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: DHS and GSA are managing an estimated $4.5 billion construction project at the St. Elizabeths Campus in Washington, D.C. The project, 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, has a projected completion date of 2026.
GAO was asked to examine DHS and GSA management of the headquarters consolidation, including the development of the St. Elizabeths campus. This report addresses the extent to which DHS and GSA have (1) developed consolidation plans in accordance with leading capital decision-making practices and (2) estimated the costs and schedules of the St. Elizabeths project in a manner that is consistent with leading practices. GAO assessed various DHS and GSA plans, policies, and cost/schedule estimates, and interviewed DHS and GSA officials.
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: What GAO Recommends
paragraphs: GAO recommends, among other things, that DHS and GSA develop revised DHS headquarters plans that reflect leading practices for capital decision making and reliable cost and schedule estimates. Congress should consider making future funding for the project contingent upon DHS and GSA developing plans and estimates commensurate with leading practices. DHS and GSA concurred with our recommendations.

section_title: Letter
paragraphs: The Department of Homeland Security (DHS) and General Services  Administration (GSA) are managing a $4.5 billion construction project at  the federally owned St. Elizabeths Campus in Washington, D.C. The  project, known as the DHS headquarters consolidation project at St.  Elizabeths, 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 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.
The DHS headquarters consolidation effort involves multiple management  issues that we consider high-risk. For example, we have found over the  years that many federal agencies face long-standing challenges involving  excess and underutilized property, deteriorating facilities, unreliable  property data, and facility protection in the post-September 11  environment. These findings led to our designation, in January 2003, of  real property management as a high-risk area. In addition, DHS  management issues, including acquisition management, have been  documented in our high-risk list since 2005.
For example, in September  2012, we reported that DHS’s acquisition policy reflects many key  management practices that could help mitigate risks and increase  chances for successful outcomes. However, most of DHS’s major  acquisition programs continue to cost more than expected, take longer to  deploy than planned, or deliver less capability than promised.
Given the magnitude of the St. Elizabeths project and the impact of  headquarters consolidation on DHS operations, you asked us to examine  DHS and GSA management of the consolidation efforts. Specifically, this  report addresses the extent to which DHS and GSA have developed DHS headquarters consolidation plans in accordance with  leading capital decision-making practices and estimated the costs and schedules of the DHS headquarters  consolidation project at St. Elizabeths in a manner that is consistent  with leading practices.
The scope of this work included DHS and GSA management of DHS  headquarters consolidation—principally the St. Elizabeths development  project—from 2005 through 2014, and DHS and GSA actions to create  and maintain cost and schedule estimates for the St. Elizabeths project.  To determine the extent to which DHS and GSA developed DHS  headquarters consolidation plans in accordance with leading capital  decision-making practices, we reviewed DHS and GSA documents  pertaining to how project requirements were determined and evaluated  DHS and GSA capital planning efforts against applicable leading  practices in capital decision-making. We interviewed DHS and GSA  officials responsible for the planning and management of the DHS  headquarters consolidation. Additionally, we reviewed DHS documents to  determine the extent to which the St. Elizabeths project is subject to DHS  oversight and agency document requirements for major acquisitions, and  evaluated the program’s compliance with acquisition directives. We also  interviewed DHS officials responsible for overseeing DHS major  acquisitions. To determine the extent to which DHS and GSA estimated  the costs and schedules of the DHS headquarters consolidation project at  St. Elizabeths in a manner that is consistent with leading practices, we  evaluated DHS and GSA documents on the estimated cost and schedule  for the St. Elizabeths project using GAO cost- and schedule-estimating  leading practices and relevant GSA guidance. We also interviewed DHS  and GSA officials responsible for managing the estimates. Appendix I  contains more detailed information on our objectives, scope, and  methodology.
We conducted this performance audit from August 2013 to September  2014 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
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.its various components were not physically consolidated, but instead  were dispersed across the NCR in accordance with their history. For  example, in 2007, DHS employees in the NCR were located in 85  buildings and 53 locations, accounting for approximately 7 million gross  square feet of government-owned and -leased office space. As of July   When the department was formed, the headquarters functions of  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.
GSA, the landlord for the civilian federal government, acquires space on  behalf of the federal government through new construction and leasing,  and acts as a caretaker for federal properties across the country. Federal  agencies give GSA information on their program and mission  requirements and GSA then works with those agencies to develop and  refine their real estate space needs. As such, GSA had the responsibility  to select the specific site for a new, consolidated DHS headquarters  facility, based on DHS needs and requirements. In addition, GSA is  responsible for awarding and managing contracts for design and  construction. DHS began planning the consolidation of its headquarters in  2005. According to DHS, increased colocation and consolidation were  critical to achieve the following objectives: (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. DHS  and GSA developed a number of capital planning documents to guide the  DHS headquarters consolidation process. To start, DHS identified its  original housing requirements in 2006 during the development of the DHS  National Capital Region Housing Master Plan. In the housing master plan,  DHS identified a requirement for approximately 7.1 million square feet of  total office space in the NCR to accommodate DHS headquarters  operations, with 4.5 million square feet on a secure campus. DHS also  developed a program of requirements for DHS headquarters components  that included a listing of current and projected space needs. In June  2007, DHS released its Consolidated Headquarters Collocation Plan. The  colocation plan summarized component functional requirements and the  projected number of seats needed on- and off-campus for NCR  headquarters personnel. According to DHS, the colocation plan is based  on the idea that the consolidated headquarters campus serves as a  central hub for leadership, operations coordination, policy, and program  management in support of the department’s strategic goals. Table 1  summarizes DHS and GSA key planning documents.
According to GSA’s planning documents, the West Campus of St.  Elizabeths, held by GSA, was the preferred site for DHS headquarters  consolidation because (1) it could accommodate the 4.5 million square  feet of office space, plus parking, and (2) was available immediately—two  key requirements for DHS. GSA developed a Master Plan in 2009 that  was to guide the overall development at the St. Elizabeths site. The plan  was vetted through numerous stakeholders and received final approval in  2009. Construction started at the campus in 2009. Figure 1 depicts the  campus as envisioned in the 2009 Master Plan.
The full development of the St. Elizabeths Campus was intended to occur  in three phases, with subphases, over 8 years. Table 2 shows the original  planned construction for each of the project’s three phases, including the  subphases, and their original and current estimated completion dates.
From fiscal years 2006 through 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. As part  of this total, the DHS headquarters consolidation project received $650  million from the American Recovery and Reinvestment Act of 2009  (ARRA). In general, GSA funding was used for building construction and  renovation, and other major infrastructure; DHS funding was used for  tenant-specific capabilities, such as information technology (IT)  infrastructure, furniture, and secure spaces, among other things. From  fiscal year 2009—when construction began—through the time of the fiscal  year 2014 appropriation, however, the gap between requested and  received funding was over $1.6 billion. Figure 2 compares funds  requested and received for the project for fiscal years 2006 through 2014.
In 2007, DHS and GSA estimated that the total cost of construction at St.  Elizabeths was $3.26 billion, with construction to be completed in 2015,  with potential savings of $1 billion attributable to moving from leased to  owned space. However, according to DHS and GSA officials, the lack of  consistent funding has affected cost estimates, estimated completion  dates, and savings. Table 3 shows changes over time to GSA cost  estimates and scheduled completion dates, as well as projected savings  associated with moving DHS staff from leased space into federally owned  space.
The majority of funding for the St. Elizabeths consolidation project  through fiscal year 2013 has been allocated to the construction of a new  consolidated headquarters for the U.S. Coast Guard (USCG) on the  campus. In 2006, DHS and GSA projected that USCG would move to St.  Elizabeths in 2011, but the move was delayed because sufficient funding  for Phase 1 of the project was not available until fiscal year 2009. In 2009,  DHS and GSA updated the projected completion date to the summer of  2013. Subsequently, USCG moved to the new building in August 2013.  Figure 3 shows schedule slippage for the overall project.
According to DHS and GSA officials, beginning in calendar year 2009,  when construction commenced, Phase 1 of the overall project was  successfully executed on schedule despite funding delays and shortfalls  during fiscal years 2011 and 2012. GSA officials told us that, from fiscal  years 2009 through 2013, DHS and GSA had requested about $1.6 billion  to complete Phase 1 of the project but received only about $933 million  for this purpose over the period. They said that they completed this phase  of the project by deferring work planned to be completed in Phase 1 so  that the USCG building could be occupied in 2013. GSA officials said that  their efforts to save money by deferring work included reducing the scope  of work needed to complete access road stonework and deferring  landscaping and construction work on one building and the visitors’ center  to future years. Figure 4 shows the entrance to the new U.S Coast Guard  Headquarters Building on the St. Elizabeths Campus.
Congress, the Office of Management and Budget (OMB), and GAO have  all identified the need for effective capital decision-making among federal  agencies. In addition, budgetary pressures and demands to improve  performance in all areas put pressure on agencies to make sound capital  acquisition choices. OMB’s Capital Programming Guide, a supplement to  OMB Circular A-11, provides guidance to federal agencies in conducting  capital decision-making. GAO also developed its Executive Guide:  Leading Practices in Capital Decision-Making, which provides detailed  guidance to federal agencies on leading practices for the four phases of  capital programming—planning, budgeting, acquiring, and managing  capital assets. These practices are, in part, intended to provide a  disciplined approach or process to help federal agencies effectively plan  and procure assets to achieve the maximum return on investment.
section_title: DHS and GSA Consolidation Plans Do Not Fully Conform with Leading Capital Decision-Making Practices
paragraphs: DHS and GSA’s overall plans for headquarters consolidation do not fully  conform with leading capital decision-making practices related to  planning. DHS and GSA officials reported that they have taken some  initial actions that could affect consolidation plans, such as adopting  recent workplace standards at the department level and assessing DHS’s  leasing portfolio. These types of actions may facilitate consolidation  planning in a manner consistent with leading practices. However, the  current collection of plans, which DHS and GSA finalized between 2006  and 2009, have not been updated to address these changes and funding  instability that could affect future headquarters needs and capabilities.  DHS and GSA have 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. In addition, DHS has not consistently applied its acquisition  guidelines to review and approve the project’s development. According to  DHS and GSA officials, they have begun to work together to consider  changes to the DHS headquarters consolidation plans. However, DHS  and GSA have not announced when new plans will be issued, and it is  unclear if they will fully conform with leading capital decision-making  practices to help plan project implementation.
In the overall capital decision-making framework, planning is the first  phase—and arguably the most important—since it drives the remaining  phases of budget, procurement, and management. The results from this  phase are used throughout the remaining phases of the process;  therefore, if key practices during this phase are not followed, there may  be repercussions on agency operations if poor capital investment  decisions are made. Given that some aspects of the project are complete,  we compared DHS and GSA headquarters consolidation efforts to date  with the 5 of 12 capital decision-making practices that are most applicable  to planning for the remaining segments of the consolidation.practices are evaluating alternatives to best decide how to meet any gaps, prioritizing and selecting projects based on established criteria, and establishing a review and approval framework supported by analysis.  conducting comprehensive assessments of needs to achieve results,  identifying gaps between current and needed capabilities,  Appendix II lists these 5 planning practices along with the remaining  practices that focus on other aspects of the overall capital decision- making framework not included in the scope of this review, such as  budgeting, procurement, and management. In addition to the above, one  important aspect of capital decision-making is recognition of the dynamic  nature of capital plans and the planning process.
The following compares DHS and GSA planning and oversight for the  remainder of the DHS headquarters consolidation project with the leading  capital decision-making practices identified above.
subsections: section_title: DHS and GSA Assessment of Needs and Capability Gaps for Headquarters Consolidation Have Not Been Updated to Reflect Changing Conditions
paragraphs: DHS and GSA capital planning efforts for DHS headquarters  consolidation have not been updated to reflect changing workplace  standards and inconsistent project funding. Leading practices in capital  decision-making call for agencies to assess requirements and determine  gaps between current and needed capabilities based on the results- oriented goals and objectives that flow from the organization’s mission. A  comprehensive assessment of needs considers the capability of existing  resources and makes use of an accurate and up-to-date inventory of  capital assets and facilities, as well as current information on asset  condition. Using this information, an organization can make decisions  about where and how to invest in facilities. During the early stages of  planning for the project, DHS and GSA developed various reports and  planning documents (see table 1) to comprehensively assess DHS needs  for a consolidated headquarters. DHS planning documents identified  office space and DHS program requirements, and discussed which DHS  functions needed to be colocated to achieve DHS’s mission. However,  the plans, which were developed prior to the release of GSA’s Master  Plan in 2009, have not kept pace with changes since then in workplace  standards and do not account for delays attributable to inconsistent  funding.
Workplace standards. Leading organizations we studied developed  comprehensive needs assessments that usually cover 5 or 6 years into  the future and are updated frequently—for example, as a part of the  organizations’ budget cycles. A needs assessment is to examine, among  other things, external factors that affect or influence the organizations’  operations, such as workplace standards. However, the current plans for  St. Elizabeths do not reflect changes in the workplace, such as telework  and smaller standard work areas that could reduce the volume of space  needed to house DHS employees. Furthermore, leading practices state  that utilizing current and accurate information is essential when taking an  inventory of current capabilities and assessing future needs. While DHS  and GSA’s original plans called for a certain size and configuration to  house employees at St. Elizabeths, changes in workplace standards  could affect the overall footprint of the St. Elizabeths project or increase  the number of staff designated to occupy space at the site, or both. This  could ultimately reduce the number of DHS headquarters employees  housed in leased space. Recent federal initiatives have been introduced  to reduce federal agency space. For example, a June 2010 presidential  memorandum directed agencies to explore how innovative approaches to  space management and alternative work arrangements, such as  telework, could help reduce the need for real estate and office space.  Another alternative work arrangement, hoteling, would allow employees  to work at multiple sites and use non-dedicated, nonpermanent  workspaces assigned for use by reservation on an as-needed basis.  Implementing hoteling could also reduce an agency’s need for office  space. Subsequently, in May 2012, OMB issued a memorandum that,  among other things, establishes the Freeze the Footprint policy. This  policy directs agencies to restrict growth in their civilian real estate  inventory. OMB supplemented that policy in March 2013 with  implementing guidance for Freeze the Footprint that required agencies  not to increase the total square footage of their office and warehouse  inventory, using fiscal year 2012 as a baseline. OMB’s implementing  guidance also directs agencies to use various strategies to maintain the  baseline, including consulting with GSA about using technology and  space management to consolidate, increasing occupancy rates in  facilities, and eliminating lease arrangements that are not cost- or space  effective.
Inconsistent project funding. In addition to workplace standards,  current funding for the St. Elizabeths project has not aligned with what  DHS and GSA initially planned. As discussed earlier, from fiscal year  2009—when construction began—through the time of the fiscal year 2014  appropriation, the gap between what DHS and GSA requested and what  was received was over $1.6 billion. According to DHS and GSA officials,  this funding gap has created cost escalations of over $1 billion and  schedule delays of 10 years, relative to their original estimates. DHS and  GSA officials cited funding shortfalls as being disruptive in sequencing  work, such as excavating soil for the DHS Operations Center and  enabling repairs on the foundation of the St. Elizabeths Center Building.According to these officials, if funding had been available, excavation  work associated with the new USCG building could have been extended  to these other parts of the project without interruption. Officials said that if  they had funds to do the excavation, they could have completed it while  the site was under construction, instead of having to work around the full  occupation and operation of the USCG building. DHS and GSA deemed  this as a lost opportunity to purposely sequence the work to maximize  construction efficiency and reduce the overall cost of development.
OMB, Capital Programming Guide, Supplement to OMB Circular A-11. changes in workplace standards and delays attributable to funding  shortfalls.
A senior DHS project official stated that the basis of the consolidation  plan remains the same and that it would be illogical to discard the plan  mid-stream in favor of some unspecified alternative, given the years of  comprehensive analysis that underpin the development and approval of  the original 2009 Master Plan. However, DHS and GSA officials reported  that they have begun to work together to consider changes to DHS  headquarters consolidation plans. Specifically, in January 2014, DHS and  GSA officials stated that they are currently reassessing requirements and  alternatives for consolidation and colocation in recognition that workplace  conditions have changed since the plan was formulated, beginning in  2006. The agencies have not announced when new plans will be issued.  Furthermore, because final documentation of agency deliberations or  analyses have not yet been developed, it is unclear if any new plans will  be informed by an updated comprehensive needs assessment and  capability gap analysis as called for by leading capital decision-making  practices. Until DHS and GSA update their capital planning documents  related to DHS headquarters consolidation—showing how DHS and GSA  asset portfolios for the consolidation efforts meet the goals and objectives  of the agencies’ strategic and annual performance plans and how these  assets will be used to help agencies achieve their goals and objectives— agency managers and Members of Congress will be limited in their ability  to fully understand how DHS and GSA intend to accomplish the  consolidation and, consequently make informed decisions about future  multi-billion dollar investments. Utilizing an updated comprehensive  needs assessment and gap analysis of current and needed capabilities to  inform revised headquarters consolidation plans can better position DHS  and GSA to assure decision makers within both agencies and in  Congress that consolidation is justified.
section_title: Changing Conditions Call for DHS and GSA to Reevaluate Alternative Approaches and Prioritize Projects for Headquarters Consolidation
paragraphs: Changes to workplace standards and funding instability provide GSA a  commensurate opportunity to evaluate and prioritize alternative  construction and leasing options to meet DHS space needs in the NCR.  As stated earlier, leading capital decision-making practices call for  agencies to determine how best to bridge performance gaps by  identifying and evaluating alternative approaches. Before choosing to  purchase or construct a capital asset or facility, leading organizations are  to carefully consider a wide range of alternatives, such as using existing  assets, leasing, or undertaking new construction. After evaluating  alternatives, leading practices call for organizations to select projects  based on a relative ranking of investment proposals. This prioritization of  projects is important because limited resources require organizations to  choose alternatives with the highest benefit or return. In the years leading  up to 2009, when GSA issued the project Master Plan, DHS and GSA  conducted alternatives analyses and used the results of these efforts to  support the existing DHS headquarters consolidation plan and prioritize  the individual projects that encompass the larger consolidation effort. For  example, in 2007, we found that DHS examined various scenarios for  housing DHS employees, such as a “campus” scenario, which would  entail consolidation resulting in several campuses, including one large  campus. Likewise, in 2008, GSA analyzed the feasibility of consolidating  DHS headquarters at a variety of sites throughout the NCR, and  determined that the only site with space available to accommodate DHS  needs was the St. Elizabeths campus. After the site was selected, DHS  and GSA worked together to prioritize the multiple construction phases  that constitute the overall St. Elizabeths campus development.
Given changes in workplace standards, among other things, as well as  cost escalation and schedule slippage associated with funding instability,  DHS and GSA would benefit from updating their alternatives evaluation  and prioritizing the range of leasing and construction alternatives. One  potential alternative, for example, would be for DHS to consider moving  entire components from currently leased space to St. Elizabeths, rather  than only the leadership of particular components as originally  envisioned. Moving more staff than currently planned to the campus from  leased space could potentially increase long-term cost savings and  facilitate more effective collaboration. If DHS and GSA were to take such  an action, this would require an overall change in their approach to  housing staff in government-owned and -leased space—a change beyond  that already considered within the context of DHS’s 2007 colocation plan.  Even if DHS were to consider moving smaller portions of its workforce  rather than entire components—for example, certain offices within  components—to St. Elizabeths, DHS would need to consider the  cascading effect of those changes and develop updated plans to reflect  that. This would entail a reconsideration of space needs in both owned  and leased space, and a commensurate reevaluation of funding needs,  depending on, among other things, the volume and type of available or  projected owned and leased space, and associated costs and benefits, as  well as alternative estimates showing when owned or leased space might  be available.
DHS 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 officials told us that  when the St. Elizabeths project was conceived, the standard office  workspace was 200 square feet per person. In response to the 2012  Freeze the Footprint initiative described earlier, where applicable, DHS  intends to reduce the average space per person for its employees across  the department to 150 square feet of space per person. However, this  potential change is not reflected in current headquarters consolidation  plans. As a result, if DHS and GSA choose to keep the original 4.5 million  square foot footprint they initially planned, they could increase the number  of staff occupying the 14,000 seats at St. Elizabeths from 14,000 to about  20,000. Conversely, if DHS and GSA decide to keep 14,000 staff they  initially planned to work at St. Elizabeths, they could shrink the overall  footprint to about 3.7 million square feet. According to DHS and GSA, the  agencies have taken steps to adapt to the changes in workplace  standards. For example, flexible workspaces were incorporated into the  build-out of the Coast Guard headquarters building during construction.  Specifically, the internal build-out of the space has flexible configurations  that can be easily and inexpensively changed to support changes in the  workplace environment, in the event that DHS decided to expand or  reduce the workforce or space. Table 4 shows the original estimates, and  the effect of increasing the number of staff occupying 14,000 seats from  14,000 to 20,000 (scenario A), or reducing the footprint to about 3.7  million square feet by keeping the estimated number of staff at 14,000  (scenario B).
Adopting either scenario or some variation between the two could have a  significant impact on the scope and cost of the project and could change  how DHS and components perform their missions. The following is a  description of potential alternatives that DHS and GSA could consider in  light of new workplace standards. DHS and GSA officials said they are  considering these types of options, although they have not yet developed  final documents or analysis. For example:
Keep the current estimated number of staff (14,000) with a reduced  square footage (3.7 million). GSA and DHS could, over the short term,  reduce the overall cost of the project with a decrease in construction  costs. Furthermore, DHS and the components slated to move to St.  Elizabeths would likely carry out their mission at the new location as  originally intended.
Maintain the current square footage projection (4.5 million square  feet) while increasing the number of staff occupying the 14,000 seats  (from 14,000 to 20,000). This change could result in an increase of  the overall short-term cost of the project because GSA might have to  build out additional office space and meet requirements for additional  services, such as computer and telecommunication lines and  technological services. However, the increased staff at St. Elizabeths  could also increase long-term savings because DHS would not need  to lease space for an increased number of employees should DHS  decide to move more to St. Elizabeths.
In addition, as discussed earlier, from fiscal years 2009 to 2014, the gap  between requested funding and funding received was over $1.6 billion.  According to DHS and GSA officials, this funding gap has created cost  escalations of over $1 billion. To help address the variation in funding  requested and received, DHS and GSA have revised their funding  strategy to focus on developing smaller construction segments that are  intended to be more financially viable and less subject to uncertainty. For  example, DHS and GSA may request full funding for a construction  segment that will result in a functional, usable building and not be  dependent on additional future funding to complete. This funding strategy  is consistent with a leading practice related to the budgeting phase of  capital decision-making, which calls for agencies to budget for projects in  useful segments. Specifically, DHS and GSA would allocate funding for  the remaining work at St. Elizabeths into usable segments that are  independent of the overall consolidation, rather than incrementally over  the length of the project, as has been done in the past. Developing a  funding strategy into segments may be a viable approach in managing  and overseeing a project with a scope and potential cost as large as St.  Elizabeths, particularly in a constrained budgetary environment.
Schedule delays—up to 10 years relative to original estimates, according  to DHS officials—have also resulted from the gap between funding  requested and funding received. These delays have posed challenges for  DHS in terms of its current leasing portfolio. Specifically, DHS’s long-term  leasing portfolio was developed based on the original expected  completion date for St. Elizabeths development in 2016. However,  according to DHS leasing data, 52 percent of DHS’s current NCR leases  will expire in 2014 and 2015, accounting for almost 39 percent of its  usable square feet. See figure 5 for DHS’s annual leasing costs and  usable square feet by year of lease expiration for 2013 through 2023.
DHS officials told us that, given delays moving the project forward and the  expiration of existing leases, DHS is currently working with GSA to  renegotiate leases where staff of individual components are currently  housed. However, DHS acknowledged that a comprehensive analysis of  its real property and leasing options in the NCR—which has a direct  bearing on development options at St. Elizabeths—is ongoing, but not  complete, and documents related to the analysis have not been finalized.
Given uncertainties about the size, scope, and timing of the project  moving forward as well as the overall cost of the project to the  government—DHS and GSA would be better positioned to make choices  about capital investments if they were to identify and analyze a broader  range of alternatives and use this alternatives analysis to inform their  prioritization and selection of efforts related to headquarters  consolidation. For example, a comprehensive alternatives analysis could  take into account (1) DHS’s actual and projected leasing costs for  locations where employees are currently housed; (2) DHS and GSA costs  to develop additional segments of the St. Elizabeths Campus, as well as  any transportation and infrastructure improvements; and (3) a range of  leasing and construction alternatives and their associated costs for the St.  Elizabeths site, depending on a determination of usable square footage  needed. After identifying and analyzing a range of alternatives that better  reflects current conditions, DHS and GSA would be better positioned to  prioritize the individual steps or projects that will compose the larger  headquarters consolidation effort. Given that $1.5 billion has already been  invested in the headquarters consolidation, a comprehensive analysis  and prioritization of alternatives, including cost and benefit analyses for  each of the alternatives being considered, that accounts for the complete  costs and benefits to the federal government as a whole, would improve  transparency and allow for more informed decision making by DHS and  GSA leadership and Members of Congress.
section_title: Project Review and Approval Process Does Not Consistently Follow DHS Acquisition Standards
paragraphs: DHS has not consistently applied its major acquisition guidance for  reviewing and approving the headquarters consolidation project. Leading  practices call for agencies to establish a formal process for senior  management to review and approve proposed capital assets. The cost of  a proposed asset, the level of risk involved in acquiring the asset, and its  importance to achieving the agency mission should be considered when  defining criteria for executive review. Leading organizations have  processes that determine the level of review and analysis based on the  size, complexity, and cost of a proposed investment or its organization- wide impact. DHS has guidelines in place to provide senior management  the opportunity to review and approve its major projects, but DHS has not  consistently applied these guidelines to its efforts to work with GSA to  plan and implement headquarters consolidation. As discussed below,  DHS has sometimes, but not always, classified the consolidation project  as a major acquisition, which has affected the extent to which the  department has oversight of the project. By not consistently applying this  review process to headquarters consolidation, DHS management risks  losing insight into the progress of the St. Elizabeths project, as well as  how the project fits in with its overall acquisitions portfolio.
DHS programs designated as major acquisitions are governed by the  policies and processes contained in DHS Acquisition Management  Directive 102-01 (MD 102) and the accompanying DHS Instruction  Manual 102-01-001. MD 102 establishes an acquisition life-cycle  consisting of four phases. According to MD 102, an acquisition program  is considered a Level 1 Major Acquisition if its life-cycle cost is at or  above $1 billion, and a Level 2 Major Acquisition if its life-cycle cost is  $300 million or more, but less than $1 billion. At predetermined points  throughout the life-cycle—known as Acquisition Decision Events—a  program deemed to be a major acquisition undergoes review by a  designated senior official, referred to as the Acquisition Decision  Authority, to assess whether the program is ready to proceed through  each of the four phases. An important aspect of this process is the review  and approval of key acquisition documents that, among other things,  establish the need for a major program, its operational requirements, and  an acquisition baseline and plan. MD 102 also requires that a DHS  Investment Review Board (IRB) review major acquisitions programs at  Acquisition Decision Events and other meetings, as needed. The IRB is  chaired by the Acquisition Decision Authority and made up of other senior  officials from across the department responsible for managing DHS  mission objectives, resources, and contracts. DHS’s Office of Program  Accountability and Risk Management (PARM) is responsible for DHS’s  overall acquisition governance process, supports the IRB, and reports  directly to the DHS Chief Acquisition Officer. PARM is to develop and  update program management policies and practices, oversee the  acquisition workforce, provide support to program managers, and collect  program performance data. Our prior work has assessed MD 102 and  found that it establishes a knowledge-based acquisition policy for  program management that is largely consistent with key practices.
DHS has 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 Acquisition Oversight List.  Thus, the project was subject to the oversight and management policies  and procedures established under MD 102. In 2012, the project as a  whole was dropped from the list, and in 2013 DHS included the IT  acquisition portion of the project on the list. DHS issued the 2014 list in  June 2014, which again included the IT portion of the project, but not the  entire project. Figure 6 shows the extent to which the headquarters  consolidation project has or has not been considered a major acquisition  by DHS under MD 102.
PARM 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. Furthermore, they stated that DHS appropriations for  the project are largely transferred to GSA through interagency  mechanisms so that, in effect, GSA is responsible for managing contracts  procured with DHS funding. PARM officials also explained that they did  not believe that the IT portion of the St. Elizabeths project should be  classified as a DHS major acquisition. They said that although the IT  acquisitions are a DHS responsibility and funded with DHS  appropriations, GSA is managing the IT contracts and therefore they  believe those acquisitions’ oversight should reside with GSA. They said  that the reason the IT component was placed on the Major Acquisition  Oversight List in 2013 was because the DHS Office of Inspector General  (OIG) recommended its inclusion. When asked why the overall  headquarters consolidation program was previously identified by DHS as  a major acquisition in earlier years, and what had changed, PARM  officials said that it was likely included on past acquisition lists because it  was a new program and DHS and GSA roles and responsibilities had yet  to be firmly established.
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. As noted above, an acquisition  program is considered a Level 1 Major Acquisition if its life-cycle cost is at  or above $1 billion. DHS and GSA were unable to provide an estimate of  the life-cycle cost for the St. Elizabeths project. However, under the  current plan, DHS reports it will need about $1.7 billion to complete the  project by 2026, not including life-cycle cost, well above the normal  threshold required for a major acquisition classification called for by MD  102. Furthermore, per MD 102, the Acquisition Review Board may  consider a project a candidate for oversight under MD 102 if the project’s  importance to DHS’s strategic and performance plans is disproportionate  to its size, or if the project has high executive visibility, impacts more than  one DHS component, has significant program or policy implications, or if  the Deputy Secretary, Chief Acquisition Officer or Acquisition Decision  Authority recommends an increase to a higher acquisition level. Given the  size and scope of the project and the extent to which the completion of  the project could impact the performance of DHS’s mission, the  headquarters consolidation project should be considered a candidate for  treatment as a major acquisition under MD 102. If DHS were to consider  the headquarters consolidation project a major acquisition, consistent with  MD 102 requirements, DHS would be better positioned to oversee the  project and provide decision makers in DHS and Congress, and the  taxpayer greater assurance that the project is being acquired on-time and  on-budget.
We also observed that, during the years (2010, 2011, 2013, and 2014)  that the headquarters consolidation project, or portions of it, was on  DHS’s major acquisition list and therefore subject to MD 102  requirements, the project did not comply with major acquisition  requirements as outlined by DHS guidelines. Specifically, the project has  not produced any of the required key acquisition documents requiring  department-level approval: (1) mission need statement, (2) capability  development plan, (3) operational requirements document, (4) integrated  logistics support plan, (5) life-cycle cost estimate, (6) acquisition program  baseline, and (7) test and evaluation master plan. Furthermore, one role  of PARM is to conduct independent evaluations of major programs’ health  and risks, but PARM has not assessed the St. Elizabeths project as of  March 2014. PARM officials stated, however, that they informally monitor  the project through regular communication with DHS officials who  oversee the St. Elizabeths project and have no concerns about the  project’s management. In accordance with MD 102, the IRB’s  predecessor body—the Acquisition Review Board—reviewed the  headquarters consolidation program with a focus on ARRA funding in  2009 and 2010, but has not reviewed the program since then, even  though the program as a whole was considered a major acquisition in  2011, and likewise with the IT component in 2013 and 2014. In May 2010,  the board generally expressed concern about the level of DHS oversight  given that the project was highly visible and important for the department,  and recommended senior leadership meetings between DHS and GSA.  In September 2010, DHS and GSA signed a memorandum of  understanding that defined certain roles for both agencies regarding  project oversight. As noted earlier, DHS officials stated the headquarters  consolidation has not undergone review by the IRB since 2010 because  they viewed it as primarily a GSA project.
DHS officials also stated that the program was under way before MD 102  was issued and that the directive requirements were not applicable. In  addition, officials stated that they regularly briefed leadership on the  status of the project and have produced some documentation, such as a  needs assessment and baseline, which officials said are similar to  documents required by MD 102. For example, the St. Elizabeths baseline  contains some cost and schedule information for the project as required  by MD 102. However, it does not contain other required information to  help measure program performance. In addition, a 2010 update to MD  102 stated the directive requirements are to be applied to the maximum  extent possible to all major acquisitions in existence when the update was  issued. According to DHS acquisition officials, since 2010, the DHS  Acquisition Officer has issued waivers for some legacy programs, but not  for the headquarters consolidation program or its IT component. Although  the St. Elizabeths program managers may provide visibility of the project  to leadership and may have similar key documentation, this falls short of  the requirements contained in MD 102. The MD 102 process provides a  more consistent, transparent review process that would involve a greater  cross section of departmental stakeholders, among other things,  especially given the magnitude of the project and the numbers of  components that would occupy space at St. Elizabeths.
DHS has established through MD 102 an acquisitions policy for major  capital assets that provides the agency with tools to better manage large  projects. For example, regular project review and approval by a cross  section of departmental leadership, along with having standardized  project documentation, can help mitigate significant acquisitions  challenges such as funding instability and capability changes.  Furthermore, the MD 102 process provides oversight and facilitates  program accountability. If the entire headquarters consolidation program  were designated as a major acquisition, DHS would be better positioned  to follow its own acquisition policy. Utilizing the MD 102 review framework  could provide the structure for more efficient program management and  provide DHS, Congress, and taxpayers greater assurance that  government funds are being spent in a way that is consistent with sound  acquisition practices, and the project is moving forward as intended.
section_title: DHS and GSA Cost and Schedule Estimates for the St. Elizabeths Project Do Not Conform with Leading Practices
paragraphs: DHS and GSA cost and schedule estimates for the headquarters  consolidation project at St. Elizabeths do not or only minimally or partially  conform with leading estimating practices, and are therefore unreliable.  Furthermore, in some areas, the cost and schedule estimates do not fully  conform with GSA guidance relevant to developing estimates. 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.
subsections: section_title: St. Elizabeths Cost and Schedule Estimates Are Unreliable
paragraphs: DHS and GSA cost and schedule estimates for the headquarters  consolidation project at St. Elizabeths contain numerous deficiencies that  do not reflect leading practices, which render the estimates unreliable. In  2013, DHS and GSA updated earlier estimates to produce the current St.  Elizabeths cost and schedule estimates summarized in figure 7. These  DHS and GSA estimates showed a total project cost of about $4.5  billion—$2.8 billion funded through GSA appropriations and the remaining  $1.7 billion funded through DHS appropriations. According to the 2013  estimates provided by DHS and GSA, based on this level of funding, the  project would be completed in 2026.
We compared the 2013 cost estimate and the 2008 and 2013 schedule  estimates with leading practices for developing such estimates and found  that the estimates do not or only minimally or partially conform with key  characteristics for developing reliable estimates. Specifically, we  compared DHS and GSA overall project cost estimates with the GAO  Cost Estimating and Assessment Guide (Cost Guide), which defines  leading practices related to four characteristics—comprehensive, well  documented, accurate, and credible—that are important to developing  high-quality, reliable cost estimates. We also compared DHS and GSA  overall schedule estimates with the GAO Schedule Assessment Guide,  which defines leading practices related to four characteristics— comprehensive, well constructed, credible, and controlled—that are  important to developing high-quality, reliable schedule estimates.5 and 6 describe the characteristics of high-quality, reliable cost and  schedule estimates that served as the foundation of our comparative  analysis.
We have applied our leading cost and schedule estimation practices in  past work involving federal construction projects, and the leading  practices were developed in conjunction with numerous stakeholders  from government and the private sector, including DHS and GSA.  Furthermore, GSA acknowledged the value of our leading cost estimation  practices in 2007 and issued an order to apply the principles to all cost  estimates prepared in every GSA project, process, or organization.
We established five descriptions for our assessments of leading practices and cost  estimate characteristics: fully meets, substantially meets, partially meets, minimally meets,  and does not meet. We consider a leading practice to be fully met when the associated  tasks are completely satisfied, substantially met when a large portion of the associated  tasks are satisfied, partially met when about half of the associated tasks are satisfied,  minimally met when a small portion of the associated tasks are satisfied, and not met  when none of the associated tasks are satisfied. Our assessment method weights each  leading practice equally and bases the assessment of each characteristic on the average  score of underlying leading practices. We assign each description a numerical value (5 for  fully meets to 1 for does not meet) and round scores to the higher numerical value (i.e., a  score of 4.5 would round up to 5). Assessments were conducted by an individual analyst,  and then the results were independently traced and verified by a second analyst. reflect the characteristics of a high-quality estimate and cannot be  considered reliable. The following two sections provide an overview of the  results of our comparison of DHS and GSA cost and schedule estimates  with the four characteristics for each of GAO’s cost- and schedule-  estimating guidelines.
subsections: section_title: St. Elizabeths Cost Estimate Partially or Minimally Conforms with Leading Practices
paragraphs: Our overall comparison of the 2013 cost estimate for St. Elizabeths  development with leading cost-estimating best practices showed that the  estimate partially or minimally conforms with leading practices.  Specifically, we found that the cost estimate for the headquarters  consolidation at St. Elizabeths partially conforms with leading practices  associated with the characteristics of comprehensive and well- documented estimates, and minimally conforms with leading practices  associated with characteristics of accurate and credible estimates.
We assessed the DHS and GSA cost estimate using the framework of the  four characteristics above associated with high-quality, reliable cost  estimates. Table 7 shows the overall results of our comparison along with  examples of selected leading practices under each characteristic and our  rationale for assessment. Appendix V provides greater detail on our  comparison of the estimate with specific leading practices that constitute  the four cost-estimating characteristics.
A reliable cost estimate is critical to the success of any program. 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, 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. Among other things, OMB states that generating  reliable program cost estimates is a critical function necessary to support  OMB’s capital programming process. Without this capability, DHS and  GSA are at greater risk of experiencing cost overruns, missed deadlines,  and performance shortfalls related to the headquarters consolidation  program.
section_title: St. Elizabeths Schedule Estimates Minimally Conform with Leading Practices
paragraphs: Our overall comparison of DHS and GSA schedule estimates with leading  schedule-estimating practices showed that the most recent schedule  estimate DHS and GSA prepared with sufficient detail for the entire  project—in 2008—minimally conforms with leading practices. Specifically,  the 2008 estimate minimally conforms with leading practices related to  each of the characteristics of comprehensive, well-constructed, credible,  and controlled estimates.
We assessed DHS and GSA schedule estimates using the framework of  the four characteristics above associated with high-quality, reliable  schedule estimates. Table 8 shows the overall results of our analysis of  the 2008 schedule estimate, along with examples of select leading  practices under each characteristic and our rationale for assessment. We  highlighted the results of the 2008 schedule comparison because the  2008 schedule was the most recent schedule that included logic  necessary for identifying a critical path. As noted above, at the request of  GSA, we also analyzed a schedule estimate updated in 2013. However,  the 2013 estimate was incomplete and did not cover the overall  consolidation program in sufficient detail. For example, the schedule  depicts only high-level activities and does not provide details needed to  understand the sequence of events, including work to be performed in  fiscal years 2014 and 2015. As a result, the 2013 schedule satisfied fewer  leading practices than the 2008 schedule, and is also unreliable.  Appendix VI provides greater detail on our comparison of both the 2008  and 2013 estimates with 10 specific leading practices that compose the  four schedule estimating characteristics.
In accordance with leading schedule estimation practices, the success of  a major program such as the consolidation project at St. Elizabeths  depends in part on having an integrated and reliable master schedule that  defines when work will occur and how long it will take and how each  activity is related to the others. For example, the program schedule  provides not only a road map for systematic project execution but also the  means by which to gauge progress, identify and resolve potential  problems, and promote accountability at all levels of the program. A  program schedule is also a vehicle for developing a time-phased budget  baseline and an essential basis for managing trade-offs among cost,  schedule, and scope. Accordingly, and despite current funding  uncertainty for the project, DHS and GSA would benefit from developing a  comprehensive schedule for the St. Elizabeths consolidation project in  accordance with leading practices. DHS and GSA officials, as discussed  in more detail below, generally did not agree with this overall assessment  because they believe the leading practices are not well-suited for the type  of complex construction projects occurring at the St. Elizabeths site.
section_title: St. Elizabeths Cost and Schedule Estimates Do Not Always Conform with GSA Project-Estimating Guidance
paragraphs: We compared the cost and schedule estimates prepared by DHS and  GSA for the St. Elizabeths project with relevant GSA guidance and found  that the estimates do not always conform with agency estimating  requirements. In commenting on our assessments of the St. Elizabeths  cost and schedule estimates, DHS and GSA officials acknowledged that  the estimates do not fully conform with our leading practices, but said that  the estimates do conform with GSA project estimation policies. GSA  officials agreed with the underlying objectives of our leading cost- and  schedule-estimating practices, but noted that other methodologies are  valid and better suited to GSA projects like construction at St. Elizabeths.  GSA officials cited GSA’s Project Estimating Requirements for the Public  Buildings Service, also called P-120, and GSA’s Facilities Standards for  the Public Buildings Service, also called P-100, as the key documents for  estimating and managing building construction programs within GSA.  Because P-120 and P-100 focus on cost estimation requirements and do  not fully describe schedule estimation, GSA officials subsequently  provided us with GSA’s Global Project Management (gPM) guidance as  an additional source as it includes the Scheduling Fundamental Guide.
We reviewed the GSA guidance listed above and noted several areas  where GSA cost and scheduling-estimating policies align with our leading  practices. More specifically, 8 of the 12 steps of a high-quality cost  estimate were at least partially reflected in GSA guidance, and 5 of our 10  leading schedule-estimating practices were at least partially reflected. For  example, GSA’s P-100 guidance fully reflects our leading cost estimation  practice of “defining the program’s characteristics,” as it contains formal,  detailed design standards and criteria for construction of new facilities  and repairs or alterations to existing buildings. GSA’s gPM guidance fully  reflects our leading schedule estimation practice of “capturing all  activities,” as it states that the first step in building a schedule is to identify  all activities required to complete the project and recommends  incorporating the activities to the project’s Work Breakdown Structure  (WBS)—a framework for documenting certain activities like estimating  costs, identifying resources, determining where risks may occur, and  providing the means for measuring program status.
In cases where GSA guidance and our leading practices align, we  compared the St. Elizabeths cost estimates with GSA guidance and found  some areas where the project estimates were developed consistent with  the guidance. For example, P-120 and P-100 call for GSA to establish a  set of ground rules for estimating GSA construction projects, such as how  inflation is applied or how budget constraints might affect the project. Our  comparison of the St. Elizabeths project cost estimate with GSA guidance  showed that the project estimate documents the ground rules consistent  with the guidance. Likewise, P-120 recommends using a WBS for  projects to be funded over more than 1 year. Our comparison showed  that the estimate included a WBS that outlined the end product and major  program effort.
In contrast, we also found areas where the 2013 St. Elizabeth cost  estimate was not prepared consistent with GSA guidelines. Specifically,  our comparison showed that the project cost estimate:
Does not include a life-cycle cost analysis. P-120 and P-100 both  require that a life-cycle cost analysis be conducted to help determine  the value of a project beyond just the cost of acquiring it, such as the  cost of repairs, operations, preventive maintenance, logistic support  utilities, and depreciation over the useful lifetime of the facility. P-100  states, for example, that “three characteristics distinguish GSA  buildings from buildings built for the private sector: longer life span,  changing occupancies, and the use of a life-cycle cost approach to  determine overall project cost.” No life-cycle cost analysis for St.  Elizabeths is reflected in the estimate, including the cost of repair,  operations, and maintenance.  Is not regularly updated to reflect significant changes in the  program. P-120 guidance states that the cost estimates for design  projects should be updated throughout the design process, and  furthermore, where costs are included, design assumptions must be  addressed in order to completely define the scope of the estimate. We  found that the estimate was updated based on available funding, but  was not regularly updated to reflect significant changes to the  program including actual costs.
Does not include an independent cost estimate. P-100 states that  GSA will develop two separate independent government estimates  (IGE) to aid in effective project controls and assist in tracking the  budget. The GSA definition of IGE does not completely align with the  GAO definition of an independent cost estimate, but no IGEs were  conducted for the entire St. Elizabeths project.
With regard to St. Elizabeths 2008 and 2013 schedule estimates, we  found some instances where the project schedule estimates were partially  consistent with GSA guidelines—the estimates covered elements of the  guidance—and others where they did not. For example, P-120 states that  schedules should realistically reflect how long each activity should take.  Our comparison of the St. Elizabeths schedule estimates with GSA  guidance showed that the project estimates partially establish the  duration of all activities—a factor that is reflected in both the 2008 and  2013 schedule estimates. Likewise, GSA’s gPM states that activities  should be sequenced after they have been defined and their duration has  been estimated, tracked according to start and finish dates, and  structured to show relationships between them to reflect their dependency  on each other. Our comparison showed that the 2008 schedule estimate  (not the 2013 estimate) partially reflected these gPM guidelines. In those  instances where schedule estimates were not prepared in a manner  consistent with GSA guidelines, we found that the 2008 and 2013  schedule estimates:
Do not capture all project activities. GSA’s gPM states that the first  step in building a schedule is to identify all activities required to  complete the project. GSA scheduling guidance also recommends  incorporating the activities into the project’s WBS as this feature helps  to organize and define the total scope of the project. However, we  observed that the St. Elizabeths schedules did not define in detail the  work necessary to accomplish a project’s objectives, including  activities both the government and contractors are to perform.
Do not contain an updated Integrated Master Schedule (IMS).
GSA’s gPM stresses the importance of regularly updating the  schedule so that it represents the most up-to-date information on  planned and completed activities, but we found no evidence that DHS  and GSA maintained and regularly updated an IMS for the entire  project. This includes providing a review of missed milestones, current  expected completion dates, and actions needed to maintain/regain  schedule progress.
Do not include a complete schedule baseline document. GSA’s  gPM states that establishing a baseline schedule that should be  changed only with formal approvals from both the project team and  the client is one of the four steps to establish a schedule. The gPM  guidance also states that the baseline schedule should be maintained  and that it should serve as the record of the “approved” schedule to  allow the project manager to calculate variance. We found no  evidence of a schedule baseline document that described the overall  schedule, the sequencing of events, and the basis for activity  durations, among other things, to help measure performance.
Reliable cost and schedule estimates are critical to providing overall  project transparency and also in providing information to a variety of  decision makers. 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. In addition, DHS and GSA officials  stated that given funding uncertainty for the St. Elizabeths project as a  whole, they were reluctant to allocate resources to conduct more detailed  cost and schedule estimates until additional appropriations were received.  They described future project phases as “not real” until they are funded.  They added that once funding for a project phase is secured, more  complete estimates would be created as part of that segment’s design.  For example, regarding the schedule estimates, a senior DHS official said  that at the programmatic level, since future phases of construction have  not been authorized, funded, or designed, it would be illogical to develop  anything beyond a generalized milestone schedule. GSA officials also  commented that planning estimates for future unfunded work is  conceptual and milestone based and therefore is sufficient for planning  Phases 2 and 3. 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, however, that this high-level schedule is not sufficiently defined  to effectively manage the program. For example, our review of the  schedule showed that project bars in the schedule that represent the two  active Phase 1 and Phase 2A efforts do not contain detailed schedule  activities that include current government, contractor, and applicable  subcontractor effort. Specifically, there is no detailed program schedule  that enables the tracking of key deliverables, and the activities shown in  the schedule address only 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.  Further, there are no milestones identified that are consistent with the  contract dates and other key dates established by management in the  baseline schedule, and the project bars for near-term work are not  mapped to a statement of work to ensure all effort is accounted for in the  schedule. Finally, the project bars for near-term work also do not contain  any risk mitigation activities. 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.
In addition to stating that it is not feasible to develop cost and schedule  estimates for the entire St. Elizabeths project that conform with leading  practices, DHS and GSA officials pointed to the project’s performance to  date as an indicator of sound overall management. Specifically, DHS and  GSA officials maintained that Phase 1 of the overall consolidation  project—primarily the USCG headquarters—was completed “on-schedule  and near on-budget,” after taking into account delays in the project start  and smaller than expected annual appropriations, thus proving that their  estimation practices were sound. As noted earlier, some of the work that  was originally planned for Phase 1, such as utility installation; security  measures; landscaping; and work on the visitors’ center, historic  auditorium, and access road, was deferred to later project stages.  According to DHS and GSA officials, reducing the scope of Phase 1  enabled the project team to shift resources to more critical capabilities  required for USCG occupancy, which resulted in on-schedule and near  on-budget completion for the portion of Phase 1 funded by Congress.  DHS and GSA officials maintained that the execution of Phase 1 was  successful and that this should have factored into our analysis of cost and  schedule estimates. However, our analysis of estimates is focused on the  remaining work in the project, not the actual performance of work  completed. Phase 1 results cannot be the sole basis used to forecast the  reliability of cost and schedule estimates for the remaining phases of  development at St. Elizabeths. As our analyses showed, the estimates  were deficient in several areas, including comprehensiveness, accuracy,  and credibility, which renders them unreliable in the context of future  work.
In addition to the planned work deferrals and reductions in scope  described above, other unanticipated obstacles affected Phase 1 project  cost and schedule as well, but DHS and GSA officials did not document  these impacts. For example, GSA officials noted that the original design  for the Coast Guard fitness center was complete and construction was set  to begin, but the building had to be redesigned and sunk farther  underground after a historic preservation stakeholder objected to the  structure’s sight-lines. Also, toxic ash was unexpectedly discovered in the  walls of one of the historic buildings, which required additional funds and  time to remove. DHS and GSA officials were not able to tell us how  much additional funding and time were required to redesign and construct  the fitness center and to remediate the toxic ash. Overall, without  documentation, we could not quantify the specific effects of these types of  actions on Phase 1 cost growth and delays. Because DHS and GSA  project cost and schedule estimates inform Congress’s funding decisions  and affect the agencies’ abilities to effectively allocate resources across  competing projects in their capital programs, there is a risk that funding  decisions and resource allocations could be made based on information  that is not reliable.
section_title: Conclusions
paragraphs: Several factors have changed since DHS began planning its consolidated  headquarters in 2005. New workplace standards allow more people to  work in less space, and recent government-wide initiatives like Freeze the  Footprint have prompted agencies to rethink their real property portfolios  and lease arrangements. In addition, the DHS headquarters consolidation  effort has not received the level of funding that DHS and GSA officials  originally envisioned. By taking into account changing workplace  standards and funding instability, assessing alternatives, prioritizing  projects, and using the results of these analyses to inform the revised  project plan in accordance with leading practices, DHS and GSA would  be better positioned to assure decision makers within both agencies and  in Congress that the consolidation project is justified. In addition, DHS  has an acquisitions policy that generally aligns with leading capital  decision-making practices, which applies to major acquisitions, as  determined by cost criteria and other factors such as project visibility.  However, DHS has moved the headquarters consolidation project or  elements of the project on and off its list of major acquisitions over the  last several years. Furthermore, during the periods when the project was  identified by DHS as a major acquisition, the program did not fully comply  with acquisition policy requirements, such as obtaining department-level  approval of certain documents. Although GSA owns the site, funds the  majority of the building construction, and oversees other contracts on  behalf of DHS, given DHS’s significant monetary investment, along with  the project’s visibility and potential impact on DHS missions, treating  headquarters consolidation as a major acquisition and applying the policy  to the maximum extent possible would provide greater assurance that  government funds are being spent in a way that is consistent with sound  acquisition practices and that the project is moving forward as intended.
Creating reliable cost and schedule estimates for the headquarters  consolidation project should be an integral part of DHS and GSA efforts to  reassess the project. DHS and GSA current estimates do not conform  with several leading practices, which make the estimates unreliable.  Furthermore, in several instances, the cost and schedule estimates do  not fully conform with GSA’s estimation policies. Although DHS and GSA  maintain that more comprehensive estimates will be conducted as the  project advances and funding is secured, decision makers could benefit  now from accurate estimates that encompass the life-cycle of the project.  Without this information, it is difficult for agency leadership and Members  of Congress to make informed decisions regarding resource allocations  and compare competing priorities. Pending the development of reliable  cost and schedule estimates, the project risks potential cost overruns,  missed deadlines, and performance shortfalls.
section_title: Recommendations for Executive Action
paragraphs: In order to improve transparency and allow for more informed decision  making by congressional leaders and DHS and GSA decision-makers, we  recommend that, before requesting additional funding for the DHS  headquarters consolidation project, the Secretary of Homeland Security  and the Administrator of the General Services Administration work jointly  to take the following two actions:  conduct the following assessments and use the results to inform  updated DHS headquarters consolidation plans: a comprehensive needs assessment and gap analysis of current  and needed capabilities that take into consideration changing  conditions, and 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.
After revising the DHS headquarters consolidation plans, 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.
We further recommend 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.
section_title: Matter for Congressional Consideration
paragraphs: 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.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DHS and GSA for review and  comment. In written comments, DHS concurred with all three of the  recommendations, and GSA concurred with the two recommendations  that applied to it. DHS and GSA comments are summarized below and  reprinted in appendix VII and appendix VIII respectively.
DHS and GSA concurred with our first recommendation that DHS  and GSA conduct a comprehensive needs assessment and  alternatives analysis. DHS and GSA commented that DHS and  GSA have already completed a draft enhanced consolidation plan  which DHS believes includes the needs assessment and gap  analysis envisioned by GAO. In addition, DHS stated that that the  cost-benefit analysis of leasing versus construction completed  during development of the original project master plan has been  updated to reflect current conditions and included as part of this  draft plan. GSA reported that it is working closely with DHS and  will share this plan with stakeholders upon completion.
DHS and GSA concurred with our second recommendation that  DHS and GSA develop revised cost and schedules that conform  to GSA guidance and leading practices. DHS commented that a  revised programmatic schedule and estimate was created in  conjunction with development of the draft enhanced plan, which,  according to DHS, is currently with the Office of Management and  Budget for approval. DHS stated that it defers to GSA as to  whether this estimate conforms to GSA or other criteria for cost  and schedule estimation, since the project is being managed and  executed by GSA and not DHS. GSA commented that it plans to  update the cost and schedule estimates upon completion of the  Enhanced Plan, and may adopt some of the leading practices  referenced by GAO.
DHS concurred with our third recommendation that DHS  designate the headquarters consolidation program a major  acquisition and apply DHS acquisition policy requirements. DHS  reported that the Acting Under Secretary for Management  determined in September 2014 that the DHS-funded portions of  the St. Elizabeths project will come under the purview of the DHS  Acquisition Review Board for oversight effective immediately to  assure senior leadership visibility over DHS funds executed by  GSA.  DHS also requested that we consider this recommendation  resolved and closed. Designating the DHS-funded portions of the  St. Elizabeths project a major acquisition partially addresses our  recommendation. It is still too early to assess the extent to which  DHS is applying its acquisition policy to the project. As stated in  our report, the St. Elizabeths headquarters consolidation project  has been moved off and on the DHS master acquisition oversight  list in prior years and in the years that it has been on the list, the  project did not comply with major acquisition requirements as  outlined by DHS guidelines. We will continue to monitor DHS’s  actions to apply its acquisition policy to the project as part of our  normal recommendation follow-up process.
In its comments, DHS also expressed concern that our report did not  sufficiently describe the roles and responsibilities of DHS and GSA.  Specifically, DHS stated that, as a tenant agency, its role is to establish  programmatic requirements; budget for and fund tenant responsible  items; provide oversight on GSA's use of DHS funds; validate that GSA  managed design and construction activities meet DHS operational and  program requirements; and coordinate with GSA and other stakeholders  throughout the process, as appropriate. DHS also noted that other  activities are managed by GSA in accordance with GSA policies and  under GSA supervision and oversight. DHS stated that, while DHS  cooperates with GSA and helps facilitate completion of these activities as  appropriate, DHS does not have any supervisory control over the  activities. Specifically, DHS stated that it did not select the St. Elizabeths  site, nor does not award or manage contracts for design and construction.  We agree that GSA has responsibility for these activities and have added  more detailed discussion of DHS and GSA roles to the report. However,  cooperation and collaboration between DHS and GSA is essential for a  variety of reasons, including the overall cost, scope, and visibility of the  project; the overall importance of the project in the context of DHS’s  mission; and in light of the fact that DHS has received $494.8 million to  date for the project. This does not include the additional $1.2 billion that  DHS expects that it will need to ensure that the project is completed by  2026. In this context, we believe that the management and  implementation of the St. Elizabeths project is a shared responsibility  between DHS and GSA, requiring them to work closely together to help  provide greater assurance to decision makers in Congress, DHS, and  GSA—as well as  taxpayers—that the project is being appropriately  managed and acquired on-time and on-budget.
DHS also expressed concern that the report is overly focused on “leading  practices” as opposed to being more outcome and results oriented. We  believe that applying the leading practice cited in our draft report would  better position DHS and GSA to manage the St. Elizabeths’ project and  help ensure better outcomes and results. DHS stated that GSA, in  concert with DHS, has already conducted sufficient analysis to support  the best practices in our report. We disagree. As we note in the report,  cost and schedule estimates for the project were deficient in several  areas, including comprehensiveness, accuracy, and credibility. Estimates  also failed to comply with GSA’s internal guidance for cost and schedule.
In its written response, GSA also commented that several of the leading  practices GAO identifies are better suited to non-real estate investments  such as weapons systems, spacecraft, aircraft carriers, and software  systems. We disagree. As stated in our report, we have applied our  leading cost and schedule estimation practices in past work involving  federal construction projects, and the leading practices were developed in  conjunction with numerous stakeholders from government and the private  sector, including DHS and GSA.  Furthermore, GSA acknowledged the  value of our leading cost estimation practices in 2007 and issued an order  to apply the principles to all cost estimates prepared in every GSA  project, process, or organization.
We are sending copies to the Secretary of Homeland Security,  Administrator of GSA, and other interested parties. In addition, the report  will be available at no charge on the GAO website at http://www.gao.gov.
If you or your staffs have questions about this report, please contact  either David Maurer at (202) 512-9627 or maurerd@gao.gov, or David  Wise at (202) 512-2834 or wised@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last   page of this report. Key contributors to this report are listed in appendix  IX.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: We conducted our review to examine (1) the extent to which the  Department of Homeland Security (DHS) and the General Services  Administration (GSA) developed DHS headquarters consolidation plans in  accordance with leading capital decision-making principles, and (2) the  extent to which DHS and GSA have estimated the costs and schedules of  the DHS headquarters consolidation project at St. Elizabeths in a manner  that is consistent with leading practices.
To determine the extent to which DHS and GSA developed DHS  headquarters consolidation plans in accordance with leading capital  decision-making principles, we reviewed and analyzed DHS and GSA  capital planning documents and interviewed DHS and GSA officials  responsible for the planning and management of the St. Elizabeths  project, as well as DHS and GSA senior leadership. We compared DHS  and GSA capital planning actions against Office of Management and  Budget (OMB) and GAO leading practices (see app. II). Our analysis of  DHS and GSA efforts using criteria for leading capital decision-making  focused on planning for the remaining segments or phases of the project  because, as we stated in previous reports, the planning phase is the crux  of the capital decision-making process. The results from this phase are  used throughout the remaining phases of the process; therefore, if key  practices during this phase are not followed there may be repercussions  on agency operations if poor capital investment decisions are made. To  determine the extent to which DHS planned and implemented the DHS  headquarters consolidation project at St. Elizabeths in accordance with  departmental acquisition guidelines, we interviewed officials from DHS’s  Office of Program Accountability and Risk Management (PARM) as well  as DHS project managers. We reviewed and analyzed DHS Acquisition  Management Directive 102-01 (MD 102) and DHS’s Major Acquisitions  Oversight List for fiscal years 2010 through 2014. We then compared the  acquisition standards detailed in MD 102 with DHS’s efforts to acquire a  consolidated headquarters facility at the GSA-owned St. Elizabeths  Campus.
To determine the extent to which DHS and GSA have estimated the costs  and schedules of the DHS headquarters consolidation project at St.  Elizabeths in a manner that is consistent with leading practices, we  interviewed DHS and GSA program officials and compared DHS and  GSA overall project cost and schedule estimates with GAO leading  practices. Specifically, the GAO Cost Estimating and Assessment Guide  (Cost Guide) identifies leading practices that represent work across the  federal government and are the basis for a high-quality, reliable cost  estimate. A cost estimate created using the leading practices exhibits  four broad characteristics: it is accurate, well documented, credible, and  comprehensive. That is, each characteristic is associated with a specific  set of leading practices. In turn, each leading practice is made up of a  number of specific tasks (see app. III). Similarly, we compared DHS and  GSA overall schedule estimates with the GAO Schedule Assessment  Guide, which defines leading practices related to four characteristics— comprehensive, well constructed, credible, and controlled—that are  important to developing high-quality, reliable schedule estimates (see  app. IV). For our evaluations of the cost and schedule estimates, when  the tasks associated with the leading practices that define a characteristic  were mostly or completely satisfied, we considered the characteristic to  be substantially or fully met. When all four characteristics were at least  substantially met, we considered a cost or schedule estimate to be  reliable. To analyze the St. Elizabeths schedule estimate, we asked DHS  and GSA to provide the most recent Integrated Master Schedule (IMS)  that included all related embedded project schedules. Although the 2013  cost estimate provided by DHS and GSA was complete, the 2013  schedule estimate did not cover the entire consolidation project in  sufficient detail. As a result, we initially analyzed the most recent  complete schedule available, which was created in 2008. The 2008  schedule estimate listed project completion in 2016. Subsequently, at the  request of GSA, we also applied our leading practices criteria to the  incomplete 2013 schedule. We shared our analysis with DHS and GSA  officials to review, comment on, and provide additional information, and  we adjusted our analysis where appropriate. Finally, we reviewed GSA  guidance that DHS and GSA officials stated was relevant to cost and  schedule estimating for the St. Elizabeths project: P-120: Project  Estimating Requirements for the Public Buildings Service (PBS); P-100:  Facilities Standards for the Public Buildings Service; and GSA’s Global  Project Management (gPM) guidance, which includes the PBS  Scheduling Fundamentals Guide. In areas where GSA estimating  guidance aligned with our leading cost and schedule-estimating leading  practices, we evaluated the extent to which the St. Elizabeths cost and  schedule estimates conformed with GSA guidance.
We conducted our work from August 2013 to September 2014 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: Leading Practices in Capital Decision-Making
paragraphs: Congress, the Office of Management and Budget (OMB), and GAO have  all identified the need for effective capital planning among federal  agencies. GAO developed its Executive Guide: Leading Practices in  Capital Decision-Making, which provides guidance to federal agencies on  planning, budgeting, acquiring, and managing capital assets. Figure 8  illustrates how capital decision-making principles fit together.
section_title: Appendix III: The Leading Practices for Developing High-Quality Cost Estimates
paragraphs: We developed the GAO Cost Estimating and Assessment Guide in order  to establish a consistent methodology that is based on best practices and  that can be used across the federal government for developing,  managing, and evaluating capital program cost estimates. We have  identified 12 steps under 4 characteristics that, followed correctly, should  result in reliable and valid cost estimates that management can use for  making informed decisions.
section_title: Appendix IV: 10 Leading Practices for Developing High-Quality Schedule Estimates
paragraphs: The GAO Schedule Assessment Guide is a companion to the Cost Guide.  A consistent methodology for developing, managing, and evaluating  capital program cost estimates includes the concept of scheduling the  necessary work to a timeline, as discussed in the Cost Guide. A well- planned schedule is a fundamental management tool that can help  government programs use public funds effectively by specifying when  work will be performed in the future and measuring program performance  against an approved plan. Table 10 represents the 10 leading practices  associated with a high-quality and reliable schedule and their concepts.
section_title: Appendix V: Summary Assessment of St. Elizabeths 2013 Cost Estimate Compared with Leading Practices
paragraphs: We assessed the Department of Homeland Security (DHS) and General  Services Administration (GSA) cost estimate using the framework of the  four characteristics—comprehensive, well documented, accurate, and  credible—associated with high-quality, reliable cost estimates. Table 11  provides greater detail on our comparison of the estimate with leading  practices that constitute the four cost-estimating characteristics.
section_title: Appendix VI: Summary Assessment of St. Elizabeths 2008 and 2013 Schedule Estimates Compared with Leading Practices
paragraphs: We assessed Department of Homeland Security (DHS) and General  Services Administration (GSA) schedule estimates using the framework  of the four characteristics—comprehensive, well constructed, credible,  and controlled—associated with high-quality, reliable schedule estimates.  Table 12 provides greater detail on our comparison of both the 2008 and  2013 estimates with 10 specific leading practices that constitute the four  schedule estimating characteristics.
section_title: Appendix VII: Comments from the Department of Homeland Security
section_title: Appendix VIII: Comments from General Services Administration
section_title: Appendix IX: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments:
paragraphs: In addition to the contacts named above, John Mortin (Assistant Director),  Karen Richey (Assistant Director), Juana Collymore, Giselle Cubillos,  Daniel Hoy, Abishek Krupanand, Jennifer Leotta, and David Lutter made  key contributions to this report. Also contributing to this report were  Charles Bausell, Susan Hsu, Eric Hauswirth, Tracey King, Linda Miller,  Jan Montgomery, and Cynthia Saunders.