Federal Real Property: DHS and GSA Have Not Implemented Recommendations to Strengthen the Management of DHS Headquarters Consolidation
Released: 2018-04-12T00:00:00

Letter

Consolidation Plans Did Not Fully Conform with Leading Capital Decision- Making Practices and GAO Recommendation Has Not Been Implemented

In our September 2014 report, we found that DHS and GSA planning for the DHS headquarters consolidation did not fully conform with leading capital decision-making practices intended to help agencies effectively plan and procure assets. Specifically, we found that DHS and GSA had not conducted a comprehensive assessment of current needs, identified capability gaps, or evaluated and prioritized alternatives that would help officials adapt consolidation plans to changing conditions and address funding issues as reflected in leading practices. At that time, DHS and GSA officials reported that they had taken some initial actions that may facilitate consolidation planning in a manner consistent with leading practices. For example, DHS had an overall goal of reducing the square footage allotted per employee across the department in accordance with workplace standards, such as standards for telework and hoteling. As we reported in 2014, 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 space at St. Elizabeths than previously anticipated. DHS and GSA officials also reported at that time that analyzing different leasing options could affect consolidation efforts. However, we found that the consolidation plans, which were finalized between 2006 and 2009, had not been updated to reflect these actions.

In addition, we found in September 2014 that funding for the St. Elizabeths project had not aligned with what DHS and GSA initially planned. We reported that according to DHS and GSA officials, the funding gap between what DHS and GSA requested and what was received from fiscal years 2009 through 2014, was over $1.6 billion. According to these officials, this gap created cost escalations of over $1 billion and schedule delays of over 10 years relative to original estimates. We found in 2014 that these delays posed challenges for DHS in terms of its leasing portfolio. Specifically, DHS’s long-term leasing portfolio was developed based on the original expected completion date for St. Elizabeths development in 2016. In 2014, DHS and GSA reported that they had begun to work together to consider changes to the DHS headquarters consolidation plans, but they had not announced when new plans would be issued. Furthermore, because final documentation of agency deliberations or analyses had not yet been developed, it was unclear if any new plans would be informed by an updated comprehensive needs assessment and capability gap analysis as called for by leading capital decision-making practices. Therefore, in our September 2014 report we recommended that DHS and GSA conduct various assessments and analyses and use the results to inform updated DHS headquarters consolidation plans. DHS and GSA concurred with this recommendation and stated that their forthcoming draft St. Elizabeths Enhanced Consolidation Plan would contain these analyses.

As of April 2018, however, the agencies had not submitted updated plan information to Congress that would either meet the requirements of the DHS Headquarters Consolidation Accountability Act or address our recommendation. According to DHS officials, the agencies prepared a comprehensive response to the Act, including updated analyses, but the information is no longer current and now needs to be revised and revalidated before it is submitted to Congress. Officials told us that the updated consolidation plans and analyses assumed that the project would receive more funding in fiscal years 2017 and 2018 than was appropriated. Further, officials told us that the current Administration is expected to provide input on the planned DHS component occupancies at the St. Elizabeths campus. We continue to believe that DHS and GSA attention to following leading capital decision-making practices—including having a consolidation plan that justifies future actions—is critical given the project’s multi-billion dollar cost and impact on departmental operations.

Cost and Schedule Estimates for the St. Elizabeths Project Did Not Reflect Leading Practices and GAO Recommendation Has Not Been Implemented

In our September 2014 report, we found that DHS and GSA cost and schedule estimates for the headquarters consolidation project at St. Elizabeths did not conform or only minimally or partially conformed with leading estimating practices, and were therefore unreliable. Furthermore, we found that in some areas, the cost and schedule estimates did not fully conform with GSA guidance relevant to developing estimates.

In 2014, we found that DHS and GSA cost estimates for the headquarters consolidation project at St. Elizabeths did not reflect leading practices, which rendered the estimates unreliable. For example, we found that the 2013 cost estimate—the most recent available at the time of our 2014 report—did not include (1) a life-cycle cost analysis of the project, including the cost of repair, operations, and maintenance; (2) was not regularly updated to reflect significant changes to the program including actual costs; and (3) did not include an independent estimate to determine whether other estimating methods produce similar results. In addition, a sensitivity and a risk and uncertainty analysis had not been performed to assess the reasonableness of the cost estimate. We have previously reported that a reliable cost estimate is critical to the success of any program. Specifically, we have found that such an estimate provides the basis for informed investment decision making, realistic budget formulation and program resourcing, meaningful progress measurement, proactive course correction when warranted, and accountability for results. Accordingly, in 2014, we concluded that DHS and GSA would benefit from maintaining current and well-documented estimates of project costs at St. Elizabeths—even if project funding is not fully secured.

In 2014, we also found that the 2008 and 2013 schedule estimates (the estimates available at the time of our review) did not include all activities for both the government and its contractors necessary to accomplish the project’s objectives and did not include schedule baseline documents to help measure performance as reflected in leading practices and GSA guidance. For the 2008 schedule estimate, we found that resources (such as labor, materials, and equipment) were not accounted for and a risk assessment had not been conducted to predict a level of confidence in the project’s completion date. In addition, we found the 2013 schedule estimate was unreliable because, among other things, it was incomplete in that it did not provide details needed to understand the sequence of events, including work to be performed in fiscal years 2014 and 2015.

In 2014, we concluded that developing cost and schedule estimates consistent with leading practices could promote greater transparency and provide decision makers needed information about the St. Elizabeths project and the larger DHS headquarters consolidation effort. However, in commenting on our analysis of St. Elizabeths cost and schedule estimates, DHS and GSA officials said that it would be difficult or impossible to create reliable estimates that encompass the scope of the entire St. Elizabeths project. In response to our findings, officials said that given the complex, multiphase nature of the overall development effort, specific estimates are created for smaller individual projects, but not for the campus project as a whole. Therefore, in their view, leading estimating practices and GSA guidance cannot reasonably be applied to the high-level projections developed for the total cost and completion date of the entire St. Elizabeths project. GSA stated that the higher-level, milestone schedule currently being used to manage the program was more flexible than the detailed schedule we proposed, and had proven effective even with the highly variable funding provided for the project.

However, our September 2014 review found this high-level schedule was not sufficiently defined to effectively manage the program. For example, our review showed that the schedule did not contain detailed schedule activities that included all government, contractor, and applicable subcontractor efforts. In our 2014 report, we recognized 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 agreed that incorporating cost- and schedule- estimating leading practices could involve additional costs. However, we also concluded that unless DHS and GSA invest in these practices, Congress risked making funding decisions and DHS and GSA management risked making resource allocation decisions without the benefit that a robust analysis of levels of risk, uncertainty, and confidence provides. Therefore, in our September 2014 report we recommended that DHS and GSA develop revised cost and schedule estimates for the remaining portions of the consolidation project in accordance with leading practices. DHS and GSA concurred with the recommendation.

As of April 2018, however, the agencies had not submitted revised cost and schedule information to Congress that would either meet the requirements of the DHS Headquarters Consolidation Accountability Act or address our recommendation. GSA is leading efforts to revise the project’s cost and schedule estimates, and according to GSA officials, the revised figures will take into account leading cost- and schedule- estimation practices, including a risk assessment. We continue to believe that creating up-to-date, reliable cost and schedule estimates for DHS headquarters consolidation should be an integral part of DHS and GSA efforts to reassess the project. Without this information, it will be more difficult for agency officials and Members of Congress to make informed decisions regarding resource allocations and compare competing funding priorities.

DHS Did Not Consistently Apply Its Acquisitions Guidance When Overseeing the St. Elizabeths Project, but Has Taken Steps to Implement GAO’s Recommendation

In our September 2014 report, we also found that DHS had not consistently applied its major acquisition guidance for reviewing and approving the headquarters consolidation project. Specifically, we found that DHS had guidelines in place to provide senior management the opportunity to review and approve its major projects, but DHS had not consistently applied these guidelines to its efforts to work with GSA to plan and implement headquarters consolidation. Part of the inconsistency was the result of DHS designating the headquarters consolidation project as a major acquisition in some years but not in others. For example, we found that in 2010 and 2011, DHS identified the headquarters consolidation project as a major acquisition and included the project on DHS’s Major Acquisitions Oversight List. Thus, the project was subject to the oversight and management policies and procedures established in DHS major acquisition guidance; however, the project did not comply with major acquisition requirements as outlined by DHS guidelines. For example, we found that the project had not produced any of the required key acquisition documents requiring department-level approval, such as life-cycle cost estimates and an acquisition program baseline, among others.

As we reported in 2014, in 2012, the project as a whole was dropped from the list. Subsequently, in 2013 and 2014, DHS included the information technology (IT) acquisition portion of the project on the list, but not the entire project. DHS officials explained that they considered the St. Elizabeths project to be more of a GSA acquisition rather than a DHS acquisition because GSA owns the site and the majority of the building construction is funded through GSA appropriations. In our 2014 report, we recognized that GSA had responsibility for managing contracts associated with the headquarters consolidation project. However, we also noted that 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, made the consolidation project a viable candidate for consideration as a major DHS acquisition. By not consistently applying this review process to headquarters consolidation, we concluded that DHS management risked losing insight into the progress of the St. Elizabeths project, as well as how the project fits in with its overall acquisitions portfolio. Thus, in our September 2014 report we recommended that the Secretary of Homeland Security designate the headquarters consolidation program a major acquisition and apply DHS acquisition policy requirements. DHS concurred with the recommendation.

As of April 2018, DHS has made some progress implementing this recommendation. For example, on September 16, 2014, DHS issued an Acquisition Decision Memorandum designating the DHS-funded portions of the headquarters consolidation program as a Major Acquisition Program to be overseen by the departmental Acquisition Review Board (ARB). DHS also made progress implementing this recommendation by conducting and documenting an ARB of the program in November 2016. The ARB process provided DHS greater oversight of headquarters consolidation, and provided a forum for officials to consider a wide range of issues affecting consolidation efforts, such as funding and project scope. In addition, in January 2018, DHS officials reported that they were working to align headquarters consolidation program documentation to meet the spirit of DHS acquisition policy guidance. We will reassess the status of this recommendation after the consolidation plan and cost and schedule estimates are updated and submitted to Congress per the DHS Headquarters Consolidation Accountability Act. At that time, we believe there will be more certainty about the future direction of the project overall, and DHS’s funded portion in particular, and we will be better able to assess the level of DHS acquisitions oversight for the project.

Chairman Perry, Ranking Member Correa, and Members of the Subcommittee, this concludes my prepared statement. I look forward to responding to any questions that you may have.

GAO Contact and Staff Acknowledgments

If you or your staff members have any questions about this testimony, please contact Chris Currie, Director, Homeland Security and Justice Issues, at (404) 679-1875 or curriec@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement are John Mortin (Assistant Director), Karen Richey (Assistant Director), Juaná Collymore, Jennifer Leotta, Thomas Lombardi, David Lutter, and Erin O’Brien.

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