Federal Contracting: Effort to Consolidate Governmentwide Acquisition Data Systems Should Be Reassessed
Released: 2012-03-15T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: The U.S. Government spends more than $500 billion each year on contracts. To ensure contracts are managed effectively, the government has established policies and procedures for advertising, awarding, administering, and reporting on them. Historically, data systems used to implement these steps have been fragmented and duplicative, with multiple systems across different agencies providing similar services. The Integrated Acquisition Environment (IAE) was initiated in 2001 to bring together different data systems into a unified system. It is intended to reduce duplication and information technology costs, and create a more streamlined and integrated federal acquisition process.

GAO was asked to assess (1) the acquisition strategy being used to develop IAE; (2) progress that has been made in consolidating IAE systems; and (3) any challenges that may affect the completion of IAE. GAO analyzed program costs, schedules, contracts, acquisition documents, and briefings, and interviewed IAE program officials and contractors.

section_title: What GAO Found
paragraphs: The development of IAE has occurred in two stages using different acquisition strategies. In 2001, GSA began establishing a portfolio of standardized government-wide data systems through an acquisition strategy known as “adopt, adapt, acquire.” GSA adopted or adapted existing agency-specific systems for government-wide use, or if no viable system met an identified need, GSA acquired a new system. These efforts resulted in a portfolio of nine data systems. In 2008, GSA began consolidating its portfolio of systems into one integrated system called the System for Award Management (SAM). In developing the system, GSA hoped to eliminate redundancy, reduce costs, and improve efficiency. Unlike the existing systems that were each designed, developed, and operated by a single contractor, IAE relies on multiple vendors to perform these same tasks for SAM. The intent of this approach is to enhance competition and innovation and for the government to own the software associated with the system. SAM will be developed in phases. In each phase, capabilities from selected IAE systems will be added to SAM and those legacy systems will be shut down.

GSA has made progress in developing SAM and phase 1, consisting of three systems, is scheduled to be completed in May 2012. GSA also has established a computing center to host SAM and a help desk to support users. Since 2009, however, IAE costs have increased by $85 million, from about $96 to $181 million. Most of the cost growth is due to GSA omitting hardware and other key components in acquiring a hosting infrastructure for SAM. External factors, including recent statutory requirements and policy changes, also have contributed to higher costs by increasing the use of the IAE systems beyond what was anticipated. Higher costs led to the need to supplement existing funding, but the program did not receive all of the additional funding it requested. In response to rising costs and limited funding, GSA officials have delayed SAM’s development schedule by almost 2 years, and taken other actions to reduce or defer costs where possible.

Higher costs and constrained resources pose a risk to IAE going forward. GSA will need to continue operating the legacy IAE systems and contend with higher SAM development costs for several more years. While GSA has taken some steps to reduce costs, it has not reevaluated the business case for SAM or determined whether it is the most cost effective alternative. Such a reevaluation is particularly important in light of the increased infrastructure costs, which are now a major impediment to completing SAM. In addition, although the SAM development phases have been pushed out several years, GSA has not modified its primary development contract to align the payment schedule with the delays. The program has continued to pay the same fixed price amount to the contractor for SAM development, operation, and maintenance even though there was little to operate and maintain for nearly 2 years. Aligning contract payments with schedule milestones will ensure that the government is not paying for work that has not yet been accomplished.

section_title: What GAO Recommends
paragraphs: GAO recommends that GSA reassess the IAE business case to determine whether the current acquisition strategy is the most cost effective alternative and if so, reevaluate the current hosting strategy and align contract payments with the program schedule. GSA agreed with GAO’s recommendations and indicated that it will take appropriate action.

section_title: Letter
paragraphs: The U.S. government spends more than $500 billion each year on  contracts. To ensure they are managed effectively, the government has  established policies and processes for advertising, awarding,  administering, and reporting on contracts. These processes use a number  of data systems to support each of these steps, from collecting key  information from contractors, to evaluating contractor performance, to  tracking contract activity. In the past, these systems were fragmented and  duplicative, with multiple systems across different agencies providing  similar services. In 2001, the Office of Management and Budget (OMB)  established an initiative called the Integrated Acquisition Environment  (IAE) to unify and integrate different acquisition data systems. IAE is  intended to enable agencies to share data and make more informed  decisions, make it easier for contractors to do business with the  government, and result in cost savings to the taxpayer.

Efforts to develop IAE have been under way since 2001, and you asked  that we assess how its implementation is proceeding. In response, we  examined (1) the acquisition strategy being used to develop IAE; (2)  progress that has been made in consolidating the IAE systems; and (3)  challenges that may be affecting the completion of a fully integrated IAE.  In order to address these objectives, we obtained and analyzed program  documents including cost estimates, schedules, contracts, and internal  analyses, and conducted our own analyses of them. We also interviewed  officials from the General Services Administration (GSA), the executive  agency for IAE, OMB, and the Acquisition Committee for E-Gov (ACE),  which is part of the Chief Acquisition Officer’s Council and has oversight  responsibilities for IAE. We discussed IAE’s acquisition strategies over  time, the program’s current status, including its cost, schedule, and  performance parameters, and technical and management challenges that  face the program. Finally, we interviewed current IAE contractors to  discuss their work on IAE systems and industry practices.

We conducted this performance audit from September 2011 to March  2012 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 federal acquisition process involves a number of steps that are  common to all government agencies such as solicitation, evaluation, and  contract award. Agencies are increasingly leveraging electronic data  systems to streamline acquisitions and reduce costs. According to GSA  officials, as these systems gained greater use within the government,  some agencies developed their own unique data systems to support  acquisition activities. These systems served specific roles in the  acquisition process, such as contractor registration or performance  tracking. There was little coordination in data systems across the  government. Agencies created their own systems based on different  standards which meant that information could not be readily shared.  These stove-piped systems resulted in higher costs to the government;  created inefficiencies; and made it confusing for government workers,  vendors, and the public to use the systems.

IAE was initiated to integrate, standardize, and streamline some of the  many different acquisition data systems used throughout the government.  The program was charged with identifying how information systems could  be used to integrate the acquisition functions common to different  agencies and to implement governmentwide data systems. Common  acquisition functions include, for example, posting contract opportunities,  registering contractors who are interested in doing business with the  government, assessing contractor past performance, and tracking and  reporting contract actions. Bringing disparate data systems together and  providing a shared services resource to enter and retrieve acquisition  information should help to eliminate unnecessary and repetitive steps in  the acquisition process and reduce information technology costs.

When IAE began, OMB directed GSA to execute and manage the  initiative. GSA officials said that they worked with other government  agencies that would use IAE’s systems and established a collaborative  governance structure that would allow agency users to set the initiative’s  priorities and budget. The Acquisition Committee for E-Gov (ACE), a  subcommittee of the Chief Acquisition Officer’s Council, provides overall  governance for IAE. The ACE has several responsibilities, including  providing strategic direction for IAE, approving IAE’s annual budget and  work plan, and ensuring IAE investments align with E-Gov business  goals. The ACE is currently co-chaired by representatives from the  Departments of Defense and Interior.

section_title: IAE Has Evolved over Two Stages
paragraphs: IAE has developed in two stages using different acquisition strategies.  Initially, GSA focused on establishing a portfolio of standardized  governmentwide systems through an acquisition strategy known as  “adopt, adapt, acquire.” Using this strategy, GSA adopted or adapted  existing agency-specific systems for governmentwide use. If there was no  viable system that could be adapted or adopted to meet an identified  need, GSA acquired a new system. GSA also established an IAE funding  strategy that consisted of contributions from agencies that use IAE  systems. In 2008, to further eliminate redundancy, reduce costs, and  improve efficiency, GSA began consolidating its portfolio of systems into  one integrated system called the System for Award Management (SAM).  Unlike the existing systems (sometimes called “legacy” systems) in which  a single contractor designed, developed, and operated each of them, IAE  relies on multiple vendors to perform these same tasks for SAM. The  intent of this approach is to enhance competition and innovation and for  the government to own the software associated with the system. SAM will  be developed in phases. In each phase, capabilities from selected IAE  systems will be added to SAM and those legacy systems will then be shut  down.
subsections: section_title: Initial Strategy Was to Assemble a Portfolio of Standardized Systems
paragraphs: During the first IAE stage, GSA worked to create a portfolio of  governmentwide systems through an acquisition strategy known as  “adopt, adapt, acquire.” GSA and OMB officials surveyed various  government stakeholders to develop an inventory of existing data  systems and to identify additional data-related needs of the government.  Using this information, the ACE directed GSA to adopt or adapt existing  agency-specific systems for governmentwide use. For example, the  Central Contractor Registration (CCR) database, where contractors  register certain business information prior to being considered for contract  awards, was a Department of Defense (DOD) system that IAE adopted  for governmentwide use in 2003. GSA officials believed DOD’s system  met the government’s requirements, and adopting it was a better  alternative than developing a new system. The Federal Procurement Data  System – Next Generation (FPDS-NG) is an example of a system that  IAE adapted. FPDS, the FPDS-NG predecessor, was initially  implemented in 1978 and in 2003 GSA hired a vendor to modernize the  system.

When no existing systems could be adopted or adapted for  governmentwide use, IAE’s strategy was to acquire new systems from  software developers. For example, GSA contracted with IBM in 2004 to  develop and operate the Online Representations and Certifications  Application (ORCA) database, for firms to submit certifications on matters  such as firm size and ownership status. Table 1 identifies the portfolio of  systems that were included in the first stage of IAE up through 2008 and  whether each system was adopted, adapted, or acquired.

Shortly after IAE was established, GSA and the ACE created a funding  structure in which agencies contribute to the program based on their level  of contracting activity. GSA negotiated memorandums of understanding  (MOU) with the 24 departments and agencies covered by the Chief  Financial Officers Act to collect funding contributions, which pay for the  development, operations, and maintenance of IAE’s portfolio. When  developing its annual budget, GSA estimates what the cost of operating  IAE will be and then determines each agency’s contribution based on its  contracting activity (number and value of contracts) the prior year. For  example, DOD is the largest agency in terms of the number and value of  contracts awarded and therefore contributes the most, 65 percent of the  total. The Federal Funding Accountability and Transparency Act of 2006  (Transparency Act) created new reporting requirements for federal loan  and grant recipients that increased the use of certain IAE systems. For  example, to comply with the Transparency Act, OMB required grant  recipients to register in CCR. In 2008, GSA negotiated separate MOUs  with 22 departments and agencies for additional contributions to fund the  higher costs associated with providing greater support to grant and loan  recipients. Overall, since 2002, about $396 million has been allocated to  IAE, as shown in table 2.

Another key component that supports the IAE systems is GSA’s contract  with Dun & Bradstreet for the use of the Data Universal Numbering  System (DUNS) and other services to verify and standardize information  on contract, grant, and loan recipients. GSA uses the DUNS numbers as  unique identifiers for organizing and tracking these entities, including  making linkages between parent and subsidiary businesses, within and  across the IAE systems. The federal government has used DUNS  numbers since 1978, and the Federal Acquisition Regulation (FAR) has  required all prospective government contractors to obtain DUNS numbers  since 1998. Since 2003, OMB has also required prospective grant  recipients to obtain DUNS numbers. IAE’s contract with Dun &  Bradstreet also supports the use of DUNS numbers for other government- wide information systems, such as USASpending.gov. GSA’s current  contract with Dun & Bradstreet was awarded in 2010 and is valued at  over $135 million for up to 8 years. The Dun & Bradstreet contract is the  largest IAE contract.

section_title: Since 2008, IAE Has Sought to Consolidate Its Portfolio
paragraphs: In December 2008, the ACE approved a proposal to aggregate the IAE  data systems into a new System for Award Management (SAM). GSA  officials said that while the existing IAE systems had provided benefits,  additional efficiencies could be achieved. For example, the systems  contained overlapping data, had separate sign-on procedures, and each  system had different hardware, software, and helpdesks. Consolidating  the IAE portfolio was intended to reduce costs by eliminating redundancy,  streamlining acquisition processes, and consolidating infrastructure.

GSA is relying on an acquisition strategy to develop SAM that is different  from what it has used in the past when GSA turned to a single contractor  to develop, operate, and support each IAE system. SAM will be split into  multiple components with separate contractors responsible for (1) system  design and operations, (2) software development, (3) hosting services,  and (4) help desk support (see table 3). The new approach to developing  SAM is intended to address lessons learned from past IAE systems.  Unlike the legacy systems, the government will own the SAM software as  open-source code, the system architecture, and all supporting hardware.  IAE officials believe that an open-source approach to software and  development will result in lower costs to the government because IAE will  be able to avoid sole-source modifications to the system and  competitively award future enhancement contracts. GSA officials said that  in the past, system enhancements were expensive, in part because the  incumbent contractors knew that GSA’s only alternative to a sole-source  enhancement contract was to develop a new system. Also, GSA officials  said the plan to consolidate help desk services into one single contractor  is an effective way to control cost and service levels.

With SAM, the system design contractor (IBM) will be responsible for  developing the system architecture, defining technical requirements,  specifying data migration procedures for each of the legacy systems, and  operating and maintaining SAM. Once IBM has specified the technical  requirements and data migration procedures for the legacy systems, a  second contractor will be responsible for writing the software code that  will make up SAM. GCE will write the code for the first phase and GSA  will competitively award software contracts for the subsequent phases.  IBM will then test and validate the software, implement the system  migration, and begin operating and maintaining the new SAM system. A  third contractor (Qwest) will provide hosting services, which involves  providing a secure facility to physically house SAM and power and  Internet connectivity. GSA will provide the hardware (hard drives, servers,  and other equipment) and software (operating system, databases, and  other software licenses) for the hosting facility. Finally, a fourth contractor  (HP) will be responsible for providing a consolidated help desk to support  SAM users.

GSA initially planned to migrate IAE systems to SAM in four phases  based on groups of legacy IAE systems (see table 4).

GSA and ACE officials viewed a phased approach as having less risk  than replacing all the legacy systems at the same time. The timing of  each phase was generally established to coincide with expiring legacy  system contracts. As each phase is completed, the capabilities of the  systems in that phase will be added to SAM and the legacy systems will  be shut down. As discussed above, each development phase requires  contributions from the four SAM contractors, with GSA managing the  various contracts. GSA officials anticipate that additional systems may be  added to SAM in the future. For example, the contract with IBM includes  an option to migrate the Past Performance Information Retrieval System  (PPIRS), which provides access to past performance information on  contractors, to SAM. In addition, FedReg has been merged with the  Central Contractor Registration (CCR) and will be included in phase 1.

section_title: Progress Made in Developing SAM, but Cost Increases and Schedule Delays Could Jeopardize Program Completion
paragraphs: GSA and its contractors have made progress in developing SAM and  phase 1 is scheduled to be completed in May 2012. GSA also has worked  with contractors to establish a hosting center for the system and a help  desk to support users. However, since 2009, the costs of developing SAM  have grown significantly. The higher development costs were primarily  due to the failure to adequately execute the SAM hosting strategy as  initially planned. To a lesser extent, external factors, including recent  statutory requirements and policy changes, have contributed to higher  operational costs as well by increasing the demand for help desk  services. While IAE costs were increasing, the program also experienced  a significant funding shortage in fiscal years 2011 and 2012. In response  to rising costs and resource constraints, GSA officials have delayed  SAM’s development schedule and taken other actions to reduce or defer  other costs.
subsections: section_title: GSA Has Made Progress in Developing SAM
paragraphs: GSA has made progress in consolidating the IAE systems. Specifically,  phase 1 of SAM is nearly complete and GSA has created a consolidated  hosting environment and established a single help desk called the  Federal Service Desk (FSD). GSA and its contractor, IBM, have  completed the overarching design of SAM as well as the phase 1  technical requirements. GSA officials also report that the agency has  purchased the hosting hardware and software needed for phase 1 and  IBM is preparing to make the hosting facility operational in time to launch  phase 1. Phase 1 is scheduled to go live in May 2012 and will replace  three IAE systems—CCR, ORCA, and EPLS. Officials report that the  phase 1 software developer is currently working closely with IBM to  coordinate the testing and validation of the phase 1 software. IBM has  begun developing the phase 2 requirements and GSA is in the process of  competing the phase 2 software development contract. Phase 3 efforts  have not yet begun. GSA officials told us FSD currently provides help  desk services for most of the IAE data systems. Help desk responsibility  for three systems remains with their legacy vendors. GSA officials expect  help desk services for these remaining systems to transition to FSD as  they become part of SAM.

section_title: IAE Has Experienced Cost Growth
paragraphs: Costs of the various SAM components have increased significantly over  the past 3 years. GSA did not develop a formal cost baseline when SAM  development was started, so we compared the initial contract value for   GSA  each of the SAM components to the current contract estimates.currently estimates that the various SAM-related contracts will cost  $181.1 million. This represents an increase of $85 million, nearly 90  percent, over the initial contract award amounts which totaled about $96  million (see fig. 1).

Most of the cost growth, about $65 million, is due to higher than expected  hosting costs. Hosting consists of a secure facility with Internet  connectivity; the hardware on which the system will be installed; the  operating system and other software necessary to operate the code that  will make up SAM; and the operation and maintenance of the hosting  environment. GSA estimated in 2008 that hosting costs for the IAE  systems were $2.8 million and that annual costs would be much less than  that after moving to a single hosting environment. However, we estimate  that SAM hosting costs will average $8 million to $9 million per year. The  higher costs are largely due to GSA omitting key components from its  contracting strategy for acquiring hosting services. GSA’s initial strategy  was to contract with a single company for all of these hosting services.  However, shortly after beginning SAM development, IAE awarded a  contract (to Qwest) for a more limited set of hosting services that only  included the hosting facility and Internet connectivity.GSA did not include the hosting hardware, software, and operation and  maintenance services that were needed. Program officials told us that at  the time they believed that the multiagency telecommunications contract  used to obtain hosting services from Qwest did not offer the  comprehensive services that were needed. Officials also said they  thought IBM was responsible for providing these items, but later realized  that was not the case. GSA decided to purchase the hosting hardware  and software itself under existing GSA schedule contracts at an estimated  cost of $29 million. After negotiations with IBM, GSA modified IBM’s  contract in June 2011, adding $36 million to the $74 million contract price  to have IBM install and operate and maintain the hosting hardware and  software in Qwest’s facility. It took GSA more than a year to finalize its  current hosting approach and program officials said they have purchased  hosting hardware and software through 13 different contracts instead of  just 1 contract as intended under their original hosting strategy.

It is not clear why  The help desk function, FSD, also experienced cost growth over its first  years of operation as the expected cost has nearly doubled to $33 million.  Most of this growth appears to have resulted from factors outside of  GSA’s control. GSA officials told us the FSD contract price is driven by  the amount of support activity provided under the contract. The higher  costs reflect a greater than expected demand associated primarily with  one data system, CCR. This system serves as a registry for any  organization that wants to do business with the federal government.  Several events occurred that substantially increased the number of CCR  help desk calls. Both the Federal Funding Accountability and  Transparency Act of 2006 (Transparency Act) and the American  Recovery and Reinvestment Act of 2009 (Recovery Act) included  provisions that increased or had the effect of increasing the number of  CCR registrants. Specifically, the Transparency Act contained  requirements for a single searchable website with data on federal loan,  grant, and contract recipients, which prompted the government to require  grant recipients to register in CCR. The Recovery Act temporarily increased the number of loan and grant recipients, which also led to  greater numbers of CCR registrants. Also, in late 2008, the CCR login  process changed in response to actions taken by DOD to improve  password security measures. As a result of these changes, there was a  drastic rise in help desk activity from CCR customers.

section_title: Cost Growth and Resource Constraints Prompted GSA to Delay the SAM Schedule and Defer Costs
paragraphs: While SAM costs were beginning to increase, the program also did not  receive funding increases it requested. Up through fiscal year 2010, IAE  was primarily funded through agency contributions. When the ACE  approved SAM development in 2008, program officials believed that  agency contributions would be sufficient to cover the development costs.  However, GSA had underestimated its funding needs and soon after the  start of SAM development, GSA officials recognized that the amount of  agency contributions was insufficient to pay to operate the existing IAE  systems and develop SAM over the next several years. GSA officials told  us they consulted with OMB and considered various funding options to  pay for the development of SAM, including increased agency  contributions, a separate appropriation request, or user fees. Ultimately,  with OMB’s support, GSA decided to seek additional funding through an  appropriation and requested $15 million for fiscal year 2011. The program   GSA also requested a $38  received $7 million of the requested amount.million appropriation in fiscal year 2012 for SAM, but did not receive any  appropriations from Congress for the year. GSA has made a $21 million  appropriation request for fiscal year 2013.

GSA officials responded to rising costs and limited resources by  modifying and delaying the SAM schedule, and deferring payments or  reducing contract requirements where possible. One of the most  significant changes was GSA’s decision to not transition FPDS-NG to the  SAM contract as an interim step prior to FPDS-NG being fully integrated  into SAM. Under the SAM design contract, FPDS-NG was scheduled to  be transitioned in June 2010 from the FPDS-NG legacy contractor to IBM.  IBM then would have been responsible for operating and maintaining  FPDS-NG “as-is” under the SAM contract and GSA could have ended the  FPDS-NG legacy contract. GSA officials said that the transition did not  occur because they had neglected to account for the hardware and  software required to host FPDS-NG in the new SAM hosting facility and  could not afford to buy these components. Instead, GSA awarded a  follow-on contract to the FPDS-NG legacy contractor that cost an  unanticipated $5.4 million in fiscal year 2011 and is expected to cost  another $3.8 million in fiscal year 2012 and a similar amount annually  through 2015.

GSA also delayed the schedule for moving the other IAE systems to  SAM. In 2010, GSA expected to complete all of the development phases  of SAM in early 2014, but under the current schedule the final phase will  be completed in 2015, 20 months later than planned (see fig. 2).

There was a 5-month delay in implementing phase 1. Delays for phases 2  and 3 are much longer, and GSA officials cited the higher costs for  hosting services as the main reason for delaying the phases. Phase 2 has   While the systems included in  also recently been split into subphases.phase 2a have been delayed for several months, GSA officials said they  can complete this phase with available resources because the systems in  phase 2a will not require a significant investment in hosting hardware and  software. Phase 2b will not be completed until mid-2014, approximately 2  years later than originally planned, in part because GSA cannot afford the  estimated $21 million necessary to complete the phase. Furthermore, the  migration of FPDS-NG is not scheduled to be completed until 20 months  later than planned, in 2015.

In addition to delaying SAM’s development schedule, GSA officials said  they have taken other steps to defer or reduce costs. In 2011, GSA  modified the payment schedule for the Dun & Bradstreet DUNS contract  to delay payments from fiscal year 2011 to fiscal year 2012. Under the  original contract, GSA was scheduled to make an $18 million payment in  August 2011. To free up funds in fiscal year 2011, GSA negotiated a  modification with Dun & Bradstreet that allowed GSA to pay only $3.8  million in 2011 and deferred the remaining payments to later years. In  addition, GSA cut FSD costs by reducing the required level of services  stated in the contract. For instance, GSA capped the number of calls the  contractor needs to respond to every month, which program officials said  has reduced costs and made it easier to estimate future costs. However,  the cap on calls may reduce the responsiveness of the help desk to  users. GSA officials said they also stopped making investments in the  legacy systems and stopped making all but the most minor of changes to  the systems. For example, GSA officials said they would fix hyperlinks on  the system websites and make other small corrections, but would avoid  making larger changes to the legacy systems unless absolutely  necessary.

section_title: Consequences of Higher SAM Development Costs Threaten IAE Going Forward
paragraphs: Schedule delays and other GSA actions taken in response to cost growth  and funding shortages are likely to lead to further cost increases that  pose a risk to IAE. Delaying the SAM schedule will require GSA to  continue operating the legacy IAE systems, in some cases for years  longer than originally expected. At the same time, GSA must contend with  higher hosting and help desk costs that will extend over several more  years. While GSA has taken some steps to reduce these costs, it has not  reevaluated whether its current acquisition strategy, including its  approach to acquire hosting services, is still the most cost-effective  approach to implement SAM. In addition, although the SAM development  phases have been pushed out several years, GSA has not modified its  development contract with IBM to reflect these changes. The program  continues to pay the same fixed-price amount to the contractor for system  development activities as well as operation and maintenance of SAM,  even though there was little to operate and maintain for the first 2 years of  development.
subsections: section_title: Increased IAE Costs Challenge Program
paragraphs: GSA delayed the SAM development schedule in response to cost growth  and reduced funding, but those delays will result in additional cost  increases as GSA has to extend the life of the legacy systems. For  example, the decision to not transition FPDS-NG to the IBM contract as  originally planned could increase GSA’s costs by approximately $16  million as GSA will have to continue operating FPDS-NG for 5 years  longer than expected. Similarly, the 2-year delay in migrating  FedBizOpps into SAM means that GSA will have to spend $2.8 million on  FedBizOpps in fiscal year 2012. Assuming costs remain the same,  continuing to operate FedBizOpps for 2 additional years will increase  costs by approximately $5.6 million. Schedule delays may also increase  FSD costs. GSA officials said that the majority of the help desk calls are  associated with CCR whose migration has been delayed 5 months. In  addition to paying the CCR legacy vendor to continue operating CCR for  5 additional months, GSA will also have to pay the FSD vendor to  continue supporting CCR.

GSA is also grappling with higher SAM development costs, but has not  assessed whether its current acquisition approach is still cost-effective.  For example, GSA abandoned its initial hosting strategy without  evaluating the cost or schedule implications of doing so. The initial  strategy to use a single contractor to provide consolidated hosting  services was intended to achieve cost savings, but the revised approach,  which relies on multiple contractors, has proven to be much more costly  than expected and led to schedule delays. Hosting costs are now a  primary impediment to moving forward because GSA cannot afford to  purchase the hardware and software necessary to complete phases 2  and 3. In addition, according to program officials, GSA efforts to procure  hosting hardware and software have resulted in 13 different contracts, the  management of which has required additional program support  resources.

GSA also continues to pay the SAM development contractor, IBM,  essentially the same amount called for in the original contract even  though schedule delays have pushed work out into the future. IBM’s  contract includes responsibility for designing as well as operating and  maintaining SAM. According to the fixed-price contract, SAM will be  developed in phases, yet the payment schedule specified that IBM was to  be paid a set amount each month (approximately 3 percent of the total  contract price) for all activities under the 36-month base contract. This  payment schedule may have been appropriate under GSA’s initial plan,  but the development schedule changed shortly after the contract was  awarded and much of the work to migrate systems into SAM will occur  much later than planned. While the SAM transition and migration  schedules have changed considerably, GSA has not adjusted IBM’s  payment schedule to reflect the current development schedule. For  example, IBM was not responsible for operating any IAE systems until the  Excluded Parties List System (EPLS) was transitioned to the SAM  contract in July 2011—17 months into the contract. By that time, GSA had  already paid IBM $6.3 million of the $20.3 million contract price for SAM  operation and maintenance. GSA and IBM officials noted that payments  to date have been for planning and preparing to migrate the legacy  systems to SAM. However, under the original schedule, IBM would have  performed these services as well as operated FPDS-NG for the same  cost. Similarly, GSA has paid more than half of the contract price for  phase 2 migration activities even though phase 2 is not scheduled to be  completed until May 2014.

We raised issues about the increasing cost with SAM, and the viability of  the hosting approach and the development contract structure with GSA  officials and they recently told us that GSA has initiated an internal  review, called a TechStat, of IAE. A TechStat is intended to be an evidence-based review of underperforming information technology  investment during which agency leadership reviews a program, examines  performance, and develops corrective actions as necessary. Program  officials said their current focus is on completing phase 1 of SAM, but  they may revisit their hosting strategy once the phase is completed. GSA  officials also told us that they will begin negotiating with IBM to change  the contract to reflect current schedule changes and available funding.

section_title: Conclusions
paragraphs: GSA’s effort to consolidate the IAE legacy systems into SAM has the  potential to reduce agency costs, eliminate redundancy, and streamline  government acquisition processes. Two years into development,  however, SAM is in trouble due to higher costs that planned funding  levels do not cover. Most of the cost growth seen to date is largely the  result of mistakes the program made. Rather than using a consolidated  hosting strategy as initially proposed, the program adopted a piecemeal  approach involving multiple sources that will cost about $65 million more  than expected. The need for additional resources to cover the increase in  hosting costs, however, coincided with significant funding shortfalls in the  past 2 years and now the program cannot afford to develop SAM as  planned.

Despite dramatically different circumstances marked by higher costs and  constrained resources, GSA has not reassessed its business case for  SAM. Specifically, GSA has not assessed whether developing SAM is still  a better option than maintaining the status quo or whether the current  development strategy, involving multiple vendors, is more cost-effective  than using a single vendor. Ensuring there is a sound business case for  moving forward will be critical before establishing an acquisition strategy  to address the program’s problems. Also, while GSA has taken steps to  reduce costs, by delaying development and deferring some costs to the  future, there may be more that can be done to stretch available  resources. For example, in light of higher hosting costs than expected,  GSA has not reevaluated whether its hosting strategy is the most cost- effective approach. In addition, GSA has not modified the primary SAM  development contract to align payments with program schedule delays.  Although GSA officials recently indicated they will begin negotiating  changes to the development contract, it continues to pay the contractor  for operation and maintenance activities even though many of the IAE  systems will not be migrated into SAM for several years. Tying contract  payments to the migration of the data systems and schedule milestones  would ensure that the government is not paying for work that has not yet  been accomplished.

section_title: Recommendations for Executive Action
paragraphs: To ensure that GSA has a sound approach for providing IAE services in  the future, we recommend that the Administrator of GSA take the  following two actions:

Reassess the SAM business case to compare the costs and benefits  of various alternatives such as: terminating SAM development and continuing to operate the  legacy systems, maintaining the current acquisition approach to developing SAM, pursuing a different acquisition strategy for SAM, such as using a  single contractor to develop and operate the system.

If the results of this assessment support continuing the current  acquisition approach, then: reevaluate the hosting strategy to ensure that it is the most cost- effective approach that can be supported with available resources,  and  take steps to ensure that the SAM development contract  payments are more closely aligned with the program schedule and  delivery of capabilities.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to GSA and OMB. In its written  comments, GSA concurred with our recommendations and indicated that  it will take appropriate action. GSA added that it has established an  integrated project team that will reassess and develop a broad plan  covering both SAM and the IAE program as a whole. GSA’s written  comments appear in appendix III. GSA also provided technical comments  that we incorporated, as appropriate. OMB informed us that it did not  have comments on the draft.

We are sending copies of this report to interested congressional  committees, the Administrator of General Services and the Director of the  Office of Management and Budget. In addition, this report will be available  at no charge on the GAO website at http://www.gao.gov.

If you or your staff have questions about this report, please call me at  (202) 512-4841. Contact points for our Offices of Congressional Relations  and Public Affairs may be found on the last page of this report. GAO staff  who made major contributions to this report are listed in appendix IV.

section_title: Appendix I: Scope and Methodology
paragraphs: To determine how the General Services Administration (GSA) developed  the Integrated Acquisition Environment (IAE) initiative, we interviewed IAE  officials and analyzed relevant documents. Specifically, we interviewed  former and current IAE officials and the two Acquisition Committee for E- Gov (ACE) co-chairs from the Departments of Defense and Interior.  These individuals described the acquisition strategy and governance  structure that IAE developed in its early years. We verified these accounts  with historical documents, such as internal newsletters and minutes from  the ACE meetings that documented IAE’s development. To learn about  the acquisition strategy IAE used to develop the System for Award  Management (SAM), we interviewed IAE officials, reviewed IAE  presentations, and analyzed SAM contract documents. We interviewed  officials from IAE and the Office of Management and Budget (OMB) to  learn about the program’s funding arrangement, obtained historical  funding documents, and reviewed four of the interagency memorandums  of understanding (MOU) used to fund IAE.

To determine the progress IAE has made in implementing SAM, we  interviewed IAE officials and two of the contractors that are implementing  SAM—IBM and GCE. We also reviewed IAE presentations, agency  memorandums and communications, and analyzed SAM-related  contracts. Due to lack of a formal cost baseline when SAM development  started, we focused on the growth of the individual contracts of SAM,  such as the IBM contract and the help desk contract. To determine SAM’s  schedule growth, we used the original schedule created by IBM shortly  after the contract was awarded and compared that to the latest schedule  IAE officials provided us.

To understand and analyze the challenges IAE is facing in their  consolidation, we interviewed officials from GSA, IAE, and OMB and  analyzed SAM-related contracts. We also discussed IAE’s acquisition  strategy with information technology contractors such as IBM and GCE.  In order to understand IAE’s budget issues, we analyzed budget  documents identifying projected funding and expenditures. We also  analyzed the structure of IBM’s contract and verified our findings with IAE  officials.

We conducted this performance audit from September 2011 to March  2012 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: Integrated Acquisition Environment (IAE) Data Systems
subsections: section_title: Data system
paragraphs: Central Contractor Registration (CCR)

section_title: Description
paragraphs: CCR originally was a Department of Defense (DOD) data system that  was brought into the Integrated Acquisition Environment (IAE) portfolio in  2003 and adapted for use across the federal government. CCR is the  primary registrant database for the U.S. government. The government  uses CCR to collect, validate, store, and disseminate data in support of  agency acquisition and award missions. According to the Federal  Acquisition Regulation, prospective contractors must register in CCR prior  to the award of a contract. Also, to register in CCR, a firm must have a  Dun & Bradstreet Data Universal Number System (DUNS) number.

section_title: Vendor information
paragraphs: The General Services Administration (GSA) has a contract with Northrop  Grumman Information Technology to operate and maintain CCR. This  contract ends September 2012.

section_title: Data system
paragraphs: Electronic Subcontracting Reporting System (eSRS)

section_title: Description
paragraphs: The Electronic Subcontract Reporting System (eSRS) was created in  2005 and intended to streamline the small business subcontracting  program reporting process and provide the data to agencies in a manner  that will enable them to more effectively manage the program. The Small  Business Administration partnered with the IAE and other agency  partners to develop the eSRS system. The eSRS is an Internet-based  reporting tool that eliminates the need for contractors to submit and  process Individual Subcontracting Reports (SF 294) and Summary  Subcontracting Reports (SF 295) in hard copy. In 2007, the eSRS  implemented an interface with FPDS-NG, which permits contractors to  enter a contract number into eSRS and have the contract data retrieved  from FPDS-NG for use in the subcontracting reports.

section_title: Vendor information
paragraphs: IAE has a contract with Symplicity, the original developer of eSRS, to  provide operation and maintenance of eSRS. This contract will expire in  September 2012, and IAE has plans to enter an interim contract with the  same vendor until the system is migrated to SAM.

section_title: Data system
paragraphs: Excluded Parties List System (EPLS)

section_title: Description
paragraphs: The purpose of EPLS is to provide a single comprehensive list of  individuals and firms excluded from receiving federal contracts or  federally approved subcontracts and from certain types of federal  financial and nonfinancial assistance and benefits. Contracting officers  use EPLS to determine whether to enter into a transaction with a specific  contractor. EPLS is also available to the general public.

section_title: Vendor information
paragraphs: In 2011, IBM assumed responsibility to maintain and operate EPLS under  the System for Award Management (SAM) contract.

section_title: Data system
paragraphs: Federal Business Opportunities (FedBizOpps)

section_title: Description
paragraphs: FedBizOpps is the single point of entry for federal buyers to publish and  for vendors to find federal business opportunities over $25,000 across  departments and agencies. Vendors can conduct ad hoc searches or set  up automatic queries to notify them when opportunities meeting their  criteria are posted.

section_title: Vendor information
paragraphs: IAE has a contract with Symplicity to operate and maintain FedBizOpps.  IAE plans to exercise the two option years on the current contract, signed  in 2011, and to extend it again until FedBizOpps is migrated to SAM.

section_title: Data system
paragraphs: Federal Agency Registration (FedReg)

section_title: Description
paragraphs: In response to GAO’s classification of intragovernmental transactions as  a governmentwide material weakness, OMB and the IAE collaborated  with DOD to create FedReg in 2003. FedReg collects standard data on  federal agency buyers and sellers who perform intragovernmental  transactions. FedReg sends data on buyers and sellers to the  Intragovernmental Transaction Exchange and Intragovernmental  Transaction System to assist in tracking all intragovernmental  transactions. FedReg also serves as a sort of government “Yellow  Pages,” providing information on federal sellers of goods and services. All  federal entities engaged in intragovernmental buying or selling must be  registered. FedReg is now embedded within CCR.

section_title: Vendor information
paragraphs: GSA has a contract with Northrop Grumman Information Technology to  operate and maintain FedReg (and CCR). This contract ends September  2012.

section_title: Data system
paragraphs: Federal Procurement Data System – Next Generation (FPDS-NG)

section_title: Description
paragraphs: The Federal Procurement Data System-Next Generation is a database  that provides information on government contracting actions over $3,000,  procurement trends, and achievement of socioeconomic goals, such as  small business participation. In fiscal year 2011, there were nearly  17,000,000 transactions recorded in FPDS-NG. FPDS-NG has been the  primary governmentwide contracting database since 1978, and it serves  as the backbone for other government contracting data systems. Since  1982, GSA has administered the database on behalf of the Office of  Federal Procurement Policy.

section_title: Vendor information
paragraphs: GSA awarded the FPDS-NG contract to Global Computer Enterprises,  Inc., in 2011, and can exercise option years through 2015.

section_title: Data system
paragraphs: Wage Determinations OnLine.Gov (WDOL)

section_title: Description
paragraphs: WDOL provides a single location for federal contracting officers to obtain  Service Contract Act and Davis-Bacon Act wage determinations. These  acts require contractors and subcontractors to pay no less than the locally  prevailing wages for services contracts and public works projects. In  addition to wage determinations, the site also provides information on  labor standards, federal and agency acquisition regulations, agency  contracting processes, and other related information.

section_title: Vendor information
paragraphs: WDOL is physically maintained by the National Technical Information  Service, an agency of the Department of Commerce.

section_title: Data system
paragraphs: Online Representations and Certifications Application (ORCA)

section_title: Description
paragraphs: This application enables prospective government contractors to  electronically submit required certifications and representations for  responses to government solicitations for all federal contracts, instead of  using hard copies for individual awards. The representations and  certifications can be considered current for up to one year. These  representations and certifications include certifications of socioeconomic  status, affirmative action compliance, and compliance with veterans’  employment reporting requirements.

section_title: Vendor information
paragraphs: IBM has been the vendor for ORCA since its inception in 2004. In 2011,  IBM assumed responsibility to maintain and operate ORCA under the  SAM contract.

section_title: Appendix III: Comments from the General Services Administration

section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact name above, John Oppenheim (Assistant  Director); Marie Ahearn; E. Brandon Booth; Jillian Fasching; Madhav  Panwar; Jeffrey Sanders; Benjamin Shattuck; Roxanna Sun; Robert  Swierczek; and Rebecca Wilson made key contributions to this report.


Question-summary annotations: questions: question: What did the GSA begin to do in 2001?
answer: In 2001, GSA began establishing a portfolio of standardized government-wide data systems through an acquisition strategy known as “adopt, adapt, acquire.”

question: Why would GSA acquire a new system?
answer: GSA adopted or adapted existing agency-specific systems for government-wide use, or if no viable system met an identified need, GSA acquired a new system.
child_questions: question: What did these efforts result in?
answer: These efforts resulted in a portfolio of nine data systems. In 2008, GSA began consolidating its portfolio of systems into one integrated system called the System for Award Management (SAM).
child_questions: question: What were the intentions of developing the SAM?
answer: In developing the system, GSA hoped to eliminate redundancy, reduce costs, and improve efficiency.

question: What did IAE do that was distinct from existing systems?
answer: Unlike the existing systems that were each designed, developed, and operated by a single contractor, IAE relies on multiple vendors to perform these same tasks for SAM.
child_questions: question: What was the purpose of this approach?
answer: The intent of this approach is to enhance competition and innovation and for the government to own the software associated with the system.

questions: question: What has GSA established?
answer: GSA also has established a computing center to host SAM and a help desk to support users.

question: How have costs changed?
answer: Since 2009, however, IAE costs have increased by $85 million, from about $96 to $181 million.
child_questions: question: What has accounted for the cost growth?
answer: Most of the cost growth is due to GSA omitting hardware and other key components in acquiring a hosting infrastructure for SAM.

question: What else can be an explanation for the cost growth?
answer: External factors, including recent statutory requirements and policy changes, also have contributed to higher costs by increasing the use of the IAE systems beyond what was anticipated.

question: What has higher costs led to?
answer: Higher costs led to the need to supplement existing funding, but the program did not receive all of the additional funding it requested.

question: How have GSA officials responded to the rising costs?
answer: In response to rising costs and limited funding, GSA officials have delayed SAM’s development schedule by almost 2 years, and taken other actions to reduce or defer costs where possible.

questions: question: What creates risks for IAE?
answer: Higher costs and constrained resources pose a risk to IAE going forward.

question: What has the GSA failed to complete?
answer: While GSA has taken some steps to reduce costs, it has not reevaluated the business case for SAM or determined whether it is the most cost effective alternative.
child_questions: question: Why are reevaluations important in this case?
answer: Such a reevaluation is particularly important in light of the increased infrastructure costs, which are now a major impediment to completing SAM.

question: What else has not happened, despite the push of the SAM development phases?
answer: In addition, although the SAM development phases have been pushed out several years, GSA has not modified its primary development contract to align the payment schedule with the delays.

question: How has the program dealt with the prices?
answer: The program has continued to pay the same fixed price amount to the contractor for SAM development, operation, and maintenance even though there was little to operate and maintain for nearly 2 years.
child_questions: question: How will aligning contract payments affect the government's role?
answer: Aligning contract payments with schedule milestones will ensure that the government is not paying for work that has not yet been accomplished.

questions: question: How much does the government spend on contracts?
answer: The U.S. Government spends more than $500 billion each year on contracts.
child_questions: question: How does the government ensure that these contracts are well-managed?
answer: To ensure contracts are managed effectively, the government has established policies and procedures for advertising, awarding, administering, and reporting on them.

question: How have data systems implemented their steps?
answer: Historically, data systems used to implement these steps have been fragmented and duplicative, with multiple systems across different agencies providing similar services.

question: Why was the IAE initiated?
answer: The Integrated Acquisition Environment (IAE) was initiated in 2001 to bring together different data systems into a unified system.
child_questions: question: What purpose does the IAE serve?
answer: It is intended to reduce duplication and information technology costs, and create a more streamlined and integrated federal acquisition process.