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IT PROGRAMS AT RISK: IS IT TOO LATE TO

SAVE $12 BILLION?

HEARING

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, AND INTERNATIONAL 

SECURITY SUBCOMMITTEE

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

SEPTEMBER 7, 2006

Available via http://www.access.gpo.gov/congress/senate

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs

(

(II)

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL L. ALEXANDER, Minority Staff Director 

TRINA DRIESSNACK TYRER, Chief Clerk 

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

TOM COBURN, Oklahoma, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

THOMAS CARPER, Delaware 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

KATY FRENCH, Staff Director 

SHEILA MURPHY, Minority Staff Director 

JOHN KILVINGTON, Minority Deputy Staff Director 

LIZ SCRANTON, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Coburn ................................................................................................. 1

Senator Lautenberg .......................................................................................... 4

Senator Carper ................................................................................................. 10

WITNESSES 

THURSDAY, SEPTEMBER 7, 2006

Karen Evans, Administrator for Electronic Government and Information 

Technology, U.S. Office of Management and Budget ........................................ 6

David A. Powner, Director, Information Technology Management Issues, U.S. 

Government Accountability Office ...................................................................... 8

ALPHABETICAL LIST OF WITNESSES

Evans, Karen: 

Testimony .......................................................................................................... 6

Prepared statement .......................................................................................... 30

Powner, David A.: 

Testimony .......................................................................................................... 8

Prepared statement .......................................................................................... 36

Questions and responses for the record .......................................................... 59

APPENDIX 

Charts submitted by Senator Coburn .................................................................... 27

(1)

1The chart referred to appears in the Appendix on page 27. 

IT PROGRAMS AT RISK: IS IT TOO LATE TO 

SAVE $12 BILLION? 

THURSDAY, SEPTEMBER 7, 2006

U.S. SENATE, SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND INTERNATIONAL SECURITY, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 9:34 a.m., in room 

342, Dirksen Senate Office Building, Hon. Tom Coburn, Chairman 

of the Subcommittee, presiding. 

Present: Senators Coburn, Carper, and Lautenberg. 

OPENING STATEMENT OF CHAIRMAN COBURN 

Chairman COBURN. Good morning. The Subcommittee on Federal 

Financial Management will come to order. 

We are having a hearing today on IT projects of the Federal Government. I have an opening statement, which I will not read. I will 

place it into the record and a copy will be given to each of you. 

This year, we are going to spend $64 billion on IT in the Federal 

Government. That is $15,000 per Federal employee per year. When 

we went to the private sector, we saw very few industries who 

spend that amount of money per employee on IT. There are some, 

but very few. The ratio is significant. 

A couple of things that we are looking at, this first poster1 shows 

what the budget is for IT, the watch list, and the percentage of the 

IT budget for Management Watch List projects. You can see for the 

2007 budget, it looks like only $9.9 billion. Some of the things we 

will raise today is whether or not that $9.9 billion is accurate. We 

have some major concerns that may not be accurate, although I 

would defer until we hear the actual testimony. 

The concern is spending $64 billion, first of all, are we getting 

our money’s worth for it? I have some real problems with the Exhibit 300 process, and the problems that I see with that is it seems 

to me that many of the Exhibit 300s are not written by the agencies but rather by the contractors to get the approval in the first 

place, which I think is a large conflict of interest for the agencies. 

The contractors should not be writing those. In fact, the agency 

should be writing them if, in fact, they think they need these IT 

projects. 

2

2The chart referred to appears in the Appendix on page 28. 

1The chart referred to appears in the Appendix on page 29. 

The second poster that is up there on the Management Watch 

List 2007,2 in terms of the percentage of projects that are on there, 

from 857 projects that are proposed in 2007, 263 of these are on 

that. That doesn’t necessarily mean there is a financial problem, 

but there may be a management or execution problem that is vital 

to the country, and I think to have 31 percent of the projects, we 

are worrying about them, says a whole lot about some of our IT 

management. 

I do want to compliment OMB on their working with us. It is 

really great to have an agency that will communicate with you, be 

fair and open and honest, and is trying to do the right things to 

right our government in terms of spending our deficits and getting 

good management tools in place, and I have been impressed with 

the quality and the openness with which our staffs and Mr. 

Portman has been available to us and his staff. 

The final poster shows performance shortfalls and how they 

break down and the number of IT projects with performance shortfalls.1 That number is actually on the rise, which gives me great 

concern. If you look at unclear baselines, you see what was happening in September and December and March of 2006. If you look 

at cost and schedule variance exceeding 10 percent, you see that 

number is on the rise, where you have 25 percent of the projects, 

the cost and scheduling variance is greater than 10 percent. 

And probably even more troublesome is that the project managers for the projects are not qualified to be running the managements, which may be one of the reasons why we are seeing the 

costs and scheduling and the unclear baselines. And then, finally, 

duplication of projects, which is also concerning. 

The key point that I want to get across with this hearing is just 

to get a better understanding of where we are on IT. Can we save 

money? 

The final point that I would make is the ability for us to look at 

and manage IT, I believe needs to be streamlined somewhat, and 

with that needs to come not cost-plus contracts, but the idea that 

if we have a clear goal in mind of what we want to accomplish, 

there, in fact, ought to be quotes out there for people to accomplish 

the goal without cost overruns, without more money, without more 

time, and they ought to sign a contract and have to perform. I 

would guarantee you, not very many businesses allow open-ended 

cost-plus contracts on IT. They get a quote, they have it competitively bid, there is a contract signed, and the requirements are met 

in the contract and if they are not met, they are enforced in a court 

of law. The idea that we have contracts that aren’t performing or 

are over cost tells us that some of our problems are in our contracting to begin with. 

So the whole goal is to look at this, to see what we can do. It 

is not to point fingers. It is not to say—I believe the efforts to get 

this under control are underway at OMB and I want to compliment 

them on that. I want to thank the GAO, as well, for being here and 

for their work on this, because I think it is important, and it is a 

large segment. Sixty-four-billion dollars a year spent on IT is a lot 

3

of money and we ought to be getting $64 billion worth of value for 

it and we need to make sure that we continue to do that in years 

forward. 

Again, I would compliment the President’s agenda in terms of 

management agenda, what he has put in in a lot of areas. I know 

it is slow to come, but we are seeing progress and I think that is 

great. But oversight is about looking at it and making sure the 

pressure is there to continue to do the same thing. 

[The prepared statement of Chairman Coburn follows:]

PREPARED STATEMENT OF SENATOR COBURN 

Not very long ago, it would have been possible to find offices in which employees 

did not rely much on computers—today, it would be unthinkable. Information technology has come to occupy so central a position in our work that we can barely remember what we did before we all had cell phones, blackberries, laptops and email. 

The Federal Government is no exception: One of the fastest growing IT markets 

is within Federal agencies. IT projects of all kinds can speed communications, secure critical records, squeeze out inefficiencies and save time. Americans are now 

able to interact with their government in ways never before dreamed of because of 

the huge strides we’ve made in IT. 

None of this, though, has come without a huge cost. Our government has invested 

hundreds of billions of dollars in IT throughout all Federal agencies. In fiscal year 

2007 alone, the Administration has requested $64 billion to fund more than 850 IT 

projects. Money will be spent on everything from defense weapons systems to electronic payroll and everything in between. But, with this huge investment, the government also carries a huge risk. IT projects are complex and especially prone to 

schedule delays, cost overruns and, sometimes, they are obsolete before they are 

even operational. In other words, IT projects are highly susceptible to waste if we 

are not vigilant in oversight. 

Providing some of that needed oversight is why we’re here today. I want to thank 

my colleague, Senator Carper, for suggesting the need for this hearing. GAO has 

identified upwards of $12 billion in Federal IT projects with significant potential for 

waste if the right measures are not taken. As a percentage of a $64 billion IT budget, $12 billion at risk is an extremely large percentage. It means that nearly one 

in five Federal dollars that the Federal Government will spend on IT in the coming 

year may result in failure and waste. This potentially wasteful spending is an enormous problem, and one which the Federal Government cannot afford, especially 

now, but not ever. 

To put $12 billion in perspective:

• It is about twice as much as the entire budget of the Department of Commerce. 

• With an average income of $43,000 in this country, it also represents the salary of nearly 280,000 working Americans. 

• $12 billion is the collective amount of money that more than 5,700 Americans 

with college degrees will earn in a LIFETIME. 

• Finally, to waste $12 billion would be tantamount to taking the taxes sent 

in by 1.5 million people and flushing it down the toilet.

We must do anything and everything to steward this money so that doesn’t happen. 

The responsibility of overseeing all Federal IT spending falls to the Office of Management and Budget. OMB reviews all IT projects on a regular basis to ensure that 

agencies are not spending money on wasteful projects, and keeps a close eye on the 

projects with problems. to this end, I want to congratulate the Office of Management 

and Budget for taking certain positive steps to keep track of the projects that pose 

the greatest risk of failure. It has developed two separate lists, each with a slightly 

different function: The High-Risk List and the Management Watch List. The HighRisk List is primarily to keep track of projects with potential performance problems, 

while the Management Watch List tracks projects planning problems. Essentially, 

one list for those projects planned well, but prone to failure in execution, and another list for those not even planned well from the start. 

Placing a project on either one of these lists is a very serious matter. A project 

is only placed on either list if it is usually risky. The disturbing reality is that, of 

the 857 Federal IT projects to be funded in 2007, 452 are currently on one or both 

of these lists. That means a staggering 53 percent of all IT projects are at serious 

4

risk. The $12 billion total is obtained from adding the value of all projects on the 

Management Watch List—$9.9 billion—to the value of High-Risk List projects with 

known ‘‘performance shortfalls’’—$2.2 billion. Numbers like this serve as a wake up 

call that something must be done to ensure Federal IT projects are being well managed and given proper oversight. 

Twelve billion dollars is bad enough. But I suspect that the real number is even 

higher. In June, this Subcommittee held a hearing on the Census Bureau, and discovered that the Bureau currently has a $1.8 billion contract for its technology 

needs in the 2010 Census. That contract, the Decennial Response Integration System, or DRIS, is experiencing so many problems at the moment that the Census Bureau is threatening to scrap it and go back to a pen and paper census, adding a 

billion dollars or more to its costs. So imagine our surprise, to find that this contract 

does not appear on either of OMB’s two lists, the High-Risk List or the Management 

Watch List. Adding this project alone to the list would increase the amount of IT 

projects at risk of waste from $12 billion to more than $13 billion. 

Similarly, GAO has uncovered other projects worth billions of dollars that meet 

the criteria for placement on one of these two lists that do not show up either. This 

means that $12 billion may be a floor, rather than a ceiling. 

Further leading me to believe that the total dollar figure at risk is higher than 

currently known has to do with the business cases, or Exhibit 300s, submitted by 

agencies. Exhibit 300s are planning documents that agencies fill out and send to 

OMB to explain their plans for costs, schedule and other important items before a 

project ever gets funding. I am concerned that contractors responsible for carrying 

out the work may actually be the ones filling out exhibit 300s on behalf of the agencies they work for. If so, this would present an enormous conflict-of-interest, whereby contractors could be responsible for not only setting agency priorities, but also 

benefiting financially from them. 

Finally, my last concern gets at an issue very near to the heart of what this Subcommittee has tried to promote: Transparency and sunshine. Transparency means 

allowing Congress and the public to know how their hard-earned money is spent. 

At the very least, the information should be given to Congress, which is asked to 

make decisions about spending taxpayer dollars. This is especially true for the government’s most at-risk IT projects. But, as of today, OMB has kept the Management 

Watch List internally and used it for its own planning purposes. 

The Management Watch List consists of 263 projects and represents $9.9 billion 

of the government’s total $64 billion in IT spending for 2007. Each of the projects 

on this list is there because it has serious planning weaknesses. I believe that Congress has a right to know not only what these projects are, but also why we are 

funding projects that have been poorly planned. I look forward to working with 

OMB to find a way forward by which Congress can know more fully what problem 

projects it is funding while enabling OMB to do its job as well. 

It is my hope that this hearing will provide a needed spark to try and get a better 

grasp on Federal IT spending. We cannot sit idly by and watch billions of dollars 

be put at risk year-by-year, with American citizens paying the price. Our goal 

should be to minimize that risk to the greatest degree possible and do everything 

in our power to protect the precious financial resources entrusted to us by Americans each year. 

I want to thank the witnesses for being here today to discuss this important issue.

Chairman COBURN. Senator Carper will be here in a moment. He 

is on the floor. I would like to recognize Senator Lautenberg at this 

time. 

OPENING STATEMENT OF SENATOR LAUTENBERG 

Senator LAUTENBERG. Thanks, Mr. Chairman. This is an especially meaningful review because, as you noted, $64 billion being 

spent on IT, information technology, is about $25,000 per Federal 

employee. That is a huge sum of money. Federal agencies from the 

Defense Department to the Department of Veterans’ Affairs are 

funding IT projects that don’t meet clear baselines and don’t maintain their cost projections, don’t stick to schedule, and don’t seem 

to have qualified project managers. 

Now, I have been in the business world and in the IT world. I 

started a company called Automatic Data Processing, ADP as it is 

5

commonly known, a company that employed IT at its very earliest 

developmental stages. That company now processes one out of six 

paychecks given to employees throughout the country. We could 

never have succeeded if we had managed our technology as does 

the government. 

It seems it is very hard to get a handle around projects that we 

do in government. Mr. Chairman, I was very active on the Transportation Subcommittee in my former iteration and we started out 

with projects with the best companies, you name it, the computer 

companies, and none of them succeeded because of magnitude of 

the project was never really understood, and these things have to 

be done, in my view, modularly to make sure that you have appropriate benchmarks to guide yourself by, guide your progress by, 

and not expect to be able to solve major problems in a single setting. 

So when we look at the $12 billion that could be wasted by poor 

planning, poor management and planning, just think, it could provide health care coverage for 85 percent of the children in America. 

It could send more than two million bright young Americans to universities. So wasting that kind of money is a disgrace. It is unacceptable. We are working hard to make our dollars go further and 

the last thing we ought to do is be throwing them away casually. 

To avoid this, we have got to hold people and government agencies 

accountable. 

Mr. Chairman, thanks again. This is consistent with your view 

of how we ought to manage government, and I agree totally, so we 

will hear from the witnesses and go on. 

Chairman COBURN. Thank you. 

Let me introduce, if I may, Karen Evans. She is the Administrator for E–Government and Information Technology at OMB. Previously, she served at the Department of Justice as an Assistant 

Director for Information Services and then as Division Director for 

Information System Management. Prior to that, she was Deputy 

Director for the Applications Management Division at the Department of Agriculture. She has an MBA from West Virginia University. 

I would also like to introduce David Powner. He is the Director 

for Information Technology Management Issues at the Government 

Accountability Office. He has been with GAO for 14 years. After 10 

years at GAO, though, Mr. Powner took a break and worked in the 

private sector for 4 years in the telecommunications industry. He 

has now been back at GAO for 4 years and brings with him a depth 

of knowledge about both private and Federal IT management. 

I would like to recognize you both. You can take the amount of 

time that you need to take in terms of your opening statements. 

Senator Carper will arrive somewhere between your opening statements and we will allow him to make a statement at that time. 

Ms. Evans. 

6

1The prepared statement of Ms. Evans appears in the Appendix on page 30. 

TESTIMONY OF KAREN EVANS,1 ADMINISTRATOR FOR ELECTRONIC GOVERNMENT AND INFORMATION TECHNOLOGY, 

U.S. OFFICE OF MANAGEMENT AND BUDGET 

Ms. EVANS. Good morning, Mr. Chairman and Members of the 

Committee. My remarks today will focus on the Administration’s 

strategy and progress in planning, managing, and measuring the 

results of the Federal Government’s information technology investments. 

The President has proposed to spend roughly $64 billion in fiscal 

year 2007 for information technology and associated support services to support the multiple and wide-ranging missions of the Federal Government. When performing appropriately, these IT investments help improve the ability of the government’s programs and 

operations to more effectively deliver services, products, and information to State, local, and Tribal Governments, industry, nonprofit 

organizations, and the American people. 

In particular, you have requested a discussion about two specific 

tools we use throughout the year to manage information technology 

investments, the Management Watch List and our high-risk list of 

projects. I plan to discuss our overall process for managing investments given our tools and how OMB executes its responsibilities 

using various methods, such as reviewing agencies’ annual budget 

submissions, engaging with agencies throughout the year on issues 

such as the E–Government scorecard of the President’s Management Agenda, and monitoring specific projects of interest to OMB, 

what we call the high-risk list projects. 

OMB reviews and evaluates the business cases as part of our 

overall evaluation of an entire agency budget submission. Business 

cases are primarily planning documents and do not reflect the actual project performance. Performance information is obtained 

through other means that I will describe later. It is important to 

note, though, that OMB is not the only intended audience for the 

business case. The primary audiences should be and are the agency 

officials and their investment review boards. These managers 

should use the business cases to effectively manage their own IT 

portfolios and to submit to OMB only those investment requests 

that meet the criteria specified in law, OMB policies, and supporting the priorities of the Administration. For the fiscal year 

2008 budget cycle, agencies will be required to post on their agency 

website within 2 weeks of the release of the President’s budget 

these updated exhibits, which will reflect the final Presidential decisions. 

Business cases reflecting one or more planning weaknesses are 

placed on what we call the Management Watch List and they are 

targeted for follow-up and correction. We continue to use the Management Watch List as one of the many tools that we use to oversee planning activities for the investments and to drive improved 

portfolio management. The fiscal year 2007 budget, as you have 

pointed out, is approximately $64 billion for IT and associate support services. Included in there is 857 business cases of which the 

263 were valued at $9.9 billion not meeting this criteria for success. 

7

As of this hearing, I am pleased to report that this year’s list has 

now been reduced to 86 investments valued at $4.5 billion. 

While over the past several years agencies have improved the 

quality of their IT project planning and justification, we have recognized the need to continue this improvement throughout the life 

cycle into the execution phase of the IT project. This time last year, 

we issued new guidance specifically to assist the agencies in monitoring and improving project planning and execution and the implementation of earned value management for their IT projects. 

The objective is to manage the risk associated with an IT investment or project to achieve the intended outcomes. Each quarter, 

agencies evaluate and report to us on the performance of these 

high-risk projects. 

These projects are high risk, not at risk, thus the definition of 

high risk. These projects require special attention from the highest 

levels of agency management and oversight authorities, including 

OMB, agencies’ Inspectors General, and GAO. For an example, a 

project could be classified as high risk because of the exceptionally 

high cost, and even if this project is performing well, we would still 

ask and classify it as a high-risk project. 

The goal is for the oversight authorities and agency management 

to have data on how these projects are performing at least quarterly to better ensure improved execution and performance. Agency 

managers and oversight authorities should know within 90 days, if 

not sooner, if a project is not performing well. The goal is to manage project risk and avoid problems or catch them early enough, 

should they occur, before the taxpayers’ dollars are wasted. 

It is also important to note that this policy is designed to supplement and complement our existing oversight and agency internal 

processes, not to replace them. This policy is separate and apart 

from the Management Watch List and discusses and presents to 

oversight authorities information differing in focus, timing, and expected results. 

OMB oversees the agencies’ activities under the President’s Management Agenda and its associated quarterly reporting process. 

Each quarter, agencies receive a scorecard about their progress and 

status in achieving the government-wide goals. We deliberately include a criterion for acceptable business cases to underscore it is 

at the core of an essential management practice and issue. The acceptability of business cases is just one of the number of critical 

components agencies must satisfy to get green or yellow on the 

scorecard. If the business case criteria are not successfully met, 

agencies do not move forward, regardless of their performance on 

other elements of the scorecard. 

Additionally, our oversight of agencies’ investment requests over 

the past 2 years have identified widespread weaknesses in agencies’ abilities to meet cost, schedule, and performance goals. Therefore, we now emphasize earned value management as a key feature 

of the quarterly scorecard. 

And finally, the recent GAO report revealed questions about the 

validity of the agencies’ information in the Exhibit 300 submitted 

to OMB. We are working with each of the agencies to correct these 

problems and to ensure that they do not occur in the future. 

8

1The prepared statement of Mr. Powner appears in the Appendix on page 36. 

We do have many examples of success, two of which I included 

in my written statement, and there are more. Each year in OMB’s 

report to Congress on the implementation of the E–Government 

Act, we included one example of the success stories from the agencies. The agencies include more information in their own annual E–

Government reports and publish them on their websites. However, 

we do need to continue improvement and build upon these successes to ensure that we do not waste the taxpayers’ dollars with 

duplicative investments or unsuccessful IT projects. 

I thank you for this opportunity to discuss the Administration’s 

strategy and we look forward to continue to work with the agencies 

and with Congress for new opportunities to refine our oversight 

and improve the execution of our projects. 

Chairman COBURN. Thank you, Ms. Evans. Mr. Powner. 

TESTIMONY OF DAVID A. POWNER,1 DIRECTOR, INFORMATION 

TECHNOLOGY MANAGEMENT ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. POWNER. Dr. Coburn, Ranking Member Carper, and Senator 

Lautenberg, we appreciate the opportunity to testify on poorly 

planned and performing IT projects across the Federal Government. 

In fiscal year 2007, the Federal Government plans to spend nearly $65 billion on information technology. Agency CIOs are accountable for ensuring their agency investments are appropriately selected, meaning they are tied to mission improvements and appropriately overseen, meaning that progress is monitored through 

proven performance measures and corrective actions taken when 

needed. GAO’s reports and others have highlighted that there is 

much room for improvement in these areas. Given this, OMB’s 

statutory responsibility, to establish processes to analyze, track, 

and evaluate the risks and results of major capital IT investments, 

is critical. 

To its credit, OMB has established several processes and criteria 

to improve the management of Federal IT projects, including the 

E–Government scorecard associated with the President’s Management Agenda, the Management Watch List that identifies poorlyplanned projects, and high-risk projects that identify poorly performing projects. 

This morning, I will summarize three key points. First, agencies 

and OMB annually identify hundreds of IT projects representing 

billions of dollars that are poorly planned or performing. Second, 

our work has shown that the number of troubled projects is likely 

even higher. And third, opportunities exist to oversee these projects 

better. 

First, over 300 projects totaling more than $12 billion in estimated IT expenditures have been identified on OMB’s Management 

Watch List or as a high-risk project with performance issues. Specifically, in the President’s budget, OMB reported that 263 projects 

representing about $10 billion is on the Management Watch List. 

Today, OMB is reporting that this number is now 86 projects totaling $4.5 billion, still significant. 

9

In addition, agencies reported that 79 high-risk projects collectively totaling more than $2 billion had performance shortfalls. 

Highlighting these projects with shortfalls creates tremendous opportunities to correct deficiencies in these investments that comprise a significant portion of the Federal IT budget. 

Our work has shown that the number of projects is likely even 

higher. OMB derives projects on its Management Watch List based 

on a detailed review of IT budget justifications, called Exhibit 300s. 

Our evaluation of Exhibit 300s showed that the information reported in them is not always accurate or reliable. This is not surprising, since there is pressure to overstate budget justifications so 

that investments can make the selection cut and to keep them off 

of OMB’s oversight radar. Ensuring reliability of information in the 

Exhibit 300s is essential for many reasons, including an accurate 

Management Watch List. 

For the high-risk projects, we found that agencies do not always 

consistently apply OMB’s criteria for identifying these projects. For 

example, we found projects that we have reported on and testified 

on that have clearly met OMB’s criteria that were not listed. These 

included a key census system and environmental satellite acquisitions that are both laden with risks. 

In addition, the charts in my written statement that lists the 

number of poorly-performing projects by agencies raises many 

questions. For instance, how can DOD only have five performing 

projects when they comprise $30 billion of the 64? In addition, 

NASA reported no projects. 

In addition to improving how these projects are identified, improvements are also needed in how these deficiencies are followed 

up on, tracked to resolution, and reported. OMB does not aggregate 

either list. We have never seen the complete list of Management 

Watch List projects, as OMB keeps this information in-house. In 

addition, we have found the processes of following up on the watch 

list projects to be ad hoc and are concerned that this may leave unattended weak projects consuming significant budget dollars. Contrary, the high-risk projects are available for IGs and GAO and 

their follow-up is transparent through a quarterly reporting process. 

To take full advantage of both lists, we recommended that OMB 

aggregate each list so that government-wide analysis can be performed, resolution of deficiencies can be tracked, and the list of 

specific projects can be shared with the Congress to assist in the 

Administration’s oversight. Until this occurs, OMB is missing an 

opportunity to seek assistance in assuring that agencies address 

project weaknesses. 

In summary, OMB should be commended for its many efforts to 

identify projects at risk and to raise the bar on CIO accountability. 

But, Mr. Chairman, this bar has a ways to go. First, OMB’s oversight starts with accurate data being reported to them. Data used 

to identify both watch list and high-risk projects needs to be improved and OMB needs to round out its oversight of these projects. 

Until this is done, not all problem projects will be identified, nor 

do we have assurance that follow-up on identified problems is 

enough to keep billions of dollars from being wasted. 

10

This concludes my statement. I would be pleased to respond to 

questions at this time. 

Chairman COBURN. Thank you, Mr. Powner. 

Welcome, Senator Carper. Let me give due credit to Senator Carper. The idea behind this hearing is his and his interest in making 

sure we are efficient. I am pleased that we are able to have this 

hearing. I also would say that this won’t be the only hearing on IT 

that this Subcommittee will have. We are going to watch this. 

Senator Carper, you are recognized for an opening statement. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Thanks so much. I apologize to our witnesses 

for not arriving earlier. As I think the Chairman knows, we begin 

every day in the U.S. Senate with an opening prayer and oftentimes the prayer is given by the Senate Chaplain, Barry Black. Occasionally, we have a guest who presents the opening prayer and 

today that person was from Delaware, the leader of our GreekAmerican community, and I wanted to be there to welcome him, so 

I missed, unfortunately, all of your statement, Ms. Evans, and part 

of yours, Mr. Powner. 

I am grateful to the Chairman for agreeing to schedule the hearing and I am thankful to my own staff and to our majority staff 

for working with us to make it a good one. 

There is a lot of money involved in these projects. As the Chairman noted, no one is more committed in the Senate than he is to 

finding ways to bring down our budget deficit and reestablish some 

fiscal sanity around here, and we can’t ignore the potential savings 

that we can accrue by putting in place solid, sound IT projects. 

That is good to the extent that there are those that are running 

off the track and we can identify those and try to get them back 

on track. That is critically important, as well. 

I remember from my own experience in my old job, my last job 

as governor, the money that we spent and money that we invested 

in IT projects of all kinds. Some of them were able to enable us to 

save a lot of money, and frankly, some of them cost a bundle and 

didn’t, at the end of the day, we didn’t have as much to show for 

them that we wanted to. They are not easy to do well, and frankly, 

the oversight in some cases, at least in our case, wasn’t what I 

would have liked. 

I am grateful to our friends from GAO for trying to help us in 

our oversight missions to make sure that to the extent that we can, 

we play the appropriate watchdog role, not just being critical but 

being constructive, asking the right questions as we go forward. 

I have a statement that I would like to enter for the record, Mr. 

Chairman. I am grateful that we are here. This is good stuff. 

Thank you. 

Chairman COBURN. Without objection, your statement as well as 

mine will be entered. 

[The prepared statement of Senator Carper follows:]

PREPARED STATEMENT OF SENATOR CARPER 

I want to thank Chairman Coburn for holding today’s hearing to focus on how the 

OMB will ensure the success of potentially $12 billion—as of this hearing, $7 billionat-risk information technology projects. As our witnesses will testify to, the President has proposed to spend nearly $64 billion in FY 2007 for information techVerDate 0ct 09 2002 09:04 Sep 19, 2007 Jkt 030594 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 C:\DOCS\30594.TXT SAFFAIRS PsN: PAT
11

nology. Without the needed investments in information technology, our government 

could not conduct its everyday business. As we all know, investment in information 

technology is not a one stop deal. Implementing and maintaining information technology involves detailed planning—with clear costs, project schedules, and performance goals. Within Federal agencies, Chief Information Officers and project managers are among the many that have the responsibility to ensure that information 

technology projects are implemented in the most efficient manner. We in this 

room—our Subcommittee, the Office of Management and Budget, and the GAO—

also have the responsibility to conduct oversight on Federal information technology 

investments. It’s unfortunate that not all information technology projects are implemented in the most efficient manner. 

As the OMB will testify to, there are currently 226 information technology 

projects classified as ‘‘high-risk.’’ The OMB also has 86 information technology 

projects listed on their ‘‘Management Watch List.’’ Information technology projects 

that are the most at-risk of planning and performance shortfalls total nearly $7 billion in Federal funds. What we will hear today is that $7 billion worth of information technology projects is in serious risk of being wasted unless:

• The OMB improves its oversight of at-risk information technology projects, 

and 

• Agenceis improve their reporting on all information technology projects.

Due to problems with the OMB’s classification of high-risk projects and projects 

on the Management Watch List, I believe the OMB cannot possibly be carrying out 

adequate oversight of information technology projects. Not only does the OMB not 

keep running-aggregate lists of the Management Watch List and high-risk projects, 

the OMB does not have consistent processes for following-up on at-risk projects. 

In my opinion, one of the most concerning problems, which the GAO will testify 

to, is that agencies often inadequately report information on their information technology projects. Agencies are required to justify resource requests for major information technology projects on forms that the OMB calls Exhibit 300s. Unfortunately, 

information on these forms is often inadequate. Agencies tend to leave out necessary 

documentation and include unreliable cost estimates. Therefore, according to the 

GAO, the OMB is depending on unreliable information when monitoring the management of major information technology projects and making critical funding decisions. Since the OMB derives its information from Exhibit 300s when placing 

projects on its Management Watch List, I believe that the number of projects on 

that list (approximately 86) is likely to be understated. 

Until we fix these problems, the Federal Government risks losing billions of dollars from the shortfalls of the most at-risk information technology projects. Personally, I believe that both the OMB and Federal agencies can do better and we must. 

I look forward to hearing suggestions from our witnesses on how we can improve 

oversight of the most at-risk information technology projects. 

Thanks you.

Chairman COBURN. I am going to start off our questioning. I 

want to try to get an understanding of process a little bit. We have 

an Exhibit 300. This is a justification for a project, is that correct? 

Ms. EVANS. It is a justification for an investment. 

Chairman COBURN. For an investment in IT——

Ms. EVANS. Yes, sir. 

Chairman COBURN [continuing]. To save money? 

Ms. EVANS. Well, not necessarily to save money, as well. It is a 

justification in order to meet a business need or requirement. 

Chairman COBURN. All right. And that is approved by an agency 

Secretary and that is approved by a management review board, is 

that correct? 

Ms. EVANS. Yes, sir. Within an agency, there is an investment 

review board and then the CIO is to manage the investment review 

process, and it is included in the project and then gets submitted 

by the Secretary. 

Chairman COBURN. So that happens. So how come we have a 

third of them that are poorly planned? 

12

Ms. EVANS. That is actually a really good question and why we 

have been working on it since I have been in this job, of going 

through and making sure that we have the underlying management practices in place, that we really are reviewing the investments, that you really are looking at those to ensure that there is 

alignment between what you are trying to do in a program and 

how the IT investment will support that program, either through 

efficiencies or to get the outcome to support a service. 

Chairman COBURN. What I am trying to figure out is the management review board, if we have nearly a third of them poorly 

planned, somebody isn’t doing their job right. 

Ms. EVANS. Yes, sir. 

Chairman COBURN. So where does that lie? Does that lie at the 

CIO level, the management review board, where does that lie? If 

the whole purpose for the Exhibit 300 is to give a justification for 

an investment for a project or an advancement or greater ability 

for the government to function in some way or measure something 

or defend us and we have that laid out and that gets approved and 

yet a third of them are poorly planned, I thought that was the purpose for the Exhibit 300, is to make sure they are planned properly. 

Ms. EVANS. Yes, sir, and the way that the process is set up and 

the way that we hold the agencies accountable is through the scorecard process. So the Secretary is ultimately held accountable for 

making the decisions of what those IT investments should go forward to support the Administration’s priorities and that agency’s 

mission goals to support the Administration’s priorities. 

Chairman COBURN. So is it possible that the Exhibit 300s aren’t 

accurate when they come through? 

Ms. EVANS. It is possible that the Exhibit 300s, based on the skill 

levels of the people evaluating them at the agency and the CIO 

who is explaining how this works, may need improvement. And so 

I think that is evident when you look at the overall performance 

and how we have ranked the agencies on scorecard, because if all 

agencies were performing well, then we would have all agencies 

showing a green progress and green status. We don’t have that. 

As you can see on the scorecard, if you have had an opportunity 

to look at it, which I am sure you have, you can see that we have 

agencies that are very red and we have agencies that are having 

mixed results, a yellow score, based on what they are doing, and 

then agencies who are green. There are a few agencies that are 

green, and it varies back and forth based on where we are in the 

year and the products that we are evaluating from our oversight 

role during the quarterly scorecard. 

So I agree with you there are problems and we have identified 

what they are and we work with the agencies to strengthen where 

those weaknesses are within the agencies. 

Chairman COBURN. When you look at these projects, do you ever 

look at the projects by vendor? 

Ms. EVANS. No. 

Chairman COBURN. Well, let me suggest that you do that because, in fact, if we have a large number of underperforming or 

poorly planned or high-risk but we are not looking at it by vendor, 

we may, in fact, see a trend by two or three vendors out of the 10 

13

or 20 or 50 that are used that says these are constantly poor performing, or these are constantly over cost or behind schedule. I 

think that one of the analyses that OMB ought to do is look at it 

by vendor and see if there is a pattern of poor performance. 

Mr. Powner talked about inaccurate reporting—what is the consequence for an agency for inaccurately reporting? 

Ms. EVANS. In the fact that we identify that there are weaknesses associated with a business case when it comes in. I am 

going to say we make an assumption that people are not deliberately reporting erroneous data, that what we need to do from an 

OMB perspective is identify what appears to be the job or what is 

the issue within that agency. Is it just within that particular investment or is it a systemic problem throughout the agency? 

For example, one thing that we have noticed across the board, 

and you have highlighted it in your charts, is the ability for agencies to put qualified project managers in charge of individual 

projects as they go forward. We have that as a systemic problem 

across the government, not just within an agency. 

So if that is a weakness that is identified, what we do, what I 

do through the CIO Council, is we come up with an overall plan, 

which we have, to work with the agencies to strengthen project 

managers, also come up with a common way that agencies can 

evaluate the qualifications of the people who they are putting in 

charge of projects so that we have a consistent measure across the 

board, and then once that is done, what we have worked now with 

the agencies over the past year is each agency has a human capital 

plan for the weaknesses of their workforce and they have specific 

milestones that are now being measured through the Human Capital Initiative on the President’s Management Agenda for them to 

either hire, recruit, or train and close those gaps so that, first and 

foremost, first defense there, is being met and that the agencies 

can then improve that area to at least move forward in that particular piece dealing with success. 

As far as if they overall have a systemic problem and we cannot 

remediate what we see as a weakness before the fiscal year starts, 

then OMB does take action such as using the tools that we have 

available, like Category B apportionments, and so then that puts 

more restrictions on the agencies to produce results instead of getting the money, them being able to do what they want to do and 

then us not having proper oversight. 

Chairman COBURN. I don’t want to question anybody’s motivation, but one of the tools of management is consequences of not 

stepping up to the line. So whether somebody inadvertently or intentionally is inaccurate in their reporting, what I want to see developed, and I think is a correct management technique, is there 

ought to be a consequence and there ought to be a measurement 

goal of whether or not they are performing accurately in terms of 

reporting accurately. 

Ms. EVANS. I can tell you that, especially when I was still at the 

agency at the Department of Energy, the goals that we have in the 

E–Government scorecard are directly reflected and were directly 

reflected in my performance plan, which then meant that my own 

individual performance plan as an SES within the government was 

that I had to meet those marks and there were consequences. If I 

14

did not achieve that within my own agency of what those requirements were, it was reflected in my own performance, which then 

reflected my ability to get a raise or a bonus or those types of activities. That alignment is now there in many of the CIOs’ performance plans and they are now getting greater alignment within their 

own agencies so that you can see how people’s performance is now 

dependent on each other. 

We have also done that internally within my own staff. So some 

of the weaknesses and some of the repeatable processes that we are 

talking about that we need to improve on ourselves, we have now—

through the President’s Management Agenda, we are a beta site. 

So my own performance plan is public so that you can see what the 

goals are, but my staff’s performance plans now align to those goals 

so that they are now vested in the agency’s success, as well. So 

there is an individual consequence back on all of us who are responsible for ensuring the management of these initiatives. 

Chairman COBURN. But the project still gets funded. 

Ms. EVANS. Sometimes the projects need to be funded, and that 

is why we put them on the Management Watch List. For example, 

when I first came into this job, one of the investments that were 

on there was TRICARE For Life. That was on the Management 

Watch List. They needed to do certain investments in order to upgrade and be able to improve health care information. You are not 

going to not fund things to support TRICARE For Life, but what 

you are going to do is then put additional oversight and management into that to ensure that—because this is now an area that we 

need that is high risk, so we need to continue to watch that to 

make sure that DOD had the right practices in place so that they 

could achieve the outcome knowing that there was a risk associated 

with it. 

Chairman COBURN. I want to go back to something Mr. Powner said, and it concerns me because the Defense Department has $30 

billion out of the $65 billion in IT. The question I have is either 

their reporting is inaccurate—as a matter of fact, I know their reporting is inaccurate because DTS, the Defense Travel System, 

isn’t on anybody’s list and it is a mess and it has been a mess from 

the time it started in terms of cost overruns and delays and everything else. So there has to be inaccurate reporting. This is going 

back to the point that my worry is that we are underestimating 

what the risk is, and I think GAO has testified to that. How is it 

that Defense can say, and I don’t know where I have it, but I have 

the list of all the projects——

Ms. EVANS. Right. 

Chairman COBURN [continuing]. And they have very few on the 

high-risk list and very few on the Management Watch List. How 

can that be? 

Ms. EVANS. And I would put the responsibility back on myself as 

far as clarity of the instructions and then consistency across the 

board about how we need to work with the agencies to be able to 

do that. So Defense is a good example. So when we are looking at 

this—this is a new policy that we put in place—there is a distinction between what is on the Management Watch List and the highrisk project list. 

Chairman COBURN. Yes, I understand the difference. 

15

Ms. EVANS. But I would say that we need to bring better clarity 

to the instructions on what should be on a high-risk project. For 

example, we have all the 24 E–Government initiatives on the highrisk project list that we monitor through another mechanism. That 

is not included because there isn’t a direct Exhibit 300 to map a 

lot of those to within each of the agencies. 

Chairman COBURN. And why is that? 

Ms. EVANS. Because of the way that we allow certain flexibility 

of how agencies would categorize a major capital investment, and 

so that is why we make a distinction between an actual project——

Chairman COBURN. And the investment——

Chairman COBURN [continuing]. And the capital investment. For 

example, our policy says that all office automation and infrastructure types of investments need to be on one business case. So that 

would be things like telecommunications, office automation, any of 

those types of things, BlackBerrys, e-mail. You could have several 

major projects included in that one investment, like what we are 

currently doing now, the upgrade to IPB6. That is a project, but 

that would only have one capital investment. If you are upgrading 

your telecommunications to use new technology like voice-over IP 

and consolidate phone systems, that is only going to show up in one 

business case, one Exhibit 300, but that is a separate project. So 

that one particular investment could have anywhere, at a minimum, like five major projects underway. So that is why we have 

distinguished between the two of them. 

A lot of the E–Government initiatives, the dollar threshold is 

really low because the total budget across the board when we are 

collecting that, it averages about $190 million all the way across 

the board for all agencies doing all of their parts within 25 initiatives and six lines of business. But it is the complexity of depending now on interagencies to meet their part and the project planning and the major milestones make that high-risk, because if one 

person misses a milestone, the ripple effect is huge. So that is why 

we distinguish those. 

We have to go back to the agencies, giving the example that you 

just gave, like DOD, and clarifying further to them how they can 

use these tools and not necessarily drive reporting underground so 

that they get on our list and then we are looking at them, but encouraging them to use these tools so that they can really manage 

it within their agencies to achieve the results. 

Chairman COBURN. My time is up. Senator Carper. 

Senator CARPER. Thanks, Mr. Chairman. 

In State Government, as in Federal Government, we use information technology in similar initiatives to provide better service. 

We use them to save money. We use them to, in many cases, improve the performance but also the job satisfaction of those that are 

working, whether it is in State or the Federal Government. I like 

to say that everything I do, everything that my team, my staff and 

I do, we could do better, and I think the same is probably true in 

every agency with whom you or each of you work. 

I want to start off with just a real basic question so I understand 

it. Now, the Chairman has delved into this, and I am sure, Ms. 

Evans, you spoke to it in your testimony. But I understood pretty 

well in State Government how we identify initiatives to which we 

16

wanted to bring information technology to bear. Just explain in a 

very basic way, how agencies identify their own IT projects, the 

screening process that they go through to have those funded, and 

then, if you will, the process by which we oversee, or OMB or someone oversees those projects to make sure that we are getting our 

money’s worth, projects end up on the watch list. 

Ms. EVANS. What an agency should do, and when I was at an 

agency myself, the way that we would do this based on the policies 

that are existing within OMB and the laws, what you are supposed 

to do is take a look at what are the agency’s business needs, and 

basic things like utilities, telecommunications, office automation, 

those types of activities, you are supposed to go through, look at 

what is the cost to operate those, if you are going to upgrade those, 

it is a major system investment that you would then take to what 

is called an investment review board. Some agencies will have 

them divided into two areas, a technical review board as well as 

an executive review board. 

So the first threshold would be the technical review board would 

say, OK, this meets all our requirements. This has a good return 

on investment. It appears that it is going to meet our agency needs. 

So it can meet that first threshold of review. 

When it goes to the second level of review, which is an executive 

review board, they have to look at that across the board of what 

dollars do we have available? What are we trying to accomplish? 

What is the mission of the agency? Does this support mission outcomes? If we invest this dollar, will we achieve X, Y, and Z? And 

the business case is supposed to be able to articulate that in a way 

and summarize it in a way that senior executives can realize if I 

invest this one dollar, I am going to achieve X results for my mission. That is how you are supposed to do it. 

And then at that point, you then tie it, and we ask it to be very 

specifically tied to a program or to a business outcome. Are there 

performance measures? How will you know you will be successful? 

Is it just total efficiency because I am going to reduce cycle time? 

Those types of activities. That all is summarized in what we are 

calling the business case, the Exhibit 300. 

Senator CARPER. Back up. Say that last sentence again, please. 

Ms. EVANS. Sure. They are supposed to review these investments 

to ensure that they are tied to a business area, that they are either 

tied to an efficiency measure, like they are going to reduce cycle 

time within an agency—I am not going to mail things out anymore, 

those types of things, or actual program performance, that they 

have a measure that they can show that if I invest a dollar, this 

is the outcome that I should get. And that is what they are supposed to include and justify within what we call an Exhibit 300. 

Then what the CIO does all throughout this process is advise, 

make sure that it is aligned with everything that they are doing 

IT-wise within the agency, information-wise, make sure there are 

no duplications for the cost savings, how you can maximize those 

things, and then they send them over included in the overall budget because these are the investments that are going to enable program results. And then we——

Senator CARPER. Let me interrupt. 

Ms. EVANS. Sure. 

17

Senator CARPER. When would that be taking place during the 

year, right about now? 

Ms. EVANS. September. Yes, sir. We get them as part of the regular budget submission, and so they are submitted concurrently 

with the overall budget and then what my area does is review and 

analyze those across the board to make sure that they are supporting the program outcomes. So there are very specific questions 

that we will ask, like we will ask, are you supporting a program 

that has been PART-ed? What are the measures associated with 

that? 

And so we look at those and we analyze them across the board. 

There are several criteria. There are several areas, acquisition 

strategy, project management, all those things. We look at them 

through our lens. So an agency may feel that they have done everything to the extent possible to mitigate risk, that they have a qualified project manager, that they have certified that project manager, 

they have good performance measures, but then we evaluate it and 

look at it and that is how they end up on the Management Watch 

List. From that planning document, we will say there appears to 

be weaknesses in the performance. 

But we also use other information at that point, because that is 

the same time that we get the annual cyber security reports coming in from the IGs and the CIOs. So if there is an overall problem 

in an agency, their ability to manage and secure data that they are 

collecting, we also use that information because there is a piece 

within the business case that talks about cyber security. 

So there are several tools that we use when we evaluate it and 

then determine that planning project, that particular effort should 

be on a Management Watch List, and then we integrate our processes into the internal OMB processes that then the Director reviews and makes recommendations to the President about what 

should be included in the investments going forward. 

Senator CARPER. Maybe for no one else in the room, but for me, 

that was helpful. Thank you. 

Mr. Powner, let me turn to you, if I could. The title of your testimony, full testimony, is ‘‘Information Technology: Improvements 

Needed to More Accurately Identify and Better Oversee Risky 

Projects Totaling Billions of Dollars.’’ Sort of reflecting back on 

what Ms. Evans has just said and thinking of what you are trying 

to do in your testimony, looking at the process that she outlined, 

what are the strengths and weaknesses of that process? 

Mr. POWNER. First of all, if we start with the Federal agencies, 

and back to Dr. Coburn, your question, too, where you look at those 

processes that are in place associated with these management review boards, our reviews of individual agencies and governmentwide looking at basic processes that are in place with these investment review boards, do they select the investments appropriately? 

And what this is all about is racking and stacking of business 

cases. You rack and stack them. You put them in priority order and 

you say, here is where the budget runs out and everyone else 

doesn’t get funding and these projects do. Now, there are a few nuances to that because of things that are called for in law and that 

type of thing——

Senator CARPER. Because of things that are called what? 

18

Mr. POWNER. There are a few nuances that because of requirements in law for certain projects need to be funded and that type 

of thing, but overall, that is how it should work, just the way Ms. 

Evans described it. 

If you look at those processes at the agency level, we found weaknesses across the board. Sometimes the investment review boards 

don’t comprise the right individuals. You can start there. The CIO 

should be driving it. You ought to have the business owners of 

these systems on the boards. We found investment boards that 

don’t have the appropriate makeup, they don’t have the appropriate processes, and I think agencies are improving over time. I 

think OMB is doing a lot to improve those processes. Our reviews 

highlight some of these things. 

This goes back to requirements called for in the Clinger-Cohen 

Act back in 1996, so this isn’t new and these processes aren’t new, 

but there are weaknesses there. So first of all, you have those 

weaknesses at the agency level. 

And then when you look at, if you think about the racking and 

stacking of these Exhibit 300s, of the business cases, there is pressure to game those business cases, to overstate. What our review 

showed, we looked at 30 of these in great detail at a number of 

agencies and they were inaccurate, unreliable, and not supported 

by documentation in a number of areas. So if you look at that, 

what do we do about it? 

I think OMB issued some new instructions where agencies are 

going to publish on their websites these business cases. That will 

help. That is a step in the right direction. Another step in the right 

direction is within the agencies, there are controls that can be put 

in place. In the private sector, the same thing happened. Folks 

game their business cases because they want to secure funding. 

What did we do? We used internal audit to review business cases. 

Why not use IGs to review a handful of business cases that would 

at least put those project owners on their toes that it is going to 

get looked at? You don’t know which ones are going to get reviewed, but you could look at a handful. There are controls that 

you could put in place to improve this process. 

Senator CARPER. My time is about to expire here on this round. 

Mr. Chairman, could I ask Ms. Evans just to respond briefly to the 

recommendations that Mr. Powner made right at the end of his 

comments? 

Ms. EVANS. Actually, I wrote the recommendation down because 

that is a great idea. We work a lot with——

Senator CARPER. Just restate the recommendation and then respond to it. 

Ms. EVANS. The recommendation is to use the Inspector Generals 

within the agencies to go and do a random check of the business 

cases to ensure quality. I think it is a wonderful idea. We work 

with the IG community often. The IG community is doing certain 

things for us right now. They do it on the cyber security aspect for 

us so that we get that independent review and I am willing to take 

that recommendation back to the IGs and ask them specifically, 

would they be willing to take that on. 

They have taken on several things for us, like validating savings 

where agencies have estimated what their cost savings would be, 

19

and validate that type of methodology. The high-risk policy 

projects, we also ask for independent validation, and that is where 

we did open up everything for IGs and GAO to request all that documentation, as well. And I do think that several of them, I know 

GAO has taken us up on that and they are reviewing that information that the agencies should have available and randomly look at 

to support whether it is really reliable data. 

Senator CARPER. Let me, first of all, thank you for the suggestion, Mr. Powner, and for the spirit that you responded to it, Ms. 

Evans. I think it would be interesting or be welcomed if you would 

let us know what kind of progress is made on this front. Thank 

you. 

Chairman COBURN. Ms. Evans, are Exhibit 300s ever rejected? 

Ms. EVANS. Yes, they are, but——

Chairman COBURN. What is the frequency of that? 

Ms. EVANS. From our perspective, it is very few because of the 

checks and balances that we have put in place, because what we 

really are doing at that point is that we want the agencies to do 

that due diligence going forward, so we really should not get failing 

business cases. 

Chairman COBURN. But let us go back to the earlier question. 

You get 30 percent of them, poor planning that we have now——

Ms. EVANS. Yes. 

Chairman COBURN [continuing]. And we haven’t rejected the Exhibit 300s. Something is wrong in between there. 

Ms. EVANS. Well, because those investments that do come forward that we then release on the Management Watch List are investments that are clearly aligned with the President’s priorities 

that we feel that we do need to go forward with, but do extra due 

diligence on whatever the gaps are that we have identified. But do 

we outright say no to something? Yes, we have done that because 

it is not either aligned with the President’s priorities or agencies 

will come back based on the guidance that we do through our budget process and will withdraw them or cancel them. 

Chairman COBURN. Based on what Mr. Powner said about the 

boards not being constituted properly, some suggestion that some 

of the firms are actually writing the Exhibit 300s rather than the 

agencies, are you aware that happens? 

Ms. EVANS. Sure. Absolutely. That is why——

Chairman COBURN. Do you not see that as a conflict of interest? 

Ms. EVANS. What I also see is that people view, and this will 

support Mr. Powner’s comments, that the Exhibit 300 is like the 

test. This is the test. If I turn in a good term paper, I am going 

to become fully funded. So we recognize that maybe we were driving certain behavior so that an industry is springing up that is 

writing business cases. We run analysis, for example, on a portfolio. This is because we get it all electronic. I ran an analysis this 

past year. We did an analysis to see exactly how many words 

changed in a business case because it is electronic. So we can run 

it through and see how many words actually changed. So knowing 

where the investments are, for example, if they are steady state, 

then we should see more things happening later in the life cycle 

on the latter part of the business case. If they are in the first part, 

20

then you would see big changes in what they have completed in 

their acquisition strategy and where they are now in execution. 

Needless to say, what was happening was we had very few business cases that there were absolutely no changes to, but there are 

sections where, for example, in security where nothing is changed 

but we knew they had a problem. So we know that there is evidence of people just trying, well, this passed last year so I will just 

resubmit it again this year. 

Chairman COBURN. So how do we fix that? How do we incentivize behavior that is based on accuracy and better outcome? 

Ms. EVANS. Well, the way that we did it, and we would welcome 

any comments or additional suggestions that you would have is 

that is why we released and really focused on execution, because 

it is one thing to talk about what you are going to do, but it is another thing to actually be able to deliver results. 

And so through our implementation and oversight of what the 

agencies are doing through earned-value management, which is 

really you are taking actual against planned, so there are 32 different criteria in that——

Chairman COBURN. So it is measurement metrics? 

Ms. EVANS [continuing]. And there is measurement metrics in 

that and it is very sensitive. And so when you start getting those 

reports and you are looking at those, and I personally read those. 

An agency does not get the checkmark to move to green that they 

actually are managing 10 percent of cost schedule and performance 

until we—and we physically go to the agency and we discuss with 

the agency managers, because we know the same weakness that 

Mr. Powner has brought up. Who is actually managing this? Are 

you just producing reports because OMB has asked for reports or 

are you really using this data to make management decisions? 

And so it is one thing to get a really good planning document. 

It is almost like you take a driver’s test. In West Virginia, you have 

to take a driver’s test, but then you actually have to drive before 

they give you the license and it is a 6 months’ difference. It is the 

same type of logic that we apply here. You can get through the first 

hurdle because you wrote a good term paper, but you have to now 

apply that knowledge that you said you have and produce results. 

Chairman COBURN. Good analogy. The problem I have with the 

way we are doing it is we are looking backwards rather than 

incentivizing behavior going forward. I would love for you all to 

think about, and maybe Mr. Powner think about, how do we set 

the system a little differently where we incentivize better behavior 

rather than have to look back? What you are doing is auditing, 

right? 

Ms. EVANS. Yes. 

Chairman COBURN. The fact that there is an audit and an audit 

can be gamed and then you are using the final, where is the performance. But how do we get it to where we have to do less auditing and less control after the fact and incentivize better in the beginning? I don’t expect you to answer that, but I think that is 

where we want to go with this, because if we have management review boards that are not constituted properly, how do we 

incentivize that to change? In other words, not after the fact that 

we come back and look at it——

21

Ms. EVANS. Right. 

Chairman COBURN [continuing]. But how do we get it right the 

first time? From my business experience, it just wasn’t acceptable. 

What we are seeing in this is things that would never be acceptable in a personally-run business or like what Senator Lautenberg 

had. It just wouldn’t be acceptable, the degree of what we are seeing, and I know it is tough to manage that. 

Again, let me go back to the Exhibit 300. The whole purpose for 

that is to put forward a plan that is based accurately, that will be 

a proper investment, whether it be through cost savings or accomplishing a goal. How do we make that tool really be what it should 

be? Let me address that to you, Mr. Powner. How do we make sure 

that every Exhibit 300 is right, is accurate, to the best of the ability it can be, with no question about motives, so that we can make 

a good judgment on it? Everything after that, once that goes 

through, it is all retrospective looking. 

If you look at the Defense Travel System, or, for example, another one that is not on the high-risk list is the Census Bureau. 

I can’t figure out how that isn’t on the high-risk list. That system 

is either gamed—I will reserve my comment. There is no way it 

should not be on the high-risk list. 

Ms. EVANS. Right. 

Chairman COBURN. Senator Carper and I have sent a letter to 

GAO today asking some very specific questions about the Decennial 

Response Integration System, because I think it is a disaster right 

now. The fact that it is not on there tells us we have got a problem 

with the list. 

Ms. EVANS. Yes. 

Chairman COBURN. How do we do that, Mr. Powner? How do we 

make it more effective prospectively rather than have to have the 

threat of a retrospective look? 

Mr. POWNER. A couple of comments. First of all, the Exhibit 300, 

the intent is fine. It is the business case. It puts in place some assurances that there are basic project management capabilities 

there associated with this investment or this project. So that is all 

well and good. I think an opportunity to streamline that over time, 

so it is not a writing exercise where contractors are filling their 

pockets, that should probably be looked at. 

But going back to one of your original questions, what are the 

consequences of submitting an Exhibit 300 that is, one, either inaccurate, or two, that shows that this project isn’t ready to go forward and spend money, there should be real consequences. I think 

Ms. Evans pointed out some of these projects, like TRICARE, we 

have to keep going forward and we have to fund them and we have 

to try to fix them on the fly. But they are not all TRICARE. Using 

the apportionment process and withholding money, that matters, 

and if we did that more, maybe folks would take it a bit more serious. 

Chairman COBURN. OK. Ms. Evans, you mentioned in your opening statement the decision to post Exhibit 300s, I think is very 

good for transparency, and to allow us to actually see those, I think 

will be very helpful. 

I think also the fact that the Congress ought to be aware of the 

high-risk list and ought to be aware of the Management Watch 

22

List. It is our responsibility to oversee that and I think we have 

pretty much had an agreement from your boss that is going to be 

made available to us. Is that your understanding? 

Ms. EVANS. About the Management Watch List and the high-risk 

list? 

Chairman COBURN. Yes. 

Ms. EVANS. Yes, sir. What we will do is we will provide the highrisk list that we have to you guys next week. 

What we would like to do, if it is OK with you, and my boss, is 

on the Management Watch List, what we do is we have a deadline 

on the scorecard of June 30. So we receive them in September and 

we work through the budget process with the agencies and then we 

have a deadline on the scorecard of June 30 where they have to remediate any of the weaknesses or have an adequate plan that 

shows that they are going to remediate the weakness that we have 

identified. If that hasn’t happened by June 30, which obviously the 

date has passed now so we can make the list available, we would 

like at that point to publish what is remaining on the Management 

Watch List so that Congress could then use that going forward in 

their own decisions that they want to make through the appropriations process. 

Chairman COBURN. The problem with that is, hopefully, most of 

the appropriations hearings and everything have already happened 

by that time, and so the decisions to really impact that will be a 

year and a half later. But we will work with you on that. 

Ms. EVANS. OK. 

Chairman COBURN. It is the obligation of the U.S. Congress to 

know what is not working right and to be able to hold oversight 

hearings on specific cases when they are not working right, we can 

be a tool for you. When it is not working right and we have that 

agency here with the Exhibit 300, with the budget and say, what 

went on here? 

We, myself and Senator Carper, have every intent to do that, is 

to help the rest of the agencies understand you are not going to 

skid this thing. We want to fund you. We want you to do what is 

right. We understand that your intent is to do what is right. But 

when it doesn’t work, we want to hold you accountable and for us 

to have the correct oversight and transparency, not just for us, but 

for the American people. 

Senator Carper and I have a bill that is going to go through this 

week, which OMB is backing and we are very thankful for, that is 

going to allow the American people to know where the money went. 

All these contracts are going to be known. Everybody in America 

is going to know who has got the contracts, unless it is a national 

security issue. So that is going to help. 

But the point is, we need to do the specific oversight, and if we 

can’t know where the problem is because we can’t get the list of 

the problems from OMB, then we don’t have the ability to carry out 

our constitutional function, which we consider very seriously on 

this Subcommittee. 

Senator Carper, do you have additional questions? 

Senator CARPER. Yes, just a few, if I could. Again, I think this 

would be probably a question for Mr. Powner. We learned today 

that there are many problems with the oversight of at-risk inforVerDate 0ct 09 2002 09:04 Sep 19, 2007 Jkt 030594 PO 00000 Frm 00026 Fmt 6633 Sfmt 6601 C:\DOCS\30594.TXT SAFFAIRS PsN: PAT
23

mation technology projects. I am just asking your opinion. How 

much in cost overruns do you think we can expect to endure from 

the most at-risk information technology projects that make up the 

$7 billion that we have heard about? 

Mr. POWNER. So to project how much the overrun would likely 

be? I think that would be very difficult to do. I think the—I mean, 

that is tough. We look at a lot of individual projects. There is one 

project we looked at, Rescue 21, a Coast Guard communications 

system that isn’t on the high-risk list that overran $300 million in 

a very short period of time. That is very common. 

Senator CARPER. The overrun was $300 million? 

Mr. POWNER. Three-hundred million. There is a system that we 

have been tracking for years, environmental satellite system, a 

joint acquisition between DOD, NOAA, and NASA called NPOESS. 

It basically provides weather forecasting information. It is important for hurricane tracking, very important going forward. That 

project has gone over a 3-year period from $6 billion life cycle cost 

to $12 billion. OK, that is not on the list. So you could look at that. 

Senator CARPER. Why not? 

Mr. POWNER. Well, that is one of our examples where we think 

the high-risk list is understated. So those are two examples that 

we pointed out in our reports, Rescue 21 at the Coast Guard and 

NPOESS——

Senator CARPER. Let me stop you for just a second and just ask 

for something. Why do you suppose those are not on the list? 

Ms. EVANS. And I agree with Mr. Powner that they should be on 

the list. What agencies have a tendency to do, and the way that 

we are measuring some of these things, which sometimes—and I 

agree that we need to improve this—is that agencies will have a 

tendency to rebaseline a project or——

Senator CARPER. When you say rebaseline, give me that in plain 

English. 

Ms. EVANS. What they do is, for example, if GAO is tracking the 

same project by a different name and it is going on for 10 years, 

agencies will have a tendency when a project is deemed a failure 

or needs to be redone, will say, OK, after 5 years, this project 

hasn’t been successful. So they will rebaseline it and——

Senator CARPER. What is rebaseline? 

Ms. EVANS. They will zero it out and they will count it as a sunk 

cost and they will give us a new Exhibit 300, so it will show as 

something new. So I am going to give you a quick example of how 

this would work. 

Senator CARPER. OK. 

Ms. EVANS. So we track by agencies, like number of business 

cases that they will submit. So last year we saw a big drop. You 

can see it right here. There was 1,087 major investments that came 

in and it dropped to 857. That is a big flag for me, going, what has 

happened here? Did people actually finish projects and stop? Because the dollar amount is the same. So something has happened 

in the way that these agencies are putting together the investments and putting together the business cases. 

We went through agency by agency. So I have one specific agency——

Senator CARPER. That is a lot to go through. 

24

Ms. EVANS. Yes, it is, but, that would be the question that I 

would figure my boss would ask me. What is the difference? What 

is the drop? Why do you see this change? Because we are collecting 

all these numbers now, we should be able to analyze them. 

So I looked at who were the biggest deviants that happened here 

and we had one agency that in fiscal year 2006, they had 51 business cases. In fiscal year 2007, they went to 34. So I sent them an 

e-mail. You should be able to answer this question fairly quickly 

and say what happened to the other 17. Because when we look at 

it, there are several of them that had brand new names. But when 

you look at how the dollars are broken out, there is development, 

modernization, enhancement, which is supposed to be new dollars, 

and steady state, which is supposed to be existing systems. 

So I asked them, I said, what happened to these 17 business 

cases? You should be able to tell me. I want to know by the end 

of the day, because that gets to your contractor issue. You should 

be able to answer this question if you are managing it. So the agency did come back and say, OK, we have recategorized this. Twelve 

of them went into what we have as the single business case for office automation. Four are actually brand new. We actually completed one, and so that is off the list, and we restructured. So that 

is the rebaselining. We restructured four of those and we canceled 

one. So when you look at it, they redistributed their portfolio in a 

way that they thought that they could better manage it. 

But we do go agency by agency to ask them what they are doing 

with those so that you are not kind of flying under the radar screen 

or that you are just doing certain things. So in these particular 

cases, what will happen is GAO will track it through the entire requirement. It could take 25 years on some of these things. What 

we are tracking is if they ended and then they start a new one because they said that they have done all of these different things, 

it becomes a new investment for us. So there is a difference between the way GAO is tracking them and the way that we get the 

information from the agency. 

Senator CARPER. All right. Thank you. 

Mr. Powner, I interrupted you in order to ask that question of 

Ms. Evans. Do you want to pick up your train of thought? 

Mr. POWNER. Well, just to round out, I think that is a very important point that Ms. Evans made on the rebaseline. Basically 

what rebaselining is is you start over. When we track in the President’s Management Agenda, that is a high bar, to OMB’s credit. To 

have all major projects within 10 percent of cost, schedule, and performance, used earned value techniques, that is a very high bar. The concern would be what some agencies do is—our cost is $200 million on this. We rebaseline it. We bump it up to $300 million. 

So now we are within 10 percent. It is kind of a ‘‘get out of jail 

free’’ card, just because they moved the total up that we are measuring from. That is what rebaselining is all about, so it is very important to look at these numbers to make sure. 

And I am sure if we looked in detail at some of these projects 

that aren’t on the high-risk lists at DOD and other places, it is 

probably due to rebaselining. So it is something we are all aware 

of and we will keep our eye out for. 

Chairman COBURN. Do you have a rebaseline list that you follow? 

25

Ms. EVANS. No, I don’t maintain a rebaseline list. 

Chairman COBURN. Should we? I mean, that is really gaming the 

system. 

Ms. EVANS. Well, we can. And what we do—some of the agencies—the term relentless has been associated with my name—— 

[Laughter.] 

Chairman COBURN. I like that. 

Ms. EVANS [continuing]. That I have been pretty stringent about 

what you can and what you can’t do on some of these major investments. But we do recognize that at a certain point, you have to be 

able to produce an audit trail so that GAO can track the history. 

But at a certain point, you do have to, like, start to ensure that 

they actually do have management practices, because some of these 

projects were so bad that if we kept all that information in there, 

they would never be able to show that they actually have the right 

progress and the right management practices in place and that 

they are now managing that effort to 10 percent of cost, schedule, 

and performance. But that is a very conscious decision and agreedupon point between OMB and the agency before we allow an agency to rebaseline. 

Chairman COBURN. My point would be is that ought to be a policy and a reporting policy inside OMB, because no matter who the 

Administration is, you want to be able to track that. That ought 

to be something that happens all the time so that we know, as a 

performance indicator. That is just a suggestion. 

Ms. Evans, is GAO reporting their examples in their report in 

June about the projects that weren’t on the high-risk list or on the 

watch list. The ones they reported, are they now on the list? 

Ms. EVANS. Yes. Actually, we have gone back very specifically 

and asked. I am very intimately aware of the Census issue, sir. 

Chairman COBURN. I am announcing today I am going to send 

a letter to every agency asking every IT project that they have and 

where they are and where they are in terms of cost overrun. We 

are going to look at those. We are going to help you. 

Ms. EVANS. OK. 

Chairman COBURN. We are going to expect them to respond and 

also list by vendor so that we can look at it. I am convinced that 

you all are trying to do the right thing, and I think Senator Carper 

is, too, but I think we need more oversight and I certainly believe 

that we need the recommendations that we saw in the GAO report 

instituted as best as we can, and maybe some of the new ones that 

Mr. Powner brought forward today. 

We have great IT companies in this country, but we don’t want 

them to get to be lazy and we want to hold them accountable as 

well as the agencies accountable. My hope is that in the next couple of months, we will single out two or three projects and look at 

those to see why they are not meeting what they need to do. We 

have done it on the Defense Travel System. I have tried to win. I 

have lost on that. The vendor is stronger than I am on the floor 

and we have spent $500 to $600 million on something we could 

have gotten for $30 million, and when they redo all the computers 

in the Pentagon, DTS isn’t going to work. They are doing a good 

job of trying to do that, but it is a half-a-billion dollars of our kids’ 

money that we have thrown out the door. 

26

We can’t have any more of those. We just have to do a better job. 

I am talking about us. Senator Carper and I are committed to do 

the oversight that is necessary and we want to help you. We don’t 

want to be your adversaries. We want to be your supporters and 

we want to shine sunshine on areas that are weaknesses and allow 

good ideas to filter up to hold people accountable. 

Anything further? 

Senator CARPER. Just to follow up on what the Chairman said, 

just in terms of reaching out to all the agencies and asking them 

to come back with the information that he has mentioned, sometimes I say to my staff, help me to be a guided missile as opposed 

to being an unguided missile. If you were to give some friendly advice and constructive advice as to how we might craft the kind of 

inquiry used just to describe it, do you have any thoughts now as 

to how it would be most constructive and most helpful to the work 

that you are trying to do, that would be welcome. If you don’t have 

anything right off the bat to share with us, maybe you could within 

the next 24 or 48 hours. That would be, I think, helpful to us. 

Ms. EVANS. OK. 

Chairman COBURN. Thank you all very much for your testimony 

and your cooperative nature. We look forward to working——

Senator CARPER. Mr. Chairman, could I interrupt just one quick 

minute? 

Chairman COBURN. Yes, sure. 

Senator CARPER. Ms. Evans indicated that one of the adjectives 

that she used to describe her is relentless, and I heard you talking 

about the Department of Defense Travel System and how you were 

outmanned on the floor. One of the adjectives that is used to describe the Chairman, and I hope me, is relentless, as well, and this 

is a good one to be relentless on. Thank you. 

Chairman COBURN. Thank you all for being here. Thanks for 

your effort, and thank you for the service to our country. 

Ms. EVANS. Thank you. 

Chairman COBURN. The hearing is adjourned. 

[Whereupon, at 10:50 a.m., the Subcommittee was adjourned.] 

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