Federal Real Property: DHS and GSA Need to Strengthen the Management of DHS Headquarters Consolidation
Published: 2014-09-19T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: This testimony summarizes the information contained in GAO's September 2014 report, entitled: Federal Real Property: DHS and GSA Need to Strengthen the Management of DHS Headquarters Consolidation ( GAO-14-648 ).
section_title: What GAO Found
paragraphs: The Department of Homeland Security (DHS) and General Services Administration (GSA) planning for the DHS headquarters consolidation does not fully conform with leading capital decision-making practices intended to help agencies effectively plan and procure assets. DHS and GSA officials reported that they have taken some initial actions that may facilitate consolidation planning in a manner consistent with leading practices, such as adopting recent workplace standards at the department level and assessing DHS's leasing portfolio. For example, DHS has an overall goal of reducing the square footage allotted per employee across DHS in accordance with current workplace standards. Officials acknowledged that this could allow more staff to occupy less space than when the campus was initially planned in 2009. DHS and GSA officials also reported analyzing different leasing options that could affect consolidation efforts. However, consolidation plans, which were finalized between 2006 and 2009, have not been updated to reflect these changes. According to DHS and GSA officials, the funding gap between what was requested and what was received from fiscal years 2009 through 2014, was over $1.6 billion. According to these officials, this gap has escalated estimated costs by over $1 billion--from $3.3 billion to the current $4.5 billion--and delayed scheduled completion by over 10 years, from an original completion date of 2015 to the current estimate of 2026. However, DHS and GSA have not conducted a comprehensive assessment of current needs, identified capability gaps, or evaluated and prioritized alternatives to help them adapt consolidation plans to changing conditions and address funding issues as reflected in leading practices. DHS and GSA reported that they have begun to work together to consider changes to their plans, but as of August 2014, they had not announced when new plans will be issued and whether they would fully conform to leading capital decision-making practices to help plan project implementation.
DHS and GSA did not follow relevant GSA guidance and GAO's leading practices when developing the cost and schedule estimates for the St. Elizabeths project, and the estimates are unreliable. For example, GAO found that the 2013 cost estimate--the most recent available--does not include a life-cycle cost analysis of the project, including the cost of operations and maintenance; was not regularly updated to reflect significant program changes, including actual costs; and does not include an independent estimate to help track the budget, as required by GSA guidance. Also, the 2008 and 2013 schedule estimates do not include all activities for the government and its contractors needed to accomplish project objectives. GAO's comparison of the cost and schedule estimates with leading practices identified the same concerns, as well as others. For example, a sensitivity analysis has not been performed to assess the reasonableness of the cost estimate. For the 2008 and 2013 schedule estimates, resources (such as labor and materials) are not accounted for and a risk assessment has not been conducted to predict a level of confidence in the project's completion date. Because DHS and GSA project cost and schedule estimates inform Congress's funding decisions and affect the agencies' abilities to effectively allocate resources, there is a risk that funding decisions and resource allocations could be made based on information that is not reliable or is out of date.

section_title: Letter
paragraphs: I am pleased to be here today to discuss our report, which is being  released today, on the Department of Homeland Security (DHS)  headquarters consolidation project at St. Elizabeths Campus in  Washington, D.C. The $4.5 billion construction project, managed by DHS  and the General Services Administration (GSA), is the centerpiece of  DHS’s larger effort to manage and consolidate its workforce of over  20,000 in the National Capital Region (NCR). As conceived in 2006, the  federally owned St. Elizabeths site was designed to consolidate DHS’s  executive leadership, operational management, and other personnel at  one secure location rather than at multiple locations throughout the  Washington, D.C., metropolitan area. Specifically, DHS envisioned  moving about 14,000 staff to the new headquarters facility and housing its  remaining personnel in other consolidated spaces across the region. With  a current projected completion date of 2026, the St. Elizabeths project is  intended to provide DHS a secure facility to allow for more efficient  incident management response and command-and-control operations,  and also provide long-term cost savings by reducing reliance on leased  space.
My testimony is based on and summarizes the key findings of our report  issued today, on DHS and GSA efforts to manage the DHS headquarter  consolidation project. My statement will address the extent to which DHS  and GSA have (1) developed DHS headquarters consolidation plans in  accordance with leading capital decision-making practices and (2)  estimated the costs and schedules of the DHS headquarters  consolidation project at St. Elizabeths in a manner that is consistent with  leading practices. To do our work we compared DHS and GSA capital  planning efforts against applicable leading practices in capital decision  making and interviewed DHS and GSA officials responsible for the  planning and management of the DHS headquarters consolidation. We  also compared DHS and GSA documents on the estimated cost and  schedule for the St. Elizabeths project with GAO cost- and schedule- estimating leading practices and relevant GSA guidance. More detailed  information on the scope and methodology can be found in our published  report. The work upon which this statement is based was conducted in  accordance with generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: The Homeland Security Act of 2002 combined 22 federal agencies  specializing in various missions under DHS. Numerous departmental  offices and seven key operating components are headquartered in the  NCR.components were not physically consolidated, but instead were dispersed  across the NCR in accordance with their history. As of July 2014, DHS  employees were located in 94 buildings and 50 locations, accounting for  approximately 9 million gross square feet of government-owned and - leased office space.
When DHS was formed, the headquarters functions of its various  DHS began planning the consolidation of its headquarters in 2005.  According to DHS, increased colocation and consolidation were critical to  (1) improve mission effectiveness, (2) create a unified DHS organization,  (3) increase organizational efficiency, (4) size the real estate portfolio  accurately to fit the mission of DHS, and (5) reduce real estate occupancy  costs. Between 2006 and 2009, DHS and GSA developed a number of  capital planning documents to guide the DHS headquarters consolidation  process. For example, DHS’s National Capital Region Housing Master  Plan identified a requirement for approximately 4.5 million square feet of  office space on a secure campus. In addition, DHS’s 2007 Consolidated  Headquarters Collocation Plan summarized component functional  requirements and the projected number of seats needed on- and off- campus for NCR headquarters personnel.
From fiscal year 2006 through fiscal year 2014, the St. Elizabeths  consolidation project had received $494.8 million through DHS  appropriations and $1.1 billion through GSA appropriations, for a total of  over $1.5 billion. However, from fiscal year 2009—when construction  began—through the time of the fiscal year 2014 appropriation, the gap  between requested and received funding was over $1.6 billion. According  to DHS and GSA officials, this gap created cost escalations of over $1  billion and schedule delays of over 10 years.
section_title: DHS and GSA Consolidation Plans Did Not Fully Conform with Leading Capital Decision- Making Practices
paragraphs: In our September 2014 report, we found that DHS and GSA planning for  the DHS headquarters consolidation did not fully conform with leading  capital decision-making practices intended to help agencies effectively  plan and procure assets. Specifically, we found that DHS and GSA had  not conducted a comprehensive assessment of current needs, identified  capability gaps, or evaluated and prioritized alternatives that would help  officials adapt consolidation plans to changing conditions and address  funding issues as reflected in leading practices. DHS and GSA officials  reported that they had taken some initial actions that may facilitate  consolidation planning in a manner consistent with leading practices. For  example, DHS has an overall goal of reducing the square footage allotted  per employee across the department in accordance with current  workplace standards, such as standards for telework and hoteling.and GSA officials acknowledged that new workplace standards could  create a number of new development options to consider, as the new  standards would allow for more staff to occupy the current space at St.  Elizabeths than previously anticipated. DHS and GSA officials also  reported analyzing different leasing options that could affect consolidation  efforts. However, we found that the consolidation plans, which were  finalized between 2006 and 2009, had not been updated to reflect these  actions.
GAO/AIMD-99-32 and OMB Capital Programming Guide. our September 2014 report, we recommended that DHS and GSA  conduct (1) a comprehensive needs assessment and gap analysis of  current and needed capabilities that takes into consideration changing  conditions, and (2) an alternatives analysis that identifies the costs and  benefits of leasing and construction alternatives for the remainder of the  project and prioritizes options to account for funding instability. DHS and  GSA concurred with these recommendations and stated that their  forthcoming draft St. Elizabeths Enhanced Consolidation Plan would  contain these analyses.
Finally, we found that DHS had not consistently applied its major  acquisition guidance for reviewing and approving the headquarters  consolidation project. Specifically, we found that DHS had guidelines in  place to provide senior management the opportunity to review and  approve its major projects, but DHS had not consistently applied these  guidelines to its efforts to work with GSA to plan and implement  headquarters consolidation. DHS had designated the headquarters  consolidation project as a major acquisition in some years but not in  others. In 2010 and 2011, DHS identified the headquarters consolidation  project as a major acquisition and included the project on DHS’s Major  Acquisitions Oversight List. Thus, the project was subject to the  oversight and management policies and procedures established in DHS  major acquisition guidance; however, the project did not comply with  major acquisition requirements as outlined by DHS guidelines. For  example, we found that the project had not produced any of the required  key acquisition documents requiring department-level approval, such as  life-cycle cost estimates and an acquisition program baseline, among  others. In 2012, the project as a whole was dropped from the list. In 2013  and 2014, DHS included the information technology (IT) acquisition  portion of the project on the list, but not the entire project. DHS officials  explained that they considered the St. Elizabeths project to be more of a  GSA acquisition than a DHS acquisition because GSA owns the site and  the majority of building construction is funded through GSA  appropriations. We recognize that GSA has responsibility for managing  contracts associated with the headquarters consolidation project.  However, a variety of factors, including the overall cost, scope, and  visibility of the project, as well as the overall importance of the project in  the context of DHS’s mission, make the consolidation project a viable  candidate for consideration as a major acquisition. By not consistently  applying this review process to headquarters consolidation, we concluded  that DHS management risked losing insight into the progress of the St.  Elizabeths project, as well as how the project fits in with its overall  acquisitions portfolio. Thus, in our September 2014 report, we  recommended that the Secretary of Homeland Security designate the  headquarters consolidation program a major acquisition, consistent with  DHS acquisition policy, and apply DHS acquisition policy requirements.  DHS concurred with the recommendation.
section_title: DHS and GSA Cost and Schedule Estimates for the St. Elizabeths Project Did Not Conform with Leading Practices
paragraphs: In our September 2014 report, we found that DHS and GSA cost and  schedule estimates for the headquarters consolidation project at St.  Elizabeths did not conform or only minimally or partially conformed with  leading estimating practices, and were therefore unreliable.  Furthermore, we found that in some areas, the cost and schedule  estimates did not fully conform with GSA guidance relevant to developing  estimates.
subsections: section_title: Cost Estimates
paragraphs: We found that DHS and GSA cost estimates for the headquarters  consolidation project at St. Elizabeths did not reflect leading practices,  which rendered the estimates unreliable. For example, we found that the  2013 cost estimate—the most recent available—did not include (1) a life- cycle cost analysis of the project, including the cost of repair, operations,  and maintenance; (2) was not regularly updated to reflect significant  changes to the program including actual costs; and (3) did not include an  independent estimate to assist in tracking the budget. In addition, a  sensitivity analysis had not been performed to assess the reasonableness  of the cost estimate. We have previously reported that a reliable cost  estimate is critical to the success of any program. Specifically, we have  found that such an estimate provides the basis for informed investment  decision making, realistic budget formulation and program resourcing,  meaningful progress measurement, proactive course correction when  warranted, and accountability for results. Accordingly, we concluded that  DHS and GSA would benefit from maintaining current and well- documented estimates of project costs at St. Elizabeths—even if project  funding is not fully secured—and these estimates should encompass the  full life cycle of the program and be independently assessed.
section_title: Schedule Estimates
paragraphs: In addition, we found that the 2008 and 2013 schedule estimates did not  include all activities for both the government and its contractors  necessary to accomplish the project’s objectives and did not include  schedule baseline documents to help measure performance as reflected  in leading practices and GSA guidance. For the 2008 schedule estimate,  we also found that resources (such as labor, materials, and equipment)  were not accounted for and a risk assessment had not been conducted to  predict a level of confidence in the project’s completion date. In addition,  we found the 2013 schedule estimate was unreliable because, among  other things, it was incomplete in that it did not provide details needed to  understand the sequence of events, including work to be performed in  fiscal years 2014 and 2015.
We concluded that developing cost and schedule estimates consistent  with leading practices could promote greater transparency and provide  decision makers needed information about the St. Elizabeths project and  the larger DHS headquarters consolidation effort. However, in  commenting on our analysis of St. Elizabeths cost and schedule  estimates, DHS and GSA officials said that it would be difficult or  impossible to create reliable estimates that encompass the scope of the  entire St. Elizabeths project. Officials said that given the complex,  multiphase nature of the overall development effort, specific estimates are  created for smaller individual projects, but not for the campus project as a  whole. Therefore, in their view, leading estimating practices and GSA  guidance cannot reasonably be applied to the high-level projections  developed for the total cost and completion date of the entire St.  Elizabeths project. GSA stated that the higher-level, milestone schedule  currently being used to manage the program is more flexible than the  detailed schedule GAO proposes, and has proven effective even with the  highly variable funding provided for the project.
We found in our September 2014 report, however, that this high-level  schedule was not sufficiently defined to effectively manage the program.  For example, our review showed that the schedule did not contain  detailed schedule activities that include current government, contractor,  and applicable subcontractor effort. Specifically, the activities shown in  the schedule only address high-level agency square footage segments,  security, utilities, landscape, and road improvements. While we  understand the need to keep future effort contained in high-level planning  packages, in accordance with leading practices, near-term work occurring  in fiscal years 2014 and 2015 should have more detailed information. We  recognize the challenges of developing reliable cost and schedule  estimates for a large-scale, multiphase project like St. Elizabeths,  particularly given its unstable funding history and that incorporating  GAO’s cost- and schedule-estimating leading practices may involve  additional costs. However, unless DHS and GSA invest in these  practices, Congress risks making funding decisions and DHS and GSA  management risk making resource allocation decisions without the benefit  that a robust analysis of levels of risk, uncertainty, and confidence  provides. As a result, in our September 2014 report, we recommended  that, after revising the DHS headquarters consolidation plans, DHS and  GSA develop revised cost and schedule estimates for the remaining  portions of the consolidation project that conform to GSA guidance and  leading practices for cost and schedule estimation, including an  independent evaluation of the estimates. DHS and GSA concurred with  the recommendation.
In our September 2014 report, we also stated that Congress should  consider making future funding for the St. Elizabeths project contingent  upon DHS and GSA developing a revised headquarters consolidation  plan, for the remainder of the project, that conforms with leading practices  and that (1) recognizes changes in workplace standards, (2) identifies  which components are to be colocated at St. Elizabeths and in leased  and owned space throughout the NCR, and (3) develops and provides  reliable cost and schedule estimates.
Mr. Chairman and members of the Subcommittee, this concludes my  prepared statement. I look forward to responding to any questions that  you may have.
section_title: GAO Contacts and Staff Acknowledgments
paragraphs: For questions about this statement, please contact David C. Maurer,  Director, Homeland Security and Justice Issues, (202) 512-9627 or  maurerd@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement. Individuals making key contributions to this statement include  David J. Wise (Director), Adam Hoffman (Assistant Director), John Mortin  (Assistant Director), Karen Richey (Assistant Director), Juana Collymore,  Daniel Hoy, Tracey King, Abishek Krupanand, Jennifer Leotta, David  Lutter, and Jan Montgomery.
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