Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue
Published: 2011-05-25T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: This testimony discusses our first annual report to Congress responding to the statutory requirement that GAO identify federal programs, agencies, offices, and initiatives--either within departments or governmentwide--that have duplicative goals or activities. This work can help inform government policymakers as they address the rapidly building fiscal pressures facing our national government. Our simulations of the federal government's fiscal outlook show continually increasing levels of debt that are unsustainable over time, absent changes in the federal government's current fiscal policies. Since the end of the recent recession, the gross domestic product has grown slowly, and unemployment has remained at a high level. While the economy is still recovering and in need of careful attention, widespread agreement exists on the need to look not only at the near term but also at steps that begin to change the long-term fiscal path as soon as possible. With the passage of time, the window to address the fiscal challenge narrows and the magnitude of the required changes grows. This testimony is based on our March 2011 report and provides an overview of federal programs or functional areas where unnecessary duplication, overlap, or fragmentation exists and where there are other opportunities for potential cost savings or enhanced revenues. In that report, we identified 81 areas for consideration--34 areas of potential duplication, overlap, or fragmentation and 47 additional areas describing other opportunities for agencies or Congress to consider taking action that could either reduce the cost of government operations or enhance revenue collections for the Treasury. The 81 areas span a range of federal government missions such as agriculture, defense, economic development, energy, general government, health, homeland security, international affairs, and social services. Within and across these missions, the report touches on hundreds of federal programs, affecting virtually all major federal departments and agencies. The testimony highlights (1) some examples from our March report; (2) needed improvements in the federal government's management and investment in information technology (IT); and (3) opportunities for achieving significant cost savings through improvements in government contracting.
section_title: What GAO Found
paragraphs: A few examples of duplication: (1) Teacher quality programs: In fiscal year 2009, the federal government spent over $4 billion specifically to improve the quality of our nation's 3 million teachers through numerous programs across the government. Federal efforts to improve teacher quality have led to the creation and expansion of a variety of programs across the federal government, however, there is no governmentwide strategy to minimize fragmentation, overlap, or duplication among these many programs. (2) Military health system: The Department of Defense's (DOD) Military Health System (MHS) costs have more than doubled from $19 billion in fiscal year 2001 to $49 billion in 2010 and are expected to increase to over $62 billion by 2015. The responsibilities and authorities for the MHS are distributed among several organizations within DOD with no central command authority or single entity accountable for minimizing costs and achieving efficiencies. Under the MHS's current command structure, the Office of the Assistant Secretary of Defense for Health Affairs, the Army, the Navy, and the Air Force each has its own headquarters and associated support functions. (3) Employment and training programs: In fiscal year 2009, 47 federally funded employment and training programs spent about $18 billion to provide services, such as job search and job counseling, to program participants. Most of these programs are administered by the Departments of Labor, Education, and Health and Human Services (HHS). Forty-four of the 47 programs we identified, including those with broader missions such as multipurpose block grants, overlap with at least one other program in that they provide at least one similar service to a similar population. (4) Surface transportation: The Department of Transportation (DOT) currently administers scores of surface transportation programs costing over $58 billion annually. The current federal approach to surface transportation was established in 1956 to build the Interstate Highway System, but has not evolved to reflect current national priorities and concerns. Over the years, in response to changing transportation, environmental, and societal goals, federal surface transportation programs grew in number and complexity to encompass broader goals, more programs, and a variety of program approaches and grant structures. (5) DOD-VA Electronic Health Record Systems: Although they have identified many common health care business needs, DOD and the Department of Veterans Affairs (VA) have spent large sums of money to develop and operate separate electronic health record systems that each department relies on to create and manage patient health information. The federal government's expenditures on IT could be reduced by, among other things, consolidating federal data centers, improving investment management and oversight, and using enterprise architectures as a tool for organizational transformation. Each year the federal government spends billions of dollars on IT investments; federal spending on IT has risen to an estimated $79 billion for fiscal year 2011. In recent years, as federal agencies modernized their operations, put more of their services online, and increased their information security profiles they have demanded more computing power and data storage resources. The federal government spent about $535 billion in fiscal year 2010 acquiring the goods and services agencies need to carry out their missions. Areas where improvements could be made to realize significant savings: (1) minimizing unnecessary duplication among interagency contracts, (2) achieving more competition in the award of contracts, (3) using award fees more appropriately to promote improved contractor performance, and (4) leveraging the government's vast buying power through expanded use of strategic sourcing.

section_title: Letter
paragraphs: We appreciate the opportunity to discuss our first annual report to  Congress responding to the statutory requirement that GAO identify  federal programs, agencies, offices, and initiatives—either within  departments or governmentwide—that have duplicative goals or  activities. This work can help inform government policymakers as they  address the rapidly building fiscal pressures facing our national  government. Our simulations of the federal government’s fiscal outlook  show continually increasing levels of debt that are unsustainable over  time, absent changes in the federal government’s current fiscal policies.  Since the end of the recent recession, the gross domestic product has  grown slowly, and unemployment has remained at a high level. While the  economy is still recovering and in need of careful attention, widespread  agreement exists on the need to look not only at the near term but also at  steps that begin to change the long-term fiscal path as soon as possible.  With the passage of time, the window to address the fiscal challenge  narrows and the magnitude of the required changes grows.
My testimony today is based on our March 2011 report and provides an  overview of federal programs or functional areas where unnecessary  duplication, overlap, or fragmentation exists and where there are other  opportunities for potential cost savings or enhanced revenues. In that  report, we identified 81 areas for consideration—34 areas of potential  duplication, overlap, or fragmentation (see app. I) and 47 additional areas  describing other opportunities for agencies or Congress to consider taking  action that could either reduce the cost of government operations or  enhance revenue collections for the Treasury (see app. II). The 81 areas  span a range of federal government missions such as agriculture, defense,  economic development, energy, general government, health, homeland  security, international affairs, and social services. Within and across these  missions, the report touches on hundreds of federal programs, affecting  virtually all major federal departments and agencies. My testimony today  highlights (1) some examples from our March report; (2) needed  improvements in the federal government’s management and investment in  information technology (IT); and (3) opportunities for achieving  significant cost savings through improvements in government contracting.
The issues raised in the report were drawn from our prior and ongoing  work. This statement is based substantially upon our March report, which  was conducted in accordance with generally accepted government  auditing standards or with GAO’s quality assurance framework, as  appropriate.
subsections: section_title: Overlap and Fragmentation Can Indicate Unnecessary Duplication
paragraphs: Overlap and fragmentation among government programs or activities can  be harbingers of unnecessary duplication. Reducing or eliminating  duplication, overlap, or fragmentation could potentially save billions of tax  dollars annually and help agencies provide more efficient and effective  services. These actions, however, will require some difficult decisions and  sustained attention by the administration and Congress. Many of the issues  we identified concern activities that are contained within single  departments or agencies. In those cases, agency officials can generally  achieve cost savings or other benefits by implementing existing GAO  recommendations or by undertaking new actions suggested in our March  report. However, a number of issues we have identified span multiple  organizations and therefore may require higher-level attention by the  executive branch, enhanced congressional oversight, or legislative action.
A few examples from our March report follow.
Teacher quality programs: In fiscal year 2009, the federal government  spent over $4 billion specifically to improve the quality of our nation’s 3  million teachers through numerous programs across the government.  Federal efforts to improve teacher quality have led to the creation and  expansion of a variety of programs across the federal government,  however, there is no governmentwide strategy to minimize fragmentation,  overlap, or duplication among these many programs. Specifically, we  identified 82 distinct programs designed to help improve teacher quality,  either as a primary purpose or as an allowable activity, administered  across 10 federal agencies. The proliferation of programs has resulted in  fragmentation that can frustrate agency efforts to administer programs in a  comprehensive manner, limit the ability to determine which programs are  most cost effective, and ultimately increase program costs.
Department of Education (Education) officials believe that federal  programs have failed to make significant progress in helping states close  achievement gaps between schools serving students from different  socioeconomic backgrounds, because in part, federal programs that focus  on teaching and learning of specific subjects are too fragmented to help  state and district officials strengthen instruction and increase student  achievement in a comprehensive manner. Education has established  working groups to help develop more effective collaboration across  Education offices, and has reached out to other agencies to develop a  framework for sharing information on some teacher quality activities, but  it has noted that coordination efforts do not always prove useful and  cannot fully eliminate barriers to program alignment.
Congress could help eliminate some of these barriers through legislation,  particularly through the pending reauthorization of the Elementary and  Secondary Education Act of 1965 and other key education bills.  Specifically, to minimize any wasteful fragmentation and overlap among  teacher quality programs, Congress may choose either to eliminate  programs that are too small to evaluate cost effectively or to combine  programs serving similar target groups into a larger program. Education  has proposed combining 38 programs into 11 programs in its  reauthorization proposal, which could allow the agency to dedicate a  higher portion of its administrative resources to monitoring programs for  results and providing technical assistance.
Military health system: The Department of Defense’s (DOD) Military  Health System (MHS) costs have more than doubled from $19 billion in  fiscal year 2001 to $49 billion in 2010 and are expected to increase to over  $62 billion by 2015. The responsibilities and authorities for the MHS are  distributed among several organizations within DOD with no central  command authority or single entity accountable for minimizing costs and  achieving efficiencies. Under the MHS’s current command structure, the  Office of the Assistant Secretary of Defense for Health Affairs, the Army,  the Navy, and the Air Force each has its own headquarters and associated  support functions.
DOD has taken limited actions to date to consolidate certain common  administrative, management, and clinical functions within its MHS. To  reduce duplication in its command structure and eliminate redundant  processes that add to growing defense health care costs, DOD could take  action to further assess alternatives for restructuring the governance  structure of the military health system. In 2006, if DOD and the services  had chosen to implement one of the reorganization alternatives studied by  a DOD working group, a May 2006 report by the Center for Naval Analyses  showed that DOD could have achieved significant savings. Our adjustment  of those savings from 2005 into 2010 dollars indicates those savings could  range from $281 million to $460 million annually, depending on the  alternative chosen and the numbers of military, civilian, and contractor  positions eliminated. The Under Secretary of Defense for Personnel and  Readiness has recently established a new position to oversee DOD’s  military healthcare reform efforts.
Employment and training programs: In fiscal year 2009, 47 federally  funded employment and training programs spent about $18 billion to  provide services, such as job search and job counseling, to program  participants. Most of these programs are administered by the Departments  of Labor, Education, and Health and Human Services (HHS). Forty-four of  the 47 programs we identified, including those with broader missions such  as multipurpose block grants, overlap with at least one other program in  that they provide at least one similar service to a similar population. As we  reported in January 2011, nearly all 47 programs track multiple outcome  measures, but only 5 programs have had an impact study completed since  2004 to assess whether outcomes resulted from the program and not some  other cause. We examined potential duplication among three selected  large programs—HHS’s Temporary Assistance for Needy Families (TANF)  and the Department of Labor’s Employment Service, and Workforce  Investment Act (WIA) Adult programs—and found they provide some of  the same services to the same population through separate administrative  structures.
Colocating services and consolidating administrative structures may  increase efficiencies and reduce costs, but implementation can be  challenging. Some states have colocated TANF employment and training  services in one-stop centers where Employment Service and WIA Adult  services are provided. An obstacle to further progress in achieving greater  administrative efficiencies is that little information is available about the  strategies and results of such initiatives. In addition, little is known about  the incentives that states and localities have to undertake such initiatives  and whether additional incentives are needed.
To facilitate further progress by states and localities in increasing  administrative efficiencies in employment and training programs, we  recommended in 2011 that the Secretaries of Labor and HHS work  together to develop and disseminate information that could inform such  efforts. As part of this effort, Labor and HHS should examine the  incentives for states and localities to undertake such initiatives and, as  warranted, identify options for increasing such incentives. Labor and HHS  agreed they should develop and disseminate this information. HHS noted  that it does not have the legal authority to mandate increased TANF-WIA  coordination or create incentives for such efforts. As part of its proposed  changes to the Workforce Investment Act, the Administration proposes  consolidating nine programs into three. In addition, the budget proposal  would transfer the Senior Community Service Employment Program from  Labor to HHS. Sustained oversight by Congress could also help ensure  progress is realized.
Surface transportation: The Department of Transportation (DOT)  currently administers scores of surface transportation programs costing  over $58 billion annually. The current federal approach to surface  transportation was established in 1956 to build the Interstate Highway  System, but has not evolved to reflect current national priorities and  concerns. Over the years, in response to changing transportation,  environmental, and societal goals, federal surface transportation programs  grew in number and complexity to encompass broader goals, more  programs, and a variety of program approaches and grant structures. This  variety of approaches and structures did not result from a specific  rationale or plan, but rather an agglomeration of policies and programs  established over half a century without a well-defined overall vision of the  national interest and federal role in our surface transportation system.  This has resulted in a fragmented approach as five DOT agencies with  6,000 employees administer over 100 separate surface transportation  programs with separate funding streams for highways, transit, rail, and  safety functions. This fragmented approach impedes effective decision  making and limits the ability of decision makers to devise comprehensive  solutions to complex challenges.
A fundamental re-examination and reform of the nation’s surface  transportation policies is needed. Since 2004, we have made several  recommendations and matters for congressional consideration to address  the need for a more goal-oriented approach to surface transportation,  introduce greater performance and accountability for results, and break  down modal stovepipes. The President’s fiscal year 2012 budget proposes  to consolidate 55 highway programs into 5 core programs. Congressional  reauthorization of surface transportation programs presents an  opportunity to address our recommendations and matters for  congressional consideration that have not been implemented in large part  because the current multiyear authorization for surface transportation  programs expired in 2009, and existing programs have been funded since  then through temporary extensions.
DOD-VA Electronic Health Record Systems: Although they have identified  many common health care business needs, DOD and the Department of  Veterans Affairs (VA) have spent large sums of money to develop and  operate separate electronic health record systems that each department  relies on to create and manage patient health information. Moreover, the  results of a 2008 study conducted for the departments found that over 97  percent of functional requirements for an inpatient electronic health  record system are common to both departments. Nevertheless, the  departments have each begun multimillion dollar modernizations of their  electronic health record systems. Specifically, DOD has obligated  approximately $2 billion over the 13-year life of its Armed Forces Health  Longitudinal Technology Application and requested $302 million in fiscal  2011 year funds for a new system. For its part, VA reported spending  almost $600 million from 2001 to 2007 on eight projects as part of its  Veterans Health Information Systems and Technology Architecture  modernization. In April 2008, VA estimated an $11 billion total cost to  complete the modernization by 2018. Reduced duplication in this area  could save system development and operation costs while supporting  higher-quality health care for service members and veterans.
The departments’ distinct modernization efforts are due in part to barriers  they face to jointly addressing their common health care system needs.  These barriers stem from weaknesses in key IT management areas such as  strategic planning and investment management. Our recent work  identified several actions that the Secretaries of Defense and Veterans  Affairs could take to overcome these barriers, including revising the  departments’ joint strategic plan, further developing the departments’ joint  health architecture, and defining and implementing a process for  identifying and selecting joint IT investments to meet the departments’  common health care business needs. In March 2011, the Secretaries  committed their respective departments to pursue joint development and  acquisition of integrated electronic health records capabilities, including  defining an architecture to guide the departments’ efforts. Further, in  testimony before the Senate Veterans Affairs Committee on May 18, 2011,  the departments’ Deputy Secretaries reaffirmed DOD’s and VA’s  commitment to addressing the weaknesses we have noted in our work  with regard to achieving these joint capabilities.
We found that duplication and overlap occur for a variety of reasons. First,  programs have been added incrementally over time to respond to new  needs and challenges, without a strategy to minimize duplication, overlap,  and fragmentation among them. Also, agencies often lack information on  the effectiveness of programs; such information could help decision  makers prioritize resources among programs. Lastly, there are not always  interagency mechanisms or strategies in place to coordinate programs that  address crosscutting issues, which can lead to potentially duplicative,  overlapping and fragmented efforts.
The recently enacted GPRA Modernization Act of 2010, which updates the  almost two-decades-old Government Performance and Results Act, may  help address some of these issues. The act establishes a new framework  aimed at taking a more crosscutting and integrated approach to focusing  on results and improving government performance. It requires the Office  of Management and Budget (OMB), in coordination with agencies, to  develop—every 4 years—long-term, outcome-oriented goals for a limited  number of crosscutting policy areas. As a result, the act could also help  inform reexamination or restructuring efforts and lead to more efficient  and economical service delivery in overlapping program areas. The  crosscutting planning and reporting requirements in the act could lead to  the development of performance information in areas that are currently  incomplete.
section_title: Expenditures on Information Technology Could Be Reduced by Consolidating Federal Data Centers, Improving Investment Management and Oversight, and Using Enterprise Architectures
paragraphs: The federal government’s expenditures on IT could be reduced by, among  other things, consolidating federal data centers, improving investment  management and oversight, and using enterprise architectures as a tool for  organizational transformation. Each year the federal government spends  billions of dollars on IT investments; federal spending on IT has risen to an  estimated $79 billion for fiscal year 2011. In recent years, as federal  agencies modernized their operations, put more of their services online,  and increased their information security profiles they have demanded  more computing power and data storage resources. While it may meet  individual agency needs, this growth has raised concerns about duplicative  investments and underutilized computing resources across the  government.
subsections: section_title: Consolidating Federal Data Centers Provides Opportunity to Improve Government Efficiency
paragraphs: Over time, the federal government’s increasing demand for more IT has led  to a dramatic rise in the number of federal data centers. According to  OMB, the number of federal data centers grew from 432 in 1998 to more  than 2,000 in July 2010. These data centers often house similar types of  equipment and provide similar processing and storage capabilities. These  factors have led to concerns about the costs associated with the provision  of redundant capabilities, the underutilization of resources, and the  significant consumption of energy.
In 2010, the Federal Chief Information Officer (CIO) reported that  operating and maintaining redundant infrastructure investments was  costly, inefficient, and unsustainable, and had a significant impact on  energy consumption. While the total annual federal spending associated  with these data centers has not been determined, the Federal CIO has  found that operating data centers is a significant cost to the federal  government, including costs for hardware, software, real estate, and  cooling costs. For example, according to the Environmental Protection  Agency, the electricity cost to operate federal servers and data centers  across the government is about $450 million annually. According to the  Department of Energy, data center spaces can consume 100 to 200 times  as much electricity as standard office spaces.
In February 2010, OMB and the Federal CIO announced the Federal Data  Center Consolidation Initiative and OMB outlined four high-level goals:    Promote the use of Green IT by reducing the overall energy and real  estate footprint of government data centers.
Reduce the cost of data center hardware, software, and operations.
Increase the overall IT security posture of the government.
Shift IT investments to more efficient computing platforms and  technologies.
As part of this initiative, OMB directed federal agencies to prepare an  inventory of their data center assets and a plan for consolidating these  assets by August 30, 2010, and to begin implementing them in fiscal year  2011. In October 2010, OMB reported that all of the agencies had  submitted their plans. OMB plans to monitor agencies’ progress through  annual reports and has established a goal of closing 800 of the data centers  by 2015. More recently, in April 2011, OMB announced plans to close 137  data centers by the end of this year.
At your request, we are currently reviewing the Federal Data Center  Consolidation Initiative as well as federal agencies’ efforts to develop and  implement consolidation plans. In our draft report, which is currently with  agencies in order to obtain their comments, we discuss our preliminary  observations based on our review of 24 agencies’ consolidation plans. As  part of their individual consolidation plans, each federal department and  agency was expected to estimate cost savings over time. In their plans, 14  agencies reported expected savings totaling about $700 million between  fiscal years 2011 and 2015; however, actual savings may be even higher  because most of these agencies’ estimates were incomplete. For example,  11 agencies included expected energy savings and reductions in building  operating costs, but did not include savings from other sources such as  equipment reductions. Four other agencies did not expect to accrue any  net savings by 2015 and six agencies did not provide estimated cost  savings. Although some agencies reported that it was too soon to fully  estimate cost savings because they are just beginning to plan for  consolidation and other agencies noted that near-term savings were offset  by consolidation costs, the opportunity for long-term savings is significant.  In October 2010, a council of chief executive officers representing  technical industry companies estimated that the federal government could  save $150-$200 billion over the next decade, primarily through data center  and server consolidation.
In our draft report, we found that despite OMB’s requirements for what  agencies should include in their asset inventories and consolidation plans,  only one of the agencies submitted a complete asset inventory and none of  the agencies submitted complete plans. For example, in their asset  inventories, 14 agencies do not provide a complete listing of their data  centers and 15 do not list all of their software assets. Similarly, in their  consolidation plans, 13 agencies do not provide specific performance  metrics and 12 do not address cost-benefit calculations. Until these  inventories and plans are complete, agencies may not be able to fully  implement their consolidation activities and realize expected savings.
Further, we found that agencies identified multiple challenges during data  center consolidation, including those that are cultural, funding-related,  operational, and technical in nature. For example, agencies face  challenges in overcoming cultural resistance to such major organizational  changes, providing upfront funding for the consolidation effort before any  cost savings accrue, maintaining current operations during the transition  to consolidated operations, and establishing and implementing shared  standards (for storage, systems, security, etc.). Mitigating these and other  challenges will require commitment from the agencies and continued  oversight by OMB and the Federal CIO.
To help ensure that the federal data center consolidation initiative  improves governmental efficiency and achieves cost savings, we are  making recommendations to OMB and to the heads of the participating  agencies. Specifically, we are recommending that agencies complete the  missing elements in their plans and that OMB monitor the agencies’  completion and implementation of those plans to ensure that promised  efficiencies and savings are realized. We also recommend that agencies  consider challenges when updating their plans.
section_title: OMB’s IT Dashboard Can Further Help Identify Opportunities to Invest More Efficiently in Information Technology
paragraphs: Given the importance of transparency, oversight, and management of the  government’s IT investments, in June 2009, OMB established a public Web  site, referred to as the IT Dashboard, that provides detailed information on  about 800 investments at 27 federal agencies, including ratings of their  performance against cost and schedule targets. The public dissemination  of this information is intended to allow OMB; other oversight bodies,  including Congress; and the general public to hold agencies accountable  for results and performance. Since our March report, we completed  additional work and reported that by establishing the IT Dashboard, OMB  has drawn additional attention to more than 300 troubled IT investments  at federal agencies, totaling $20 billion, which is an improvement from the  previously used oversight mechanisms. The Federal CIO recognized that  the Dashboard has increased the accountability of agency CIOs and  established much-needed visibility into investment performance.
In a series of IT Dashboard reviews completed in July 2010 and March  2011, we reported that OMB’s Dashboard had increased transparency and  oversight, but that improvements were needed for the Dashboard to more  fully realize its potential as a management and cost-savings tool.  Specifically, in reviews of selected investments from 10 agencies, we  found that the Dashboard ratings were not always consistent with agency  cost and schedule performance data. For example, the Dashboard rating  for a Department of Homeland Security investment reported significant  cost variances for 3 months in 2010; however, our analysis showed lesser  variances for the same months. In another case, a Department of Justice  investment on the Dashboard reported that it has been less than 30 days  behind schedule from July 2009 through January 2010. Investment data  that we examined, however, showed that the investment was behind  schedule by 30 days to almost 90 days from September to December 2009.  A primary reason for the data inaccuracies in the Dashboard’s ratings was  that while the Dashboard was intended to represent near real-time  performance information, the cost and schedule ratings did not take into  consideration current performance. In these reports, we made a number of  recommendations to OMB and federal agencies to improve the accuracy of  Dashboard ratings. Agencies agreed with these recommendations, while  OMB agreed with all but one. Specifically, OMB disagreed with the  recommendation to change how it reflects current investment  performance in its ratings because Dashboard data are updated on a  monthly basis. However, we maintained that current investment  performance may not always be as apparent as it should be; while data are  updated monthly, ratings include historical data, which can mask more  recent performance.
OMB officials indicated they had relied on the Dashboard as a  management tool, including using investment trend data to identify and  address performance issues and to select investments for a TechStat  session—a review of selected IT investments between OMB and agency  leadership that is led by the Federal CIO. According to OMB, as of  December 2010, 58 TechStat sessions had been held with federal agencies.  Additionally, OMB officials stated that as a result of these sessions, 11  investments have been reduced in scope, and 4 have been cancelled.
According to the Federal CIO, use of the Dashboard as a management and  oversight tool has already resulted in a $3 billion budget reduction. OMB’s  planned improvements to the Dashboard, along with full implementation  of our recommendations and the possible identification of duplicative  investments have the potential to result in further significant savings.  Additional opportunities for potential cost savings exist with the use of the  Dashboard by executive branch agencies to identify and make decisions  about poorly performing investments, as well as its continued use by  congressional committees to support critical oversight efforts.
section_title: Enterprise Architectures Are Key Mechanisms for Identifying Potential Overlap and Duplication
paragraphs: An enterprise architecture is a modernization blueprint that is used by  organizations to describe their current state and a desired future state and  to leverage IT to transform business and mission operations. Historically,  federal agencies have struggled with operational environments  characterized by a lack of integration among business operations and the  IT resources that support them. A key to successfully leveraging IT for  organizational transformation is having and using an enterprise  architecture as an authoritative frame of reference against which to assess  and decide how individual system investments are defined, designed,  acquired, and developed. The development, implementation, and  maintenance of architectures are widely recognized as hallmarks of  successful public and private organizations, and their use is required by  the Clinger-Cohen Act of 1996 and OMB.
Our experience has shown that attempting to modernize (and maintain) IT  environments without an architecture to guide and constrain investments  results in organizational operations and supporting technology  infrastructures and systems that are duplicative, poorly integrated,  unnecessarily costly to maintain and interface, and unable to respond  quickly to shifting environmental factors. For example, we have conducted  reviews of enterprise architecture management at federal agencies, such  as the Department of Homeland Security (DHS) and the Federal Bureau of  Investigation (FBI), as well as reviews of critical agency functional areas,  such as DOD financial management, logistics management, combat  identification, and business systems modernization. In addition, as  discussed earlier, we have reviewed the DOD and VA’s joint health  architecture efforts, which are intended to guide identification and  development of common health IT solutions.
These reviews have continued to identify the absence of complete and  enforced enterprise architectures, which in turn has led to agency  business operations, systems, and data that are duplicative, incompatible,  and not integrated. These conditions have either prevented agencies from  sharing data or forced them to depend on expensive, custom-developed  system interfaces to do so. For example, we previously reported that IT  had been a long-standing problem for the FBI, with nonintegrated  applications, residing on different servers, each of which had its own  unique databases and did not share information with other applications or  with other government agencies. As a result, these deficiencies served to  significantly hamper the FBI’s ability to share important and time-sensitive  information internally and externally with other intelligence and law  enforcement agencies.
In 2006, we reported that the state of enterprise architecture development  and implementation varied considerably across departments and agencies,  with some having more mature architecture programs than others.  However, overall, most departments and agencies were not where they  needed to be, particularly with regard to their approaches for assessing  each investment’s alignment with the enterprise architecture and  measuring and reporting on enterprise architecture results and outcomes.  In our prior work, most departments and agencies reported they expect to  realize benefits from their respective enterprise architecture programs,  such as improved alignment between their business operations and the IT  that supports these operations and consolidation of their IT infrastructure  environments, which can reduce the costs of operating and maintaining  duplicative capabilities, sometime in the future. What this suggests is that  the real value in the federal government from developing and using  enterprise architectures remains largely unrealized.
Our recently issued seven-stage enterprise architecture management  maturity framework recognizes that a key to realizing this potential is  effectively managing department and agency enterprise architecture  programs. However, knowing whether benefits and results are in fact  being achieved requires having associated measures and metrics. In this  regard, it is important for agencies to satisfy the core element of the  framework—enterprise architecture results and outcomes are measured  and reported. Examples of results and outcomes to be measured include  costs avoided through eliminating duplicative investments or by reusing  common services and applications and improved mission performance  through re-engineered business processes and modernized supporting  systems.
Our work has shown that over 50 percent of the departments and agencies  assessed had yet to fully satisfy this element. On the other hand, some  have reported they are addressing this element and have realized  significant financial benefits. For example, in 2006 we reported that the  Department of the Interior had addressed all but one of the elements in  our enterprise architecture management maturity framework, which  meant that it was well–positioned to realize the significant benefits that a  well-managed architecture program can provide. It has since  demonstrated that it is using its enterprise architecture to modernize  agency IT operations and avoid costs through enterprise software license  agreements and hardware procurement consolidation. These architecture- based decisions have resulted in reported financial benefits of at least $80  million. This means that the departments and agencies can demonstrate  achievement of expected benefits, including costs avoided through  eliminating duplicative investments, if enterprise architecture results and  outcomes are measured and reported. We have work under way to  determine the extent to which federal departments and agencies are  realizing value from their use of enterprise architectures.
Notwithstanding these challenges, we have also reported on departments  that have demonstrated improvements to their enterprise architecture  programs. In 2009, we reported that to DHS’s credit, recent versions of its  enterprise architecture largely addressed our prior recommendations  aimed at adding needed architectural depth and breadth. For example, in  response to our prior recommendation that the architecture include a  Technical Reference Model  that describes, among other things, the  technical standards to be implemented for each enterprise service, the  2008 version of the enterprise architecture included a Technical Reference  Model that identified such standards. The department also adopted an  approach for extending the architecture through segments, which is a  “divide and conquer” approach to architecture development advocated by  OMB. However, we also concluded that while recent versions largely  addressed our prior recommendations, important content, such as  prioritized segments and information exchanges between critical business  processes, was still missing.
In addition, in response to our recommendations, DOD adopted a  federated approach to developing and using its business enterprise  architecture, which is a coherent family of parent and subsidiary  architectures, to help modernize its nonintegrated and duplicative  business operations and the systems that support them. According to  DOD, the federated business enterprise architecture is expected to identify  and provide for sharing common applications and systems across the  department and its components and promote interoperability and data  sharing among related programs. For example, the architecture now  focuses on improving the department’s ability to manage business  operations from an end-to-end perspective. In this regard, it depicts 15  end-to-end business processes, such as hire-to-retire and procure-to-pay.  In addition, it also identifies the corporate architectural policies,  capabilities, rules, and standards that apply DOD-wide. While this is  important progress, DOD has yet to define these end-to-end processes at a  lower level so that any redundant or duplicative system functions can be  identified and avoided.
To advance the state of enterprise architecture development and use in the  federal government, senior leadership in the departments and agencies  need to demonstrate their commitment to this organizational  transformation tool, as well as ensure that the kind of management  controls embodied in our framework are in place and functioning.  Collectively, the majority of the departments’ and agencies’ architecture  efforts can still be viewed as a work in progress with much remaining to  be accomplished before the federal government as a whole fully realizes  their transformational value. Moving beyond this status will require most  departments and agencies to overcome significant obstacles and  challenges, such as organizational parochialism and cultural resistance,  inadequate funding, and the lack of top management understanding and  skilled staff. One key to doing so continues to be sustained organizational  leadership. As our work has demonstrated, without such organizational  leadership, the benefits of enterprise architecture will not be fully realized.  OMB can play a critical role by continuing to oversee the development and  use of enterprise architecture efforts, including measuring and reporting  enterprise architecture results and outcomes across the federal  government.
section_title: Improving Federal Contracting Could Save Billions
paragraphs: The federal government spent about $535 billion in fiscal year 2010  acquiring the goods and services agencies need to carry out their missions.  Our March report highlighted four areas where improvements could be  made to realize significant savings. These are: (1) minimizing unnecessary  duplication among interagency contracts, (2) achieving more competition  in the award of contracts, (3) using award fees more appropriately to  promote improved contractor performance, and (4) leveraging the  government’s vast buying power through expanded use of strategic  sourcing.
subsections: section_title: Improved Data on Interagency Contracting Needed to Minimize Duplication and Better Leverage the Government’s Buying Power
paragraphs: Interagency contracting is a process by which one agency either uses  another agency’s contract directly or obtains contracting support services  from another agency. In recent years, interagency and agencywide  contracting accounts for more than $50 billion in procurement spending  annually. Agencies have created numerous interagency and agencywide  contracts using existing statutes, the Federal Acquisition Regulation, and  agency-specific policies. With the proliferation of these contracts,  however, there is a risk of unintended duplication and inefficiency.  Billions of taxpayer dollars flow through interagency and agencywide  contracts, but the federal government does not have a clear,  comprehensive view of which agencies use these contracts and whether  they are being used in an efficient and effective manner. Without this  information, agencies may be unaware of existing contract options that  could meet their needs and may be awarding new contracts when use of  an existing contract would suffice. The government, therefore, might be  missing opportunities to better leverage its vast buying power.
Government contracting officials and representatives of vendors have  expressed concerns about potential duplication among the interagency  and agencywide contracts across government, which they said can result  in increased procurement costs, redundant buying capacity, and an  increased workload for the acquisition workforce. Some vendors stated  they offer similar products and services on multiple contracts and that the  effort required to be on multiple contracts results in extra costs to the  vendor, which they pass to the government through increased prices.  Some vendors stated that the additional cost of being on multiple  contracts ranged from $10,000 to $1,000,000 per contract due to increased  bid and proposal and administrative costs.
We identified two overriding factors that hamper the government’s ability  to realize the strategic value of using interagency and agencywide  contracts: (1) the absence of consistent governmentwide policy on the  creation, use, and costs of awarding and administering some contracts;  and (2) long-standing problems with the quality of information on  interagency and agencywide contracts in the federal procurement data  system. In April 2010, we recommended that OMB, which has  governmentwide procurement policy responsibilities, establish a policy  framework for establishing some types of interagency contracts and  agencywide contracts, including a requirement to conduct a sound  business case. We also recommended that OMB take steps to improve the  data on interagency contracts including updating existing data on  interagency and agencywide contracts, ensuring that departments and  agencies accurately record these data, and assessing the feasibility of  creating and maintaining a centralized database of interagency and  agencywide contracts. OMB agreed with our recommendations.
In December 2010, the Federal Acquisition Regulation was amended to  require that agencies prepare business cases for some multiagency  contracts. This business case analysis also requires that agencies evaluate  the cost of awarding and managing the contract and compare this cost to  the likely fees that would be incurred if the agency used an existing  contract or sought out acquisition assistance. In addition, OMB is  developing additional business case guidance that will require agencies to  prepare business cases describing the expected need for any new  multiagency or agencywide contract, the value added by its creation, and  the agency’s suitability to serve as an executive agent. OMB also reports  that it has a new effort under way to improve contract information in the  Federal Procurement Data System-Next Generation, the current federal  government database for information and data on all federal contracts.  OMB also is discussing options for creating a clearinghouse of existing  interagency and agencywide contracts. Requiring business case analyses  for new multiagency and agencywide contracts and ensuring agencies  have access to up-to-date and accurate data on the available contracts will  promote the efficient use of interagency and agencywide contracting. Until  such controls to address the issue of duplication are fully implemented,  the government will continue to miss opportunities to take advantage of  the government’s buying power through more efficient and more strategic  contracting.
section_title: Promoting Competition for Federal Contracts Can Produce Savings
paragraphs: Competition is a cornerstone of the federal acquisition system and a  critical tool for achieving the best possible return on contract spending.  Competitive contracts can save money, improve contractor performance,  and promote accountability for results. Federal agencies generally are  required to award contracts competitively, but a substantial amount of  federal money is being obligated on noncompetitive contracts annually.  Federal agencies obligated approximately $170 billion on noncompetitive  contracts in fiscal year 2009 alone. While there has been some fluctuation  over the years, the percentage of obligations under noncompetitive  contracts recently has been in the range of 31 percent to over 35 percent.  Although some agency decisions to forego competition may be justified,  we found that when federal agencies decide to open their contracts to  competition, they frequently realize savings. For example, we found in  2006 that the Army had awarded noncompetitive contracts for security  guards, but later spent 25 percent less for the same services when the  contracts were competed.
Our work also shows that agencies do not always use a competitive  process when establishing or using blanket purchase agreements under  the General Services Administration’s schedules program. Agencies have  frequently entered into blanket purchase agreements with just one vendor,  even though multiple vendors could satisfy agency needs. And even when  agencies entered into blanket purchase agreements with multiple vendors,  we found that agencies have not always held subsequent competitions  among those vendors for orders under the blanket purchase agreements,  even though such competitions at the ordering level are required.
OMB has provided guidance for agencies to promote competition in  contracting, and improve the effectiveness of their competition practices.  In July 2009, OMB called for agencies to reduce obligations under new  contract actions that are awarded using high-risk contracting authorities  by 10 percent in fiscal year 2010. These high-risk contracts include, among  other considerations, those that are awarded noncompetitively and those  that are structured as competitive but for which only one offer is received.  We are currently reviewing the agencies’ savings plans to identify steps  taken toward that goal. By more consistently promoting competition in  contracts, federal agencies would have greater opportunities to take  advantage of the effectiveness of the marketplace and potentially achieve  billions of dollars in cost savings.
section_title: Adherence to New Guidance on Award Fee Contracts Could Improve Agencies’ Use of Award Fees and Produce Savings
paragraphs: Several major agencies spent over $300 billion from fiscal year 2004  through fiscal year 2008 on contracts that included monetary incentives  known as award fees. The purpose of these incentives is to motivate  enhanced contractor performance. In 2005, however, we found that DOD  paid billions of dollars in award fees regardless of acquisition outcomes. In  2007, we found significant disconnects between program results and fees  paid at the National Aeronautics and Space Administration. In 2009, we  reported that five agencies had paid more than $6 billion in award fees,  but were not consistently following award fee guidance and did not have  methods for evaluating the effectiveness of an award fee as a tool for  improving contractor performance. We identified three primary issues  related to the use of award fees that, if addressed, could improve the use  of these incentives and produce savings. Specifically, (1) award fees are  not always linked to acquisition outcomes, (2) award fee payments are  made despite unsatisfactory contract performance, and (3) contractors  have been permitted to earn previously unearned award fees in  subsequent evaluation periods, a practice known as “rollover,” where  unearned award fees are transferred from one evaluation period to a  subsequent period, thus allowing contractors additional opportunities to  earn previously unearned fees.
Although required by OMB guidance since 2007, we reported in 2009 that  award fees were not always linked to acquisition outcomes. But when  efforts are made to do so, savings can be achieved. For example, the Joint  Strike Fighter program created metrics for areas such as software  performance, warfighter capability, and cost control that were previously  assessed using less-defined criteria. By using metrics to assess  performance, the Joint Strike Fighter program paid an estimated $29  million less in fees in the 2 years since the policy changed than it might  have when applying the former criteria.
OMB’s 2007 guidance directed agencies to ensure that no award fee should  be paid for performance that does not meet contract requirements or is  judged to be unsatisfactory. We reported in 2009 that programs across the  agencies reviewed used evaluation tools that could allow contractors to  earn award fees without performing at a level that is acceptable to the  government under the terms of the contract. For example, a Department  of Energy research contract allowed the contractor to earn up to 84  percent of the award fee for performance that was defined as not meeting  expectations. In addition, we found two HHS contracts, including a  contract for Medicare claims processing, in which it was possible for the  contractor to receive at least 49 percent of the award fee for unsatisfactory  performance. By contrast, some programs within DOD have prohibited  award fee payments for unsatisfactory performance. For example, we  found that the Air Force saved $10 million on a contract for a satellite  program by not paying an award fee to a contractor with unsatisfactory  performance.
DOD guidance on award fees since 2006 has been that the practice of  rollover should be limited to exceptional circumstances to avoid  compromising the integrity of the award fee process. We found that based  on contracts reviewed in 2005, DOD rolled over an average of 51 percent  of the total unearned fees. For example, the contractor for the F-22 Raptor  received over 90 percent of the award fee, including fees paid in  subsequent evaluation periods, even though the program’s cost and  schedule targets had to be revised 14 times. By later limiting rollover, we  estimated in 2009 that DOD would save over $450 million on eight  programs from April 2006 through October 2010.
Recent changes to the Federal Acquisition Regulation in 2010 have  prohibited the practices of rollover of unearned award fees and awarding  fees to contractors that have performed unsatisfactorily. Some agencies  are updating and disseminating guidance that could increase the pace and  success rate of implementing these new regulations. Further, agencies  such as DOD are increasing the likelihood that award fees would be better  linked to acquisition outcomes by implementing key practices, like a peer  review process that examines the plan for administering award fees.  However, sustained progress in the use of award fees will require that  contracting agencies adhere to the recent changes to the Federal  Acquisition Regulation. Enhanced oversight by OMB and Congress is  warranted to ensure successful implementation.
section_title: Applying Strategic Sourcing Best Practices throughout the Federal Procurement System Could Produce Significant Savings
paragraphs: Since 2002, spending on federal contracts has more than doubled to about  $540 billion in 2009, consuming a significant share of agencies’  discretionary budgets. Because procurement at federal departments and  agencies generally is decentralized, the federal government is not fully  leveraging its aggregate buying power to obtain the most advantageous  terms and conditions for its procurements. In the private sector, however,  an approach called strategic sourcing has been used since the 1980s to  reduce procurement costs at companies with large supplier bases and high  procurement costs. We reported that to reduce costs, improve  productivity, and more effectively procure products and services, many  companies have adopted a strategic sourcing approach—centralizing and  reorganizing their procurement operations to get the best value for the  company as a whole. The federal government could do the same and  realize significant savings as a result.
Since 2005, OMB has encouraged agencies to coordinate their buys  through Federal Strategic Sourcing Initiative (FSSI) interagency  procurement vehicles awarded by the General Services Administration. In  addition, some agencies have awarded agencywide (also referred to as  enterprisewide) contracts under strategic sourcing programs within an  individual federal department or agency. In July 2010, OMB’s  congressional testimony on the status of improvements to federal  acquisition cited examples of what progress is being achieved under  agency strategic sourcing efforts. Under the FSSI effort for example, a  team of agencies selected office products in late 2009 as a promising  strategic sourcing opportunity to combine buying power for about $250  million in requirements. This office products initiative is expected to  reduce costs at these agencies by as much as 20 percent, for a total savings  of almost $200 million over the next 4 years. Further, an agencywide  initiative at the Department of Homeland Security—which accounted for  $14.3 billion in contract spending in 2009—is expected to save $87 million  during the next 6 years for a standardized suite of discounted desktop  operating systems, e-mail, and office automation products.
These results demonstrate the potential to achieve significant savings  through the use of strategic sourcing approaches. The starting point for  such efforts, however, is having good data on current spending, but in  April 2010 we reported that OMB and agencies cannot be sure the  government is fully leveraging its buying power because of the absence of  comprehensive, reliable data to effectively manage and oversee an  important segment of total procurement spending: interagency and  agencywide contracts. Acquisition leaders across the government need to  more fully embrace the strategic sourcing initiative beginning with  collecting, maintaining, and analyzing data on current procurement  spending. Then, agencies have to conduct assessments of acquisition and  supply chain functions to initiate enterprisewide transformations.
In conclusion Mr. Chairman, Ranking Member Senator Collins, and  Members of the Committee, careful, thoughtful actions will be needed to  address many of the issues discussed in our March report, particularly  those involving potential duplication, overlap, and fragmentation among  federal programs and activities. These are difficult issues to address  because they may require agencies and Congress to re-examine within and  across various mission areas the fundamental structure, operation,  funding, and performance of a number of long-standing federal programs  or activities with entrenched constituencies. Continued oversight by OMB  and Congress will be critical to ensuring that unnecessary duplication,  overlap, and fragmentation are addressed.
As the nation rises to meet the current fiscal challenges, we will continue  to assist Congress and federal agencies in identifying actions needed to  reduce duplication, overlap, and fragmentation; achieve cost savings; and  enhance revenues. As part of current planning for our future annual  reports, we are continuing to look at additional federal programs and  activities to identify further instances of duplication, overlap, and  fragmentation as well as other opportunities to reduce the cost of  government operations and increase revenues to the government. We will  be using an approach to ensure governmentwide coverage through our  efforts by the time we issue of our third report in fiscal year 2013. We plan  to expand our work to more comprehensively examine areas where a mix  of federal approaches is used, such as tax expenditures, direct spending,  and federal loan programs. Likewise, we will continue to monitor  developments in the areas we have already identified. Issues of  duplication, overlap, and fragmentation will also be addressed in our  routine audit work during the year as appropriate and summarized in our  annual reports.
Thank you, Mr. Chairman, Ranking Member Senator Collins, and Members  of the Committee. This concludes my prepared statement. I would be  pleased to answer any questions you may have.
For further information on this testimony or our March report, please  contact Janet St. Laurent, Managing Director, Defense Capabilities and  Management, who may be reached at (202) 512-4300, or  StLaurentJ@gao.gov; and Katherine Siggerud, Managing Director, Physical  Infrastructure, who may be reached at (202) 512-2834, or  SiggerudK@gao.gov. Specific questions about information technology  issues may be directed to Joel Willemssen, Managing Director, Information  Technology, who may be reached at (202) 512-6253, or  WillemssenJ@gao.gov. Questions about federal contracting may be  directed to Paul Francis, Managing Director, Acquisition and Sourcing  Management, who may be reached at (202) 512-4841, or  FrancisP@gao.gov. Contact points for our Congressional Relations and  Public Affairs offices may be found on the last page of this statement.
section_title: Appendix I: Duplication, Overlap, or Fragmentation Areas Identified
paragraphs: DOD and the Department of Veterans Affairs  (VA)
Two bureaus within the Department of State  (State)
section_title: Appendix II: Federal Agencies and Programs Where Cost-Saving or Revenue-Enhancement Opportunities May Exist
paragraphs: Department of the Treasury’s (Treasury)  Internal Revenue Service (IRS)
Department of Health and Human Services’  Centers for Medicare & Medicaid Services  (CMS)
Department of Homeland Security (DHS)
Transportation Security Administration (TSA)
DHS’s Customs and Border Protection (CBP) collections could produce a one-time savings of  $640 million  80.  Social Security needs data on pensions from  noncovered earnings to better enforce offsets and  ensure benefit fairness, resulting in estimated  $2.4-$2.9 billion savings over 10 years  81.  Congress could pursue several options to improve  collection of antidumping and countervailing  duties   This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.