savings from liquidating regional office space and reducing the 

number of employees in the consolidated regional office structure. 

However, Census will not fully realize these savings until fiscal year 

2014.

• We have reported that 11 of the agencies involved in the data center 

consolidation initiative have found it challenging to fund their 

consolidation efforts.32

A former OMB official said that centrally administered incentive funds 

could be effective in helping agencies initiate a consolidation, particularly 

cross-government consolidations, such as those that were pursued under 

For example, one agency noted that having to 

fund efforts long before any savings would be realized was difficult. 

There is no standard method by which agencies are paying for these 

up-front data center consolidation costs. Some agencies are using 

working capital funds while others use funds appropriated through the 

annual budget process; other agencies are using a combination of the 

two. The Department of Commerce, in its 2011 data center 

consolidation plan, noted that it has worked to overcome up-front cost 

challenges and more effectively obtain funds to meet its data center 

consolidation requirements by streamlining information technology 

operations and by having its data center consolidation project team 

demonstrate the cost benefit of the initiative to the department’s 

executive management.

 

31A working capital fund is a type of intragovernmental revolving fund that generally 

finances the centralized provision of common services within an agency, such as building 

security or human capital management. Receipts come primarily from other government 

agencies, programs, or activities. See GAO, Principles of Federal Appropriations Law,

GAO-08-978SP (Washington, D.C.: September 2008). Census’s working capital fund 

contains money that the bureau collects for providing management and administrative 

services to its internal divisions and survey support services for other federal and 

nonfederal entities. See GAO, Intragovernmental Revolving Funds: Commerce 

Departmental and Census Working Capital Funds Should Better Reflect Key Operating 

Principles, GAO-12-56 (Washington, D.C.: Nov. 18, 2011).

32GAO-11-565. 
 

Page 21 GAO-12-542 Consolidation Proposals 

the Lines of Business initiative.33 As we have previously reported, the 

administration is undertaking one such effort by having OMB manage the 

Partnership Fund for Program Integrity Innovation, a fund that provides 

federal agencies money to pilot projects and evaluations that test ideas 

for improving the delivery of federal assistance programs administered 

through state and local governments.34 The fund is intended to help 

agencies, among other goals, improve administrative efficiency and is 

expected to help agencies achieve total cost savings that are equal to or 

greater than the fund’s $32.5 million appropriation. Additionally, we have 

reported that the Department of Housing and Urban Development (HUD) 

has developed a centrally administered fund to support its Transformation 

Initiative, a multifaceted and multiyear effort intended to reexamine how 

HUD does business by focusing on improving performance, replacing 

outdated information technology systems, evaluating programs, and 

streamlining processes.35 In fiscal year 2010, HUD received authorization 

from Congress to transfer up to 1 percent of the budgets from selected 

program offices to a Transformation Initiative fund that is intended to 

support projects that improve the overall performance of the agency, 

including a few project areas that are specifically expected to improve 

efficiency.36 Furthermore, in September 2011, we recommended that the 

Director of OMB work with Congress and federal agencies to develop 

proposals for funding mechanisms that assist federal agencies with the 

up-front costs associated with longer-term efficiency improvement 

projects.37

 

33The Bush administration’s Lines of Business initiative was designed to improve the 

federal government’s use of information technology and better business practices. In the 

spring of 2004, OMB announced the formation of Lines of Business task forces. The task 

forces analyzed data to identify ways where services could integrate common information 

technology and electronic government-related practices across agencies into a single 

unified standard. OMB planned to form “centers of excellence” or “shared service vendors” 

for each line of business to manage common functions and tasks across agencies. 

We requested an update on the status of this recommendation 

in April 2012. However, OMB has not yet indicated how it will address the 

recommendation. 

34GAO, Streamlining Government: Key Practices from Select Efficiency Initiatives Should 

Be Shared Governmentwide, GAO-11-908 (Washington, D.C.: Sept. 30, 2011). 

35GAO-11-908. 

36Consolidated Appropriations Act, 2010, Pub. L. No. 111-117, 123 Stat. 3034, 3093 

(2010).

37GAO-11-908. 
 

Page 22 GAO-12-542 Consolidation Proposals 

The need for agencies to consolidate incompatible information technology 

systems can be one of the most challenging aspects of a consolidation, 

particularly if the initiative crosses departmental lines. We have previously 

reported that individual agencies have hundreds of incompatible networks 

and systems and that the maintenance of these legacy systems is costly. 

We have found that even now the architectures agencies are developing 

are duplicative, poorly integrated, unnecessarily costly to maintain and 

interface, and unable to respond quickly to shifting environmental 

factors.38

• In the early 2000s, when the payroll systems consolidation initiative 

was announced, many of the agencies’ payroll systems were nearing 

the end of their estimated life cycles. OMB capitalized on the situation 

by not authorizing agencies, other than the four chosen payroll service 

providers, to spend money on modernizing their payroll systems, 

thereby leveraging the shift to the selected payroll providers. 

However, OPM officials also said that funding for systems 

modernization for the four remaining payroll service providers, which 

was promised at the outset of the payroll consolidation initiative, has 

not materialized. They noted that this lack of funding for systems 

modernization is a major problem and puts the long-term viability of 

the consolidated federal payroll services system at risk.

Consolidation success depends on a wide range of factors, including 

getting incentives right for those affected by the consolidation. 

Stakeholders often view a consolidation as working against their own 

interests. For example, agency clients and customers may have concerns 

about potential reduction in service or access to agency officials. 

Contractors providing services or systems to multiple agencies may be 

concerned that consolidation will result in fewer agency customers and 

create a situation where they are competing with agencies to provide 

management or administrative services. Congress, which authorizes and 

funds federal agency operations, may be sensitive to these concerns, 

especially when Congressional members’ constituencies are adversely 

affected. Moreover, stakeholders frequently raise valid concerns on the 

basis of their familiarity with an agency’s operations, and the concerns 

need to be addressed openly and objectively. Failure to effectively 

engage with stakeholders and understand and address their views can 

 

38GAO-11-318SP. 

Who Are the Consolidation 

Stakeholders, and How 

Will They Be Affected?
 

Page 23 GAO-12-542 Consolidation Proposals 

undermine or derail the initiative. To that end, it is critical that agencies 

identify who the relevant stakeholders are and develop a two-way 

communication strategy that both addresses their concerns and conveys 

the rationale for and overarching benefits associated with a consolidation 

initiative. We have previously reported that communication is not just 

“pushing the message out,” but should facilitate a two-way, honest 

exchange with and allow for feedback from employees, customers, and 

other stakeholders.39

Closing regional offices or facilities, which may be necessary to generate 

cost savings or efficiency gains, may engender strong opposition from 

local residents and the population served by the office. We have 

previously described how independent commissions, which by design are 

to be less subject to parochial or political pressures, can more easily

effect change, ensure that data collection and analysis are efficient and 

objective, and implement recommendations quickly.

Full agreement among stakeholders is relatively 

uncommon because stakeholders’ interests can differ significantly; a 

comprehensive two-way communication strategy is central to forming the 

effective external and internal partnerships that are vital to the success of 

any organization.

40

• For example, DOD and BRAC Commission officials cite the 

establishment of an independent commission and nomination of 

commissioners by the President, in consultation with congressional 

leadership, as one of the key elements that contributed to DOD’s 

ability to eliminate excess capacity by closing or realigning military 

bases. In addition, the President and Congress have to accept or 

reject the commission’s report in its entirety. More recently, we 

reported that an independent commission or governmentwide task 

 

39GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers and 

Organizational Transformations, GAO-03-669 (Washington, D.C. July 2, 2003).

40GAO/NSIAD/RCED-98-23. Also, in February 2012, the House passed as amended H.R. 

1734, the Civilian Property Realignment Act. The legislation would establish an 

independent Civilian Property Realignment Commission to identify opportunities for the 

federal government to reduce its inventory of civilian real property and reduce costs. The 

legislation would require each federal agency to submit current data to the General 

Services Administration and OMB regarding the agency’s federal civilian real property and 

to recommend sales or other dispositions of federal property, reductions in civilian 

property inventory, and operational efficiencies. 

External Stakeholders
 

Page 24 GAO-12-542 Consolidation Proposals 

force might be necessary to help overcome stakeholder influences in 

deciding how to dispose of unneeded real property.41

An effective and ongoing communication strategy tailored to address 

different stakeholder groups and their concerns is also essential.

• For example, IRS and Census officials pursued a data-driven 

communication strategy that started well in advance of their regional

office closures. Census officials said they used data to demonstrate to 

local elected officials how streamlining operations would allow Census 

to save money and conduct surveys more efficiently. In addition, 

Census developed scripts and timelines to roll out the announcement 

so key officials could deliver the same information and message 

throughout the country at the same time (see fig. 1). Census officials 

said their communication strategy allowed them to present a unified 

front and consistent information. 

 

41GAO-11-520T. 
 

Page 25 GAO-12-542 Consolidation Proposals 

Figure 1: Timeline for Census Bureau Consolidation Plan Announcement

• To address congressional concerns about processing centers closing 

in their districts, IRS officials reported they developed a 

communication strategy based on data showing that they could close 
 

Page 26 GAO-12-542 Consolidation Proposals 

one site every other year without adversely affecting operations, due 

in large part to the steady increase in electronic filing and concurrent 

decline in paper filing of tax returns. Also, once the decision had been 

made to close processing centers, IRS took steps to communicate 

with taxpayers about changes in filing locations through a variety of 

media including websites, informational packages sent to taxpayers, 

and tax practitioner forums.

Agency officials reported that a comprehensive communication strategy 

that involves employees is a key component of any consolidation effort. 

Consolidations of physical infrastructure or management support 

functions often generate uncertainty for agency employees through job 

loss, relocation, or considerable changes in the way jobs are done. 

Regular and early communication facilitates a two-way exchange, which 

allows for feedback and tailored information to meet employees’ specific 

needs. The communication can help to build trust and an understanding 

of the planned change, potentially defusing the opposition while 

strengthening commitment to the effort.

• Once IRS determined it was closing processing sites, agency officials 

and representatives from the National Treasury Employees Union 

said they negotiated how shutting down individual sites would occur 

and what mitigation measures would be available to employees. A 

variety of communication channels including websites, town hall 

meetings, and newsletters helped employees keep abreast of dates 

and the consolidation’s progress. IRS also posted information on its 

internal websites regarding the range of services available to 

employees losing their jobs, such as separation packages, 

reassignment opportunities, retraining and placement assistance, and 

counseling. In addition, IRS began hiring limited term or temporary 

employees at sites slated for closure, allowing the agency to 

communicate realistic expectations about job duration.

• Census officials also reported developing a comprehensive employee 

communication strategy. The strategy’s intent was to address morale 

issues among employees keeping their jobs but with new or different 

responsibilities, as well as employees relocating or losing their jobs. 

The week following the consolidation’s announcement, the Census 

Bureau Director visited the six closing regional offices to answer 

employees’ questions and listen to concerns. Human resource 

representatives followed up quickly with regional office employees to 

discuss these concerns. Three months later, the representatives held 

video conferences with individual employees to explain the early 

retirement and buyout process. Census also created a consolidation 

Internal Stakeholders
 

Page 27 GAO-12-542 Consolidation Proposals 

intranet site accessible to all Census employees that contains a 

variety of information, including internal job postings. In addition, 

Census electronically distributes a monthly consolidation newsletter 

and has established an “800” telephone number employees can call 

with consolidation questions. Census has dedicated itself to 

answering all questions submitted through the 800 number and 

posting all questions and answers to the intranet site.

Concerns about ceding control in a new consolidated environment of 

shared services can also be a major challenge. A report we issued in 

1980 looking at barriers to closing regional offices cited management 

resistance on the basis of concerns that participating in shared service 

arrangements would diminish their control and lead to a decrease in 

service.42

• A former OPM official involved with the payroll consolidation initiative 

said that even though the payroll effort was an intellectually simple 

concept, it still required “brute force” to execute. She said that 

agencies resisted the effort because they claimed they had a type of 

payment necessitating a unique payroll system. To address these 

concerns and devise solutions, OPM established a Payroll Advisory 

Council that included representatives from the provider agencies and 

client agencies. The council met quarterly to develop migration and 

business processes. OPM officials said the council was a valuable 

vehicle for bringing together key stakeholders and encouraging them 

to feel they were part of the process. They said it helped get people 

on the same page and motivated them to move the project forward.

For example, we reported that many agencies were reluctant to 

adopt automatic airline ticket payment plans and teleticketing procedures 

even though these techniques had been shown to be cost effective and 

subsequently have become the norm. Agencies had developed their own 

travel systems to support important aspects of their operations, and many 

managers did not believe that a common support arrangement would 

satisfy their unique needs. Thirty years later, the same general issue 

resonates.

Employee resistance to cultural change is a particularly thorny issue 

when consolidation involves more than one agency. Constructing a new 

organizational culture that respects the core values of the involved 

organizations and is welcoming to all employees is critical to the success 

 

42GAO, Streamlining the Federal Field Structure: Potential Opportunities, Barriers, and 

Actions That Can Be Taken, FPCD-80-4 (Washington, D.C.: Aug. 5, 1980).
 

Page 28 GAO-12-542 Consolidation Proposals 

of a multiagency consolidation effort. Our prior work has shown that many 

transformations fail because the cultures of the components were not fully 

understood or considered.43 Thus, managers need to understand the 

different cultures that are coming together, and the steps that can be 

taken to establish a common culture.44

• Federal Health Care Center (FHCC) officials reported that the center 

has sought to address the challenges of cultural integration through a 

wide variety of actions and approaches, such as involving all staff in 

establishing the mission, vision, and goal statements; creating its first 

strategic plan; and blending previously unique organizational 

celebrations and recognition events. According to the officials, 

ongoing assessments of progress with cultural integration have been 

maintained through staff satisfaction and climate surveys, as well as 

frequent communication opportunities with leadership through allhands town hall meetings and other communication venues. From 

fiscal years 2011 through 2012, FHCC improved in 12 of 13 measured 

categories including work group effectiveness and leadership 

cohesion; however, its score dropped slightly in the work group 

cohesion category. In addition, VA and DOD, through FHCC staff, use 

a staff satisfaction benchmark as one measure to assess the center’s 

integration, a benchmark that has been met. Officials noted that 

establishing a common culture from two distinct and firmly established 

entities like the VA and the United States Navy has been challenging. 

However, with a focus from leadership and the actions mentioned 

above, officials said the center has seen progress in establishing its 

own common culture.

Implementing large-scale organizational mergers, acquisitions, and 

transformation initiatives, such as consolidations, are not simple 

endeavors and require the concentrated efforts of both leadership and 

employees to accomplish new organizational goals. As we have 

previously reported, productivity and effectiveness may actually decline in 

the period immediately following a private sector merger and 

acquisition.45

 

43

This happens for a number of reasons including that 

GAO-03-669. 

44Peter Frumkin, Making Public Sector Mergers Work: Lessons Learned (Arlington, Va.: 

IBM Center for The Business of Government, August 2003).

45GAO-03-293SP. 

To What Extent Do Plans 

Show That Change 

Management Practices Will 

Be Used to Implement the 

Consolidation?
 

Page 29 GAO-12-542 Consolidation Proposals 

attention is concentrated on critical and immediate integration issues and 

diverted from longer-term mission issues. In addition, employees and 

managers inevitably worry about their place in the changed organization.

As part of our body of work on organizational mergers, acquisitions, and 

other transformations, we recommended that to minimize the duration 

and the significance of any reduced productivity and effectiveness, 

agencies should have an implementation plan that includes essential 

change management practices such as active, engaged leadership of 

executives at the highest possible levels; a dedicated implementation 

team that can be held accountable for change; and a strategy for 

capturing best practices, measuring progress toward the established 

goals of the consolidation, retaining key talent, and assessing and 

mitigating risk, among others.46

Whether consolidations originate from within an agency in response to 

changing conditions or outside pressures, or from the most senior levels 

of government, it is essential that top government and agency leaders are 

committed to the consolidation and play a lead role in executing it. As we 

have previously reported, leadership must set the direction, pace, and 

tone and provide a clear, consistent rationale to agency staff to increase 

the likelihood of a successful consolidation.

Appendix III has a list of key change 

management practices.

47

• According to OPM officials who managed the implementation of the 

payroll consolidation initiative, the initiative required sustained White 

House and OMB involvement as well as the creation of the advisory 

council discussed above that brought together the key players from 

each of the agencies.

• The plan to consolidate Census Bureau regional offices originated 

among senior-level Census officials. Specifically, the director, deputy 

director, and Field Division’s senior management developed various 

options on the basis of different configurations and multiple plans. 

According to Census officials, they maintained absolute secrecy 

during this planning stage, which they said allowed them to consider a 

range of options that may otherwise have encountered immediate 

 

46GAO-03-293SP. 

47GAO-03-239SP. 

Will Top Leadership Be 

Engaged in Driving the 

Consolidation?
 

Page 30 GAO-12-542 Consolidation Proposals 

resistance. Once the Director of the Census Bureau decided on the 

new structure, the agency developed a communication strategy and 

informed key stakeholders, including relevant congressional members 

and staff, state and local elected officials, affected regional office staff, 

and then all other regional Census Bureau employees. Census 

leaders noted that they are now involved with every implementation 

step of their internally-driven effort.

• We recently observed that in light of current efforts to reduce the 

federal budget deficit, which include significant proposed cuts in the 

budgets of most departments and agencies, including EPA, the 

agency will need to more effectively use its scientific and laboratory 

resources across the agency to ensure the agency is best positioned 

to fulfill the critical scientific work for its core mission.48

We have previously reported that successful major merger and 

transformation efforts dedicate a strong and stable consolidation 

implementation team to lead the day-to-day management of a 

transformation initiative.

Although 

independent evaluations have identified problems with EPA’s 

laboratories’ operations and management and called for improved 

planning, coordination, and leadership, as well as consolidation of 

laboratories, EPA has not appointed a top science official with 

responsibility and authority over all of the agency’s research, science, 

and technical activities. Instead, these activities remain fragmented 

and largely uncoordinated, reflecting the independent organizational 

and management structures of the 15 senior officials charged with 

managing the scientific work performed at each laboratory. To 

improve cohesion in the management and operation of EPA’s 

laboratories, we recommended that EPA establish a top-level science 

official with the authority and responsibility to coordinate, oversee, and 

make management decisions regarding major scientific activities 

throughout the agency, including the work of all program and regional 

laboratories. In response to our recommendation, EPA proposed to 

increase the responsibilities of its science advisor. However, it is not 

clear that this will fully address the issue and it may ultimately 

introduce additional challenges for EPA.

• For example, IRS determined that the oversight, planning, and 

implementation of its consolidation should be centralized. The agency 

 

48GAO-11-347. 

Will a Dedicated 

Implementation Team Lead the 

Consolidation?
 

Page 31 GAO-12-542 Consolidation Proposals 

assigned responsibility for the implementation of its processing site 

consolidation plan to two offices within the Wage & Investment 

Division—the Customer Account Services Project Management Office 

and the Submission Processing Project Management Office. IRS 

officials said that it was important to have the same people involved 

throughout the process, and they noted that it was also helpful to 

establish time lines. They also used action plans to detail needed 

tasks and issues encountered during the consolidation process. The 

plans contained specific action items, dates, and responsible parties 

to help ensure accountability. IRS executives and managers reported 

that they met frequently during the consolidation process to discuss 

the action plans and progress made. The IRS also developed website 

resources to help the implementation team communicate changes to 

the rest of the agency.

A 2007 audit conducted by the Treasury Inspector General for Tax 

Administration (TIGTA) found that the IRS implementation team 

helped to ensure a smooth transition during the consolidation.49

• OPM officials credited the sustained involvement of top leadership at 

the White House and OMB and a small, but dedicated, 

implementation team as driving factors in the payroll consolidation 

initiative. To oversee the payroll initiative, OPM created a Program 

Management Office, which consisted of the payroll initiative director, 

five full-time staff, and three contractors. The project director reported 

directly to the director of OPM. One OPM official emphasized that 

these were dedicated staff that spent all of their time on the project, 

rather than as an additional duty.

Specifically, TIGTA noted that the implementation team developed 

detailed plans that contained specific action items, dates, and 

responsible parties to help ensure accountability. The implementation 

team also met frequently with IRS executives and managers to 

discuss issues and progress made and communicated often with 

employees. TIGTA also found that the reduction in the number of 

processing sites did not adversely affect the processing of individual 

tax returns, and the IRS continued to have successful filing seasons 

during the consolidation process. They reported that IRS efforts to 

maintain high productivity and minimize the effect on taxpayers during 

the transition were generally successful.

 

49Treasury Inspector General for Tax Administration, Consolidation of Tax Return 

Processing Sites is Progressing Effectively, but Improved Project Management is Needed, 

2007-40-165 (Washington, D.C.: Aug. 31, 2007). 
 

Page 32 GAO-12-542 Consolidation Proposals 

We have previously reported that federal agencies engaging in large 

projects need to plan to monitor and evaluate their efforts to identify areas 

for improvement.50

Agencies consolidating physical infrastructure or management functions 

should plan to have metrics of success. These measures should show an 

organization’s progress toward achieving an intended level of 

performance or results. Meaningful performance measures should also 

be limited to the vital few and cover multiple government priorities such as 

quality, timeliness, cost of service, customer service, and outcomes. 

Performance measurement systems need to include incentives for 

managers to strike the difficult balance among competing interests. One 

or two priorities, such as timeliness and cost, should not be 

overemphasized at the expense of others such as quality. Finally, 

measures need to provide managers and other stakeholders with timely, 

action-oriented information in a format that helps them make decisions 

that improve program performance.

Reporting on these activities can help key decision 

makers within the agencies, as well as stakeholders, obtain feedback for 

improving both policy and operational effectiveness. Establishing

implementation goals and milestone dates, and tracking progress toward 

those goals helps agency officials pinpoint performance shortfalls and 

suggest midcourse corrections, including any needed adjustments to the 

organization’s future goals and milestones. Moreover, transparent 

reporting tools can help agencies manage stakeholder expectations about 

how much is being spent, when savings will start to accrue, and whether 

the agency is meeting performance goals during the transition. Imprecise 

information can produce an unrealistic expectation of cost savings and 

undermine the public’s trust.

51

• For example, we reported that the performance plan VA and DOD 

developed to assess the provision of care and operations at the 

FHCC lacked transparency and may not provide a meaningful and 

accurate measure of success.52

 

50

DOD and VA developed 15 

integration benchmarks and their corresponding performance 

measures to help them monitor their performance in three main areas: 

GAO-03-669. 

51GAO, Tax Administration: IRS Needs to Further Refine Its Tax Filing Season 

Performance Measures, GAO-03-143 (Washington, D.C.: Nov. 22, 2002).

52GAO-11-570. 

Will the Implementation Plan 

Include Metrics to Measure 

Progress toward the 

Consolidation’s Goals?
 

Page 33 GAO-12-542 Consolidation Proposals 

patient and staff satisfaction; clinical and administrative functions; and 

external evaluation. FHCC staff developed a scorecard that calculates 

a single monthly summary score for the performance measures, 

which they planned to present at their regular Advisory Board 

meetings. We reported that although the scorecard has the potential 

to be useful in tracking performance results over time, it does not 

account for data collection variation; there are no designated target 

scores to indicate successful performance; and the scorecard initially 

contained a calculation error, all of which raised concerns about its 

ability to provide transparent, meaningful, and accurate information. 

To address these concerns, we recommended that the Secretaries of 

Veterans Affairs and Defense direct FHCC leadership to conduct 

further evaluation of the scorecard reporting tool and its methodology 

and make revisions that will better ensure the transparency and 

accuracy of the information reported. In response to our 

recommendations, the VA stated that it changed the calculation 

process for the scorecard’s monthly score. Specifically, FHCC staff 

will populate the scorecard with a score for each measure every 

month using either data acquired that month, or the most recent 

available data for those measures.

• Census officials reported that they developed several financial and 

non-financial measures to assess their performance as they 

reorganize their regional structure. Officials also reported that they 

asked their survey clients to identify key concerns and risks, and then 

developed performance metrics to track those concerns. The 

measures they developed and plan to monitor include product quality, 

stakeholder satisfaction, productivity, transition costs, accrued 

savings, employee morale, and progress made toward meeting 

project milestones.

• According to TIGTA, IRS did not adequately monitor the costs and 

benefits that accrued as the consolidation plan was implemented and 

reported imprecise savings data.53

 

53Treasury Inspector General for Tax Administration, 2007-40-165.

The IRS could not provide reliable 

financial information on technology or personnel costs. The IRS also 

included savings resulting from electronic filing—and the subsequent 

decreased paper workload—in the savings it attributed to 

consolidation. To address TIGTA’s concern, the agency developed a 

methodology for tracking costs and benefits related to site closures, 
 

Page 34 GAO-12-542 Consolidation Proposals 

which separated consolidation efforts from the effects of reduced 

paper workload due to electronic filing. Being able to accurately 

monitor costs and estimate when savings will begin to accrue is 

essential for providing sound information to congressional decision 

makers, maintaining public confidence in the agency’s ability to carry 

out large operations, and ensuring that long-term, multimillion dollar 

projects proceed in the most efficient manner.

To monitor the success of those consolidation initiatives that involve one 

agency taking over a management function for another agency, agencies 

may find it helpful to measure customer service. Customer service 

measures can include customer access to services, wait times, accuracy, 

and other factors.54

• As the managing partner of the Human Resources Line of Business, 

OPM regularly assesses the four payroll providers on their ability to 

deliver on different business practices that customer agencies 

consider important, including customer relationship management. 

Practices are defined as proven management ideas that include 

techniques, methods, processes, or activities that can help an agency 

deliver outcomes. For example, the customer relationship 

management category includes the following practices: (1) understand 

and proactively address provider’s customer needs; (2) proactively 

communicate and build relationships with provider’s customers; (3) 

effectively respond to customer inquiries and requests; and (4) 

employ formal change management techniques to help customers 

identify and manage change. For each of the practices, OPM 

developed a set of yes-no assessment questions—such as, Does 

your provider make findings from customer surveys, interviews, focus 

groups, etc. available to you?—to substantiate a provider’s ability to 

demonstrate the practice. Through this assessment, OPM can monitor 

and report on which customer relationship practices agency providers 

effectively employ and which need to be strengthened.

• State developed uniform service standards to measure service 

delivery at overseas posts; however, we found that these standards 

did not always address common concerns of overseas customers. For 

example, some agencies have raised concerns that ICASS service 

providers cannot meet their unique requirements, priority is given to 

 

54GAO, Managing for Results: Opportunities to Strengthen Customer Service Efforts, 

GAO-11-44 (Washington, D.C.: Oct. 27, 2010).
 

Page 35 GAO-12-542 Consolidation Proposals 

some agencies over others, and their annual ICASS invoices contain 

billing errors, which require a significant amount of time to correct. 

State’s performance reporting does not disaggregate results by 

customer agency, and as such, does not reflect the extent to which 

service delivery is inequitable across agencies, nor do State’s metrics 

gauge progress on reducing the incidence of billing errors. To help 

ensure that State can more adroitly identify and address customer 

complaints, we recommended that it develop additional performance 

measures that gauge ICASS service providers’ progress in resolving 

major sources of customer dissatisfaction.55

We have previously recommended that officials need a strategy to ensure 

that employees will have the appropriate skills to perform what may be 

new roles following consolidation. As described earlier, agencies may 

choose to consolidate infrastructure or functions because the old way of 

operating has become obsolete.

State officials said they 

plan to increase the number of services for which performance data—

including customer satisfaction data—are collected as part of an effort 

to better identify and meet the needs of customer agencies.

• For example, IRS consolidated processing sites to address the 

increase in electronic tax filing and subsequent decrease in paper 

filing. Officials from the National Treasury Employees Union said they 

worked with employees who were going to lose their jobs at the paper 

processing sites to apply to transfer and get the necessary training to 

work at IRS’s phone centers. 

• Census officials also reported that some employees will have different 

and additional responsibilities, such as a greater supervisory role, 

under the new management structure. They are developing training 

that they plan to implement in waves as the consolidation progresses.

We have previously reported that agencies may also expect to see higher 

rates of turnover following a consolidation because individuals do not see 

their place in the new organizations. As agency officials consider closing 

offices to reduce costs and streamline operations, they run the risk of 

losing their top performers located in affected offices. While some 

turnover is to be expected and is appropriate, the new organization must 

“re-recruit” its key talent to limit the loss of needed individuals. When rerecruiting key talent, top leaders should identify which competencies are 

 

55GAO-12-317. 

Will the Implementation Plan 

Include a Strategy for 

Attracting and Retaining Key 

Talent?
 

Page 36 GAO-12-542 Consolidation Proposals 

vital to the success of the new organization and select individuals who 

demonstrate those competencies.

• To minimize the risk of losing a considerable pool of talent and 

expertise all at once, Census officials told us that employees in the 

closing regional offices are being provided the opportunity to express 

interest in, and be considered for, existing vacancies elsewhere with 

the Census Bureau and Department of Commerce before any other 

internal or external recruitment actions are pursued.

As we have demonstrated throughout this report, consolidations are 

inherently risky endeavors. There are up-front costs that can quickly spiral 

upward. Moreover, significant delays in the project timeline could 

negatively impact an agency’s ability to carry out its core mission. To 

understand the various factors that could potentially derail a consolidation 

effort and make informed judgments concerning the actions needed to 

reduce those risks, we have previously described the importance and 

value of developing comprehensive plans for assessing and mitigating 

risks.56

Identifying, analyzing, and developing ways to manage risks is a 

continuous process that leadership and managers should monitor on a 

regular and recurring basis throughout the consolidation.

An effective implementation plan should identify all factors that will 

affect the program’s cost, schedule, or technical status, including political, 

organizational, or business issues. Budget and funding risks, as well as 

risks associated with start-up activities, staffing, and organizational 

issues, should also be considered.

• To help mitigate some of the major risks associated with consolidating 

the Human Resources Line of Business—such as selecting a provider 

agency that cannot adequately meet the needs of the client agency—

OPM provided agencies with templates for conducting a risk analysis 

report and a fit gap analysis. The fit gap analysis template instructs 

customer agencies to perform a walk-through of each business 

process from beginning to end for each process scenario, show how 

the steps are supported by the provider agency, identify all 

shortcomings, and describe options for resolving those gaps. This 

resolution plan should provide an estimate of the implementation 

 

56GAO, Information Security Risk Assessment: Practices of Leading Organization,

GAO/AIMD-00-33 (Washington, D.C.: November, 1999). 

Will the Implementation Plan 

Include a Strategy for 

Assessing and Mitigating Risk?
 

Page 37 GAO-12-542 Consolidation Proposals 

effort including time and resources and be of sufficient detail to be 

used by other migration team members who are responsible for 

resolving the gap.

• Census officials developed a risk management plan intended to 

minimize the effect of unplanned events. Census created a Risk 

Review Board that meets monthly to assess and evaluate the effect of 

different categories of risks and to control changes to their master 

schedule. Some of the areas they are monitoring include the impact of 

the restructuring on affected employees, comprehension of new roles 

and responsibilities in the new operating environment, and security 

given the change in information technology architecture. Each 

identified risk is assigned a risk owner who must develop an analysis 

that includes a description of the risk, root cause, and possible impact 

on three major categories of the project: performance, cost, and 

schedule. The risk owner and review board will also determine the 

likelihood of occurrence on the basis of five categories ranging from 

extremely unlikely to extremely likely. Figure 2 has an identification 

form Census managers use to monitor risks. In addition to these 

planning and management steps, Census also added a 5 percent 

contingency to its restructuring budget to help absorb unforeseen 

costs.
 

Page 38 GAO-12-542 Consolidation Proposals 

Figure 2: Identification Form Census Managers Use to Monitor Risks

We have previously reported that managers of successful transformations 

seek to learn from best practices wherever they may be found.57

 

57

Agency 

officials involved with consolidation efforts reported that they sought the 

advice of public and private sector managers about their consolidation 

experiences.

GAO-03-239SP. 

Is There a Strategy for Using 

the Consolidation Experiences 

of Other Organizations and 

Lessons Learned?
 

Page 39 GAO-12-542 Consolidation Proposals 

• For example, Census officials consulted with officials from Statistics 

Canada, Canada’s national statistical agency, which had recently 

consolidated their operations. Specifically, Census officials were 

looking for advice on how to communicate internally and externally 

their decision to consolidate and what to expect in terms of employee 

reaction and morale. They also consulted with other federal statistical 

agencies as well as a variety of private, non-profit, and academic data 

collection organizations to better understand how these organizations 

manage field staff and provide them with secure access to sensitive 

programmatic and cost data. According to one Census official, the key 

lesson from these consultations was that consolidation is not only 

possible, but can lead to demonstrable gains in efficiency, at the same 

time that security can be maintained. He also reported that their 

counterparts advised that it is imperative to maintain constant 

communication at all levels and at every stage of the consolidation 

process.

• IRS and OPM officials reported that they implemented a lessons 

learned process after each phase of their consolidation plan to identify 

what worked well and what needed to be improved in future phases. 

According to IRS officials, after each site closure, they created a 

complete, searchable file of all documents related to the 

consolidation, and gave the next sites scheduled to close access. One 

official said that this repository of action plans, employee notifications, 

and other communications provided a blueprint for future 

consolidations and prevented unnecessary duplication of effort. OPM 

officials reported that post-implementation, each payroll provider 

agency met with representatives from the customer agencies to 

assess different aspects of the initiative such as project management 

and communication. OPM and the providers used that information to 

better plan and manage future migrations. According to OPM officials, 

the provider agencies were able to institute some changes on the 

basis of this feedback, such as involving both senior level managers 

and line personnel early in the planning stages and maintaining 

frequent communication including weekly conference calls and 

biweekly reviews of the project plan.

We provided the draft for review and comment to the five agencies with 

consolidation initiatives that were not covered by prior GAO work and 

made technical changes as appropriate. 

Agency Comments
 

Page 40 GAO-12-542 Consolidation Proposals 

We are sending copies of this report to the appropriate congressional 

committees and other interested parties. The report is also available at no 

charge on the GAO website at http://www.gao.gov. If you have any 

questions concerning this report, please contact me at (202) 512-6806 or 

mihmj@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

Key contributors to this report are listed in appendix IV.

J. Christopher Mihm

Managing Director, Strategic Issues
Appendix I: Scope and Methodology

Page 41 GAO-12-542 Consolidation Proposals 

To identify key questions that federal agencies should consider when 

evaluating whether to consolidate physical infrastructure or management 

functions, we identified and reviewed relevant literature on public sector 

consolidations produced by academic institutions, professional 

associations, think tanks, news outlets, and various other organizations. 

This information complemented our review of GAO’s extensive body of 

work on government reform. Specifically, we reviewed close to 50 reports 

produced from 1980 to 2011 that recommended or commented on 

consolidation of physical infrastructure or management functions at the 

federal level.

We interviewed practitioners and academic experts in public management 

and government reform including Jitinder Kohli from the Center for 

American Progress; John Koskinen from Freddie Mac; Rosemary O’Leary 

from the Maxwell School of Syracuse University; and Paul Posner from 

the School of Public and International Affairs, George Mason University. 

We also interviewed former officials from the Office of Management and 

Budget; Karen Evans, Mark Forman, John Marshall, and Robert Shea, 

knowledgeable about management function consolidations and the Lines 

of Business initiative. We selected these practitioners and experts on the 

basis of our literature review and recommendations from other experts. 

We also met with a panel of Fellows from the National Academy of Public 

Administration, comprising former government executives.1

Using our literature review and interviews, we derived a set of questions 

to help decision makers evaluate whether consolidation of physical 

infrastructure or management functions will lead to greater efficiencies or 

effectiveness. We provided the questions to many of the individuals we 

Participants 

included Jonathan Breul; Doris Hausser; Dwight Ink; Susan Jacobs; 

Herbert Jasper; John Kamensky; Albert Kliman; F. Stevens Redburn; and 

Thomas Stanton. The participants described their consolidation 

experiences at federal agencies such as the Office of Management and 

Budget; the Office of Personnel Management; the U.S. Agency for 

International Development; the U.S. Department of Agriculture; the 

Department of Health and Human Services; and the Department of 

Housing and Urban Development.

 

1

Established in 1967 and chartered by Congress, the National Academy of Public 

Administration is a non-profit, independent coalition of public management and 

organizational leaders. For more information, go to www.napawash.org. 

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 42 GAO-12-542 Consolidation Proposals 

interviewed for their review and incorporated their comments where 

appropriate.

To illustrate how agencies have attempted to address the questions about 

consolidation, we selected eight consolidation examples at the federal 

agency level. These examples include a mix of physical infrastructure and 

management functions, intra-agency and interagency initiatives, and 

recommended, ongoing, and completed efforts. For our illustrative 

examples, we reviewed documentation such as cost analyses and 

performance plans to obtain information about how agencies planned and 

implemented consolidation efforts and collected through interviews and 

document requests information from the agencies on how they estimated, 

gathered, or calculated consolidation cost savings. Because it was not the 

purpose of this report to assess the anticipated or actual success of 

consolidation efforts, we did not attempt to independently verify the 

reliability of these data or estimates. As a result, the reported estimated or 

actual cost savings are of undetermined reliability. We also conducted 

interviews with agency officials responsible for implementing the 

consolidation initiatives, as well as union representatives from the

National Treasury Employees Union. In the examples of the Department 

of Defense’s Base Realignment and Closure, the Environmental 

Protection Agency’s laboratories, the Office of Management and Budget’s 

data center consolidation, and the Department of State’s International 

Cooperative Administration Support Services, we relied on our recently 

published reports.2

 

2

We drew from our prior reports: GAO, Military Base Realignments and Closures: Key 

Factors Contributing to BRAC 2005 Results, 

Table 4 lists the consolidation initiatives and the types 

of consolidation for the examples we included in the report.

GAO-12-513T (Washington, D.C.: Mar. 8, 

2012); Military Base Realignments and Closures: Estimated Costs Have Increased While 

Savings Estimates Have Decreased Since Fiscal Year 2009, GAO-10-98R (Washington 

D.C.: Nov. 13, 2009); Military Bases: Analysis of DOD’s 2005 Selection Process and 

Recommendations for Base Closures and Realignments, GAO-05-785 (Washington, D.C.: 

July 1, 2005); Environmental Protection Agency: To Better Fulfill Its Mission, EPA Needs a 

More Coordinated Approach to Managing its Laboratories, GAO-11-347 (Washington, 

D.C.: July 25, 2011); Data Center Consolidation: Agencies Need to Complete Inventories 

and Plans to Achieve Expected Savings, GAO-11-565 (Washington, D.C.: July 19, 2011); 

and Embassy Management: State Department and Other Agencies Should Further 

Explore Opportunities to Save Administrative Costs Overseas, GAO-12-317 (Washington, 

D.C.: Jan. 31, 2012).
Appendix I: Scope and Methodology

Page 43 GAO-12-542 Consolidation Proposals 

Table 4: Federal Agency Consolidation Examples in Various Stages of 

Implementation

Consolidation initiative Type of consolidation

Department of Commerce Census Bureau 

Regional Offices

Intra-agency / physical infrastructure

Department of Defense Base Realignment and 

Closure

Intra-agency / physical infrastructure

Department of the Treasury Internal Revenue 

Service Processing Centers

Intra-agency / physical infrastructure

Environmental Protection Agency Laboratories Recommended intra-agency / 

physical infrastructure

Office of Management and Budget Federal Data 

Center Consolidation Initiative

Intra-agency / physical infrastructure 

and management function

Office of Personnel Management Payroll 

Systems 

Interagency / management function

Department of State International Cooperative 

Administrative Support Services System

Interagency / management function

Department of Veterans Affairs and Department 

of Defense Federal Health Care Center

Interagency / physical infrastructure 

and management function

Source: GAO.

We did not attempt to identify all consolidation efforts of physical 

infrastructure and management functions at the federal level that could 

have illustrated the questions, challenges, and practices that decision 

makers could adopt to help them overcome challenges. While we believe 

that these questions, challenges, and practices are applicable across 

different agencies and for various types of consolidation efforts, with our 

approach we are not able to definitively say that the experiences 

associated with these consolidation activities can be applied successfully 

to future federal consolidation initiatives.

We provided the draft for review and comment to the five agencies with 

consolidation initiatives that were not covered by prior GAO work and 

made technical changes as appropriate. We conducted our work from 

June 2011 to May 2012 in the Washington, D.C., metropolitan area in 

accordance with all sections of GAO’s Quality Assurance Framework that 

are relevant to our objective. The framework requires that we plan and 

perform the engagement to obtain sufficient and appropriate evidence to 

meet our stated objectives and to discuss any limitations in our work. We 

believe that the information and data obtained, and the analysis 

conducted, provide a reasonable basis for any findings and conclusions in 

this product.
Appendix II: Additional Questions Related to 

Physical Infrastructure and Management 

Function Consolidation Initiatives

Page 44 GAO-12-542 Consolidation Proposals 

The following are additional sub-questions related to the ideas, strategies, 

and leading practices that may facilitate physical infrastructure or 

management function consolidations. This list is not exhaustive, nor is it 

necessary for an agency to consider every listed question. Rather, the 

presence of some of these considerations may indicate that agency 

officials have developed a sound consolidation strategy. Conversely, the 

absence of consideration of these questions could indicate that agency 

officials have not adequately planned their physical infrastructure or 

management function consolidation.

What Are the Goals of the Consolidation? What Opportunities Will 

Be Addressed through the Consolidation and What Problems Will Be 

Solved? What Problems, If Any, Will Be Created?

• Have agency leaders identified specific goals to be achieved through 

consolidation?

• Have agency leaders assessed how consolidation can help an agency 

incorporate changes in technology, business processes, or the needs 

of customers or clients?

• How have agency leaders weighed the importance of achieving the 

goals against a realistic assessment of the effort that will be required 

to achieve them?

• How have agency leaders considered the risks to consolidation that 

could prevent the achievement of goals and planned for ways to 

manage them?

• Are agency leaders defining the benefits associated with consolidation 

and describing how the future will be both different from and better 

than the past?

• Are agency leaders providing a clear and compelling picture of what 

will constitute success?

What Will Be the Likely Costs and Benefits of the Consolidation? 

Are Sufficiently Reliable Data Available to Support a Business-Case 

Analysis or Cost-Benefit Analysis?

• What data on the likely costs and benefits of a consolidation are 

available?

• Are the data sufficiently accurate and reliable? What data on the likely 

costs and benefits of a consolidation are unavailable, and has a plan 

been developed to mitigate the unavailability or unreliability of certain 

data?

• On the basis of the data available, can a reasonable expectation of a 

consolidation’s costs and benefits be drawn?

Appendix II: Additional Questions Related to 

Physical Infrastructure and Management 

Function Consolidation Initiatives
Appendix II: Additional Questions Related to 

Physical Infrastructure and Management 

Function Consolidation Initiatives

Page 45 GAO-12-542 Consolidation Proposals 

• Have the likely costs and benefits been subjected to a sensitivity 

analysis? How sensitive are the estimated costs and benefits to 

variation in less reliable data or other key assumptions?

How Can the Up-Front Costs Associated with the Consolidation Be 

Funded?

• Can immediate efficiencies or uncommitted funds in other areas be 

redirected to pay for the up-front costs of a consolidation?

• Has the agency considered how it will assess return on investment for 

any funding for up-front costs?

• Can a working capital fund or other funds be drawn on as a funding 

mechanism?

• Is Congress amenable to establishing a funding mechanism for a 

consolidation and appropriating funds for it?

Who are the Consolidation Stakeholders, and How Will They Be 

Affected? How Have the Stakeholders Been Involved in the 

Decision, and How Have their Views Been Considered? On Balance, 

Do Stakeholders Understand the Rationale for Consolidation?

• Have agency leaders identified affected stakeholders?

• Have agency leaders determined the necessary frequency and timing 

of communication about the consolidation to internal and external 

stakeholders?

• Does the communication strategy allow for a two-way exchange of 

information between management and stakeholders?

• How is the agency planning to involve employees to obtain their ideas 

and get their support? Have union representatives been consulted? 

Are there employee task teams responsible for developing and 

proposing common solutions to particular issues related to the 

consolidation?

• How does the agency plan to provide information to employees about 

how their jobs might be affected, what their rights and protections 

might be, or how their responsibilities might change with the new 

organization?

• Is the agency planning to communicate information through different 

channels such as e-mail, face-to-face meetings, large and small group 

meetings, intranet websites, and town hall meetings?
Appendix II: Additional Questions Related to 

Physical Infrastructure and Management 

Function Consolidation Initiatives

Page 46 GAO-12-542 Consolidation Proposals 

To What Extent Do Plans Show That Change Management Practices 

Will Be Used to Implement the Consolidation?

Will Top Leadership Be Engaged in Driving the Consolidation Plan?

• Do agency leaders have plans to move deliberately to demonstrate 

their conviction and commitment to making the needed changes?

• Do agency leaders have plans to provide clear guidance to 

employees about how to conduct business during a potentially 

turbulent period?

Will a Dedicated Implementation Team Lead the Consolidation?

• Will the implementation team have strong program management skills 

and a proven record of successfully working through or overseeing 

major transformations?

• Are there networks such as senior executive councils, functional 

teams, or cross-cutting teams that can ensure that changes are 

thoroughly implemented and sustained over time?

Will the Implementation Plan Include Metrics to Measure Progress toward

the Consolidation’s Goals?

• Will there be an action plan with goals and milestones to track 

progress and identify any needed mid-course adjustments?

• Will an action plan identify critical phases and the essential activities 

that need to be completed by and on any given date? Are there plans 

to publicize and report progress on specific goals for each phase of 

the initiative?

• Is there a strategy for tracking employee attitudes toward the 

consolidation and identifying any morale or productivity issues?

• Will the implementation plan include a strategy for attracting and 

retaining key talent?

Will the Implementation Plan Include a Strategy for Assessing and 

Mitigating Risk?

• Will the implementation plan be informed by a risk assessment that 

includes the following five steps?

• Set strategic goals and objectives, and determine constraints

• Assess risks

• Evaluate alternatives for addressing these risks

• Select the appropriate alternatives

• Implement the alternatives and monitor progress made and results 

achieved
Appendix II: Additional Questions Related to 

Physical Infrastructure and Management 

Function Consolidation Initiatives

Page 47 GAO-12-542 Consolidation Proposals 

Is there a Strategy for Using the Consolidation Experiences of Other 

Organizations and Lessons Learned?

• Have agency officials involved with the consolidation initiative 

identified and consulted with other agencies or organizations that 

planned for or implemented a similar consolidation effort?

• Is there a process for capturing lessons learned after each phase of 

the consolidation and using the information to improve the 

management of subsequent phases?
Appendix III: Key Change Management 

Practices 

Page 48 GAO-12-542 Consolidation Proposals 

Appendix III: Key Change Management 

Practices 

HIGHLIGHTS OF A GAO FORUM

Mergers and Transformation: Lessons

Learned for a Department of Homeland

Security and Other Federal Agencies

www.gao.gov/cgi-bin/getrpt? GAO-03-293SP.

To view the full report, including the scope

and methodology, click on the link above.

For more information, contact J. Christopher

Mihm at (202) 512-6806 or mihmj@gao.gov.

Highlights of GAO-03-293SP

November 2002
Appendix III: Key Change Management 

Practices 

Page 49 GAO-12-542 Consolidation Proposals 
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 50 GAO-12-542 Consolidation Proposals 

J. Christopher Mihm, (202) 512-6806 or mihmj@gao.gov

In addition to the contact named above, Elizabeth Curda, Assistant

Director, and Judith Kordahl, Analyst-in-Charge, supervised the

development of this report. Jessica Nierenberg and Dan Webb made 

significant contributions to all aspects of this report. Martin De Alteriis 

assisted with the design and methodology. A.J. Stephens provided legal 

counsel. Janice Latimer and Kathleen Padulchick verified the information 

in the report, and Donna Miller developed the report’s graphics.

Other important contributors included Vijaykumar Barnabas; Jill Center; 

Carol Henn; David Hinchman; Diane LoFaro; James Michels; Angela 

Miles; Susan Offutt; Joanna Stamatiades; and Laura Talbott.

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(450910)
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