USDA Service Centers: Multibillion Dollar Effort to Modernize Processes and Technology Faces Significant Risks
Released: 1998-09-30T00:00:00

Letter

Scope and Methodology

In conducting our review, we analyzed relevant service center IT modernization plans and studies. These included USDA’s Service Center Business Process Reengineering Business Case, Service Center Business Need and Technical Alternative Evaluation Study, Service Centers Modernization Strategy, Business Integration Center Project Plan, Service Centers Strategic Plan, Service Center IT Procurement Plan, and Common Computing Environment Implementation Strategy. We interviewed senior USDA officials coordinating the Service Center Implementation initiative, as well as those leading various projects under this initiative, to gain an understanding of the department’s efforts and plans to modernize business processes and IT for the service centers. We interviewed senior Office of the Chief Information Officer officials to discuss the role that office has played in overseeing the service center IT modernization and implementing the Clinger-Cohen mandates within the department, and met with Office of Management and Budget (OMB) officials to discuss their reviews of funding requests by USDA for this effort.

To identify significant risks in USDA’s activities and plans, we compared the management of these efforts with requirements of the Clinger-Cohen Act and with generally accepted sound management principles as outlined in our executive guides and OMB guidance on evaluating and managing IT investments, and determined whether recommendations from past reports, particularly those related to USDA’s Info Share program, had been implemented. We did not validate the accuracy of agency-provided data on cost or benefit estimates, or actual costs. Appendix I provides further details of our scope and methodology.

We conducted our review from September 1997 through May 1998, in accordance with generally accepted government auditing standards. We provided a draft copy of this report to USDA for comment. USDA’s comments are discussed in the “Agency Comments and Our Evaluation Section” and are reproduced in appendix II.

Background

In early 1992, USDA began studying options for restructuring the department, including the county-based structure consisting of thousands of county offices nationwide delivering farm and rural development programs to customers. At that time, USDA had separate IT modernization efforts planned for each of the farm service, conservation, and rural development agencies. In light of the impact of possible restructuring on these plans, the Chairman and Ranking Minority Member of the Senate Committee on Agriculture, Nutrition, and Forestry urged USDA to postpone purchases of computer technology beyond what was necessary to maintain existing systems until the new structure of the department was defined. USDA agreed, and in April 1993 established a consolidated, multiagency program called Info Share. The goal of Info Share was to improve operations and delivery of services to customers by reengineering business processes and developing integrated information systems.

We reported in August 1994 that Info Share was being managed as a vehicle for acquiring new technology rather than for reengineering business processes to better serve farm service customers. We recommended that Info Share be refocused on business process reengineering rather than on information technology acquisition, and that Info Share be linked to the department’s reorganization.

In response to our report, the General Services Administration canceled USDA’s procurement authority for the program and OMB placed Info Share on its list of high-risk programs. However, as reported by USDA’s Office of Inspector General (OIG), over $100 million had already been spent on the project during fiscal years 1993 and 1994. USDA later disbanded the Info Share program.

USDA established the Service Center Implementation initiative in February 1995. Its objectives are to (1) reduce the number of field office locations for the farm service and rural development agencies from about 3,700 to about 2,500 and (2) restructure these 2,500 locations into one-stop service centers that would serve farm service, conservation, and rural development customers. In doing so, USDA expects to improve service delivery to customers and reduce costs.

Responsibility for the Service Center Implementation initiative is assigned to a Subcommittee of the National Food and Agriculture Council (NFAC) consisting of agency administrators for the service center agencies. To achieve the objectives of the Service Center Implementation initiative, NFAC has undertaken several activities. One activity involves the service center IT modernization effort that consists of several major projects to reengineer business processes and acquire integrated information systems—computers, software, telecommunications, and data. Other ongoing NFAC activities include closing and moving field offices into collocated sites, training staff on culture change to prepare them to work together within a single location, and consolidating the agencies’ separate administrative structures into a single structure that supports all three agencies. A small interagency team—the Service Center Implementation team—works for NFAC to coordinate these projects and activities.

The department also has two other activities underway that could have an impact on the IT modernization projects. One is a county-based study evaluating, among other things, how the Farm Service Agency (FSA), Natural Resource Conservation Service (NRCS), and Rural Development (RD) can best deliver service to customers at the service centers. The department contracted for this study in December 1997 and intends to use the results, due in September 1998, to help determine how county offices will be structured and how the department will deliver services. The second activity is the department’s effort to make its information systems Year 2000 compliant.

USDA’s Chief Information Officer (CIO) has overall responsibility for implementing the Clinger-Cohen Act within the department. This official also has oversight responsibility within the department for the service center IT modernization. A senior policy adviser, who reports to the CIO, is responsible for conducting periodic reviews of projects under the initiative and contracting for independent verification and validation assessments when the CIO’s office believes they are warranted.

Service Center IT Modernization Is Massive and Complex

USDA’s service center IT modernization consists of four major projects, undertaken concurrently since fiscal year 1996: (1) developing new business processes, (2) acquiring and installing telecommunications equipment, (3) acquiring, implementing, and maintaining a common computing environment at about 3,100 locations, and (4) acquiring and developing geospatial data. Each is described below.

Business Process Reengineering Project

USDA’s NFAC commissioned four business process reengineering teams to develop new, common business processes for operating the one-stop service centers. One team was responsible for reengineering processes used to interface with customers and provide general information and then refer customers to program specialists for more detailed information; the second team was responsible for reengineering processes to assist customers in applying for program benefits, processing applications, and delivering benefits; the third team was responsible for reengineering processes used to acquire, access, annotate, update, analyze, and share geospatial information; and the fourth team was responsible for reengineering administrative processes supporting fleet management, travel, and hiring.

In August 1997, these four teams collectively developed 17 recommendations for implementing business improvements. The recommendations included developing a common database for customer information and creating a mechanism for providing consistent cross-training at all service centers. The teams also identified steps necessary for implementing these recommendations. USDA plans to begin implementing the recommendations during the remainder of fiscal year 1998 and in fiscal year 1999.

Telecommunications Project

The goal of the telecommunications project is to replace the existing telecommunications infrastructure to allow the agencies located in the same building or geographic area to share data and transfer calls, consolidate telecommunications services, and provide an integrated electronic mail (e-mail) system and satellite transmission down-links for training. To do so, USDA is acquiring and installing new data communications equipment (i.e., modems, routers, hubs), voice communications equipment (i.e., integrated phone systems), and wiring. USDA’s current plans call for completing installation of this equipment and wiring at about 3,100 locations—2,554 service centers, 52 state offices, and 500 other support offices—by the end of 1998.

USDA’s original goal was to install new telecommunications equipment and wiring at all sites by the end of 1997. However, in January 1997 USDA experienced significant problems when it began nationwide implementation of the project. Because telecommunications equipment being installed at the initial sites was not properly configured and did not interface with the existing computer equipment, it did not work properly and therefore delayed the installation schedule. As a result of this, as well as other factors, the telecommunications project fell more than 1 year behind schedule, and the overall cost of the project has increased by millions. As of May 31, 1998, about 40 percent of the 3,100 planned installations had been completed.

Common Computing Environment Project

The goal of the common computing environment project is to replace the service center agencies’ existing information technology systems (separate and various hardware, software, and applications at the 3,100 locations) with a common computing environment. To do so, the department plans to install a single, integrated information system—which USDA refers to as the common computing environment—consisting of new computer hardware (file and application servers, workstations, portable computers, and printers) and software for office automation, geographic information systems, and e-mail. USDA estimates that it will acquire some 38,000 personal computers—consisting of 7,000 workstations, 21,000 laptops, and 10,000 personal data assistants—and 24,000 printers, and thousands of cellular phones, global positioning satellite instruments, and digital cameras.

To date, USDA has completed planning documents and studies on configuring application servers for the common computing environment. These studies identified three alternatives for configuring various types of application servers and placing them within the service centers and/or at the state offices. USDA also recently acquired a limited number of network servers for office automation to test the integration of this new equipment with the agencies’ existing computer equipment in a controlled environment. The department plans to conduct pilot tests at nine sites during the summer of 1998, and to begin acquiring new network servers before the end of fiscal year 1998. Plans show that the department will acquire the application servers during 2001.

Included under this project will be the complex and time-consuming task of modifying the service center agencies’ existing business applications to operate on the new application servers. Currently, FSA, NRCS, and RD together have about 150 existing applications comprising about 12 million lines of code, much of which must be modified. USDA estimates show that this task will require as many as 1,500 staff years to complete. It is not clear when USDA will complete this task as some planning documents show that this may be completed by fiscal year 2002 while others show a completion date as late as fiscal year 2008. Until existing business applications are modified, the department plans to concurrently maintain and operate the new application servers and legacy systems.

Geospatial Data Project

The geospatial data project entails two primary activities to acquire and develop data for the geographic information systems that will be installed. The first of these is the acquisition of digital orthophotography—aerial photographs of farm land digitized to be readable by a computer and augmented to provide detail related to land terrain and elevation. The second involves the acquisition and development of digitized data describing aspects of the nation’s soils or wetlands data. USDA plans to complete the acquisition of these data by 2003.

As of May 1998, about 31 percent of the specified digital orthophotography had been acquired, and about 7 percent of the specified digital soils data had been obtained.

Overall Life-Cycle Costs Estimated to Exceed $3 Billion

USDA’s life-cycle cost estimates show that the department could ultimately spend more than $3 billion on its four service center IT modernization projects from 1996 to 2011. As shown in table 1, most of this amount (over 75 percent) would be spent on the common computing environment project. A more detailed breakout of these cost estimates is provided in appendix III.

By completing these projects and incurring these costs, USDA expects to significantly improve customer service, such as reducing the number of trips customers must make to an office or the amount of information they must provide to enroll in programs. USDA estimated the value of such improvements to customers to total about $773 million by 2011. Also over this time period, USDA estimates savings of $5.5 billion achieved mostly through productivity gains from reducing staff time needed (an estimated 19 million hours annually) to handle such tasks as explaining programs or determining eligibility. The department cautioned, however, that these estimates must be validated in an operational environment.

While there is little doubt that modernizing processes and IT for the service centers can result in significant qualitative and quantitative improvements for the department and its customers, none of the estimated billions in productivity gains identified will result in actual dollar savings to the department. This is because USDA currently has no plans to make additional staff reductions (i.e., reductions beyond those already planned as part of the administrative consolidation) based on these expected productivity gains.

Table 2 details reported actual and planned costs for the four major service center IT modernization projects by fiscal year, from 1996 through 1999.

To date, the reported source of funding for the service center IT modernization projects has primarily been the Commodity Credit Corporation (CCC), as shown in table 3. CCC is a government-owned and operated corporation used to finance many domestic and international agricultural programs. In 1996, the Congress limited CCC’s funding for computer and telecommunications equipment and services to a maximum of $170 million in fiscal year 1996 and a maximum of $275 million for fiscal years 1997 through 2002. About 70 percent of USDA spending for the service center IT modernization projects in fiscal years 1996 and 1997 came from CCC funds. Only about 35 percent will come from CCC in fiscal years 1998 and 1999. The remainder will come from appropriated funds.

In addition to spending funds for the service center IT modernization, USDA agencies continue to acquire IT independently. Over the past 2 years, agencies have reported spending about $100 million to acquire computer hardware and software separate from the $145 million specifically reported under the service center IT modernization (see table 4).

Between 1995 and 1997, for example, NRCS and RD purchased about 6,800 computers/laptops at a reported cost of about $51 million to replace equipment in the service centers. FSA, NRCS, and RD also plan to spend about $50 million total on computer hardware and software in fiscal years 1998 and 1999, at least $8.5 million of which would be used to replace existing service center equipment.

Weaknesses Create Significant Risks for Service Center IT Modernization

USDA’s multibillion dollar service center IT modernization has several significant weaknesses that place the entire effort at risk of not achieving an adequate return on its investment or its goal of improved customer service. Specifically, the department (1) has acquired, and plans to continue acquiring, new technology without first reengineering its processes to provide one-stop service in all service centers; (2) is not managing its service center IT modernization projects as investments using cost, benefit, risk, and performance information to select, control, and evaluate projects throughout their life-cycle; (3) lacks a comprehensive plan for its service center IT modernization that specifies dependencies among projects, critical milestones, and resources required; (4) is not following an incremental approach in acquiring technology using cost justifications and performance measures for each increment to reduce risks associated with large-scale acquisitions or projects; and (5) has not established the management structure with the requisite responsibility, accountability, and authority for managing and coordinating the separate service center IT modernization projects and ensuring that critical tasks are completed on time and within budget.

Technology Acquired and More Acquisitions Planned Prior to Defining New Business Processes

The Clinger-Cohen Act requires that agencies analyze their missions and, where appropriate, reengineer mission-related and administrative processes before making significant investments in supporting information technology to avoid wasting funds on IT that does not meet their needs. We have previously reported that when IT projects precede business process redesign, they typically fail or reach only a fraction of their potential.

USDA has defined and documented neither a concept of operations nor the mission-related business processes that will be needed to provide one-stop service at all its centers. The Secretary envisions every one-stop service center providing its customers with access and service for all farm, conservation, and rural development programs. Yet, the department’s plans show that all three agencies—FSA, NRCS, and RD—will be physically collocated at only about 700 of its 2,554 service centers. Approximately 1,650 other centers will house only two agencies, with the remaining 200 centers having staff from only one agency present. Because the department does not currently provide services and programs for all three agencies at every site, new and fundamentally different processes, information flows, and databases would be required to meet the Secretary’s vision of one-stop service in all service centers.

Nevertheless, the department has reported already spending over $140 million on its service center IT modernization, and plans to spend over $200 million more in fiscal years 1998 and 1999, with most of these funds used for acquiring new technology. Because the department’s plans show that it will still be reengineering processes during fiscal years 1998 and 1999, and may not be finished reengineering until 2003, USDA has no assurance that these new IT acquisitions will meet customer needs or allow the department to provide one-stop service as envisioned by the Secretary.

Furthermore, USDA’s efforts to reengineer business processes at the service centers are redundant and uncoordinated. Both the county-based study USDA contracted for in December 1997 and the service center IT modernization’s business process reengineering project are evaluating how the service center agencies (FSA, NRCS, and RD) should provide customer service at the centers. The two, however, are proceeding independently. Without integrating the study and the reengineering project, USDA may find costly rework necessary and waste IT resources. For example, one deliverable of the study is to include options to consolidate, centralize, outsource, privatize, cross-service, or franchise programmatic functions. The study may, therefore, recommend outsourcing or privatizing functions that are being reengineered by the service center IT modernization.

Information Technology Is Not Being Managed as an Investment

Agencies are required by the Clinger-Cohen Act of 1996 to use a capital planning and investment control process to assess and manage the risks of IT acquisitions. This act requires agencies to compare and prioritize all IT projects using explicit quantitative and qualitative decision criteria. In September 1996, we reported that successful public and private organizations select, control, and evaluate major IT projects based on objective, reliable data including expected and actual mission benefits, potential risks, and estimated and actual costs of each project. In September 1995, after USDA’s OIG reported that the department was not effectively tracking costs for Info Share, the Senate Appropriations Committee noted in report language that it expected USDA to develop a comprehensive cost accounting and budget tracking process prior to making IT purchases.

USDA’s CIO is still in the process of developing and testing a capital planning and investment control process for the department and its agencies to use when assessing and managing IT acquisitions. Also, the department has not yet developed a comprehensive cost accounting and budget tracking system for the service center IT modernization. In the absence of a completed investment control process and cost accounting and budget tracking system, USDA continues to spend hundreds of millions of dollars on IT with no assurance that these expenditures will return commensurate benefits, and with limited ability to control and evaluate these investments effectively.

For example, the department reviewed and approved the service center IT modernization plans and fiscal year 1998 and 1999 IT budgets of $200 million without considering explicit qualitative and quantitative information that is necessary to effectively assess IT projects and make high-quality investment decisions. First, no information on mission-related performance measures for any of the service center IT modernization projects was used because such information had not yet been developed, and risk information had been developed for only the telecommunications project. Second, information on estimated benefits and costs was not available for some projects. Moreover, although OMB developed capital asset criteria and worksheets that agencies are to use to consistently and objectively rate and rank IT projects, the department did not use this decision criteria to rate and rank its service center IT modernization projects.

Once selection has occurred, as we reported in September 1996, leading organizations continue to manage their investments, maintaining a cycle of continual control and evaluation. To do so, projects are reviewed by senior executives at specific milestones as the project moves through its lifecycle and as the dollar amounts spent on the project increase. At these milestones, the executives compare the expected costs, risks, and benefits with the actual costs incurred, risks encountered, and benefits realized to date. This enables senior executives to (1) identify and focus on managing high-potential or high-risk projects, (2) reevaluate investment decisions early in a project’s lifecycle if problems arise, (3) be responsive to changing external and internal conditions in mission priorities and budgets, and (4) learn from past successes and failures in order to make better decisions in the future.

Although USDA has had the service center IT modernization projects underway since 1996 and has spent millions of dollars on them, the department is not systematically controlling and evaluating these IT projects throughout their lifecycles. First, executives are not reviewing these projects at specific milestones to ensure that these continue to be viable investments. Second, the department is not developing and maintaining the quantitative and qualitative information needed by these executives to effectively control and evaluate these IT projects. For example, the department has not developed an effective cost estimating, budgeting, and accounting process to identify, track, and report actual costs so that these could be compared to estimated costs. Third, while benefits have been estimated for the IT projects, they are not defined in terms of measurable mission-related performance improvements so that actual benefits could be tracked against estimates to assess the impact the IT investments have on productivity and mission performance. Finally, USDA has not identified and quantified risks for each of the projects.

Service Center IT Modernization Lacks Comprehensive Plan

Although USDA began its service center IT modernization in 1996, it still has no comprehensive plan for this effort. Such a plan is important for defining the milestones for major segments of each project under the IT modernization, dependencies among all the project’s segments, and resources required to complete them. It helps identify priorities as to which project segments must be completed first and where milestone and resource shifts must be made to ensure that the most critical segments are completed on time, within budget, and, more importantly, are successful.

The department has been drafting a plan that identifies activities under its Service Center Implementation initiative, including information on the service center IT modernization projects. USDA expected to complete this plan by September 1997, but had not done so as of May 31, 1998.

As currently drafted, however, this plan is not comprehensive and cannot be used for identifying priorities and where resource shifts must occur among the IT modernization projects to ensure that the most critical segments are completed. First, the plan does not identify all major segments of the four IT modernization projects. For example, milestones and dependencies for some major segments—such as implementing reengineered processes or migrating applications to the new computing environment—are not identified.

Second, the draft plan does not include any information on resources needed to complete the IT modernization projects. Project estimates show that as many as 1,600 IT staff will be needed in fiscal years 1999 and 2000. This includes about 1,500 IT staff to carry out and support the common computing project and another 100 IT staff to implement the reengineering and geospatial projects. Staff estimates were not available for the telecommunications project. Currently, however, USDA documents show that there are only about 1,380 total IT staff within FSA, NRCS, and RD combined. USDA could not explain why its resource estimates were incomplete and inconsistent, and could not provide a plan for meeting the requirement for 1,600 IT staff.

Better planning of IT resources for the modernization is especially critical because IT resources will also be required for other important USDA efforts. For example, a large number of the existing 1,380 IT staff will be needed to ensure Year 2000 compliance of the service center agencies’ application systems that comprise about 12 million lines of code in thousands of offices. In May 1998 we testified that USDA faces tremendous challenges in ensuring that vital public services are not disrupted due to Year 2000-related computing problems and that FSA expressed concern that they may lack the staff resources necessary to complete Year 2000 work.

Similarly, IT resources will be required to consolidate the three service center agencies’ separate administrative structures. However, as part of this consolidation, which USDA began in March 1998, NFAC plans to reduce the service center agencies’ current IT staffing levels by about 400 over the next 4 fiscal years.

None of these major efforts (i.e., the modernization, Year 2000 conversion, or the administrative consolidation) will succeed unless USDA plans effectively for the use of its IT resources.

Incremental Approach Not Being Used to Reduce Risks

To reduce risks associated with large-scale IT projects, the Clinger-Cohen Act requires agencies to implement major IT acquisitions in manageable increments. Each increment is independently cost-justified and performance-based measures are developed to ensure that each increment provides an attractive return on investment and provides mission-related benefits.

To date, USDA has not been acquiring new technology incrementally. For example, rather than divide its $129 million telecommunications project into successive increments, and demonstrating the effectiveness of each increment before acquiring the next, USDA committed to implementing the entire project, which includes completely replacing voice and data communications equipment at all 3,100 sites. By not using an incremental approach, USDA has significantly increased the risks associated with this project, which has already fallen more than a year behind schedule and according to USDA will be $17.5 million over its budget of $111.3 million.

For planned fiscal year 1998 and 1999 acquisitions for its common computing environment project, USDA has identified a phased implementation strategy where each phase could be acquired separately. For example, one phase entails acquiring network servers for all of the centers, while another entails acquiring application servers to provide the common computer equipment to run service center business applications. However, the department has not developed cost justifications and performance measures for each phase to ensure that each phase independently provides an attractive return on the planned investment and measurable mission-related benefits.

Service Center IT Modernization Management Structure Has Not Been Established

To succeed, complex IT projects must be managed effectively. We have reported in the past on the need for strong project management at USDA when undertaking IT projects. In a September 1994 assessment, a contractor identified the lack of a manager dedicated full-time to Info Share as one of the root causes for its problems. In May 1995, USDA’s OIG raised similar concerns citing the fact that USDA lacked a single individual or group with the requisite responsibility and authority to make decisions and manage the various projects under Info Share. Subsequently, in September 1995, the Senate Appropriations Committee noted in report language that it expected USDA to defer new technology acquisitions until concerns raised by USDA’s OIG about project management, and other areas, were satisfied.

Although the Secretary delegated overall responsibility for implementing the Service Center Implementation initiative to a subcommittee of NFAC and an executive officer was appointed to coordinate the activities of this subcommittee, USDA still lacks the project management structure needed to manage a modernization of this magnitude. Specifically, USDA has not assigned a senior-level official with overall responsibility, authority, and accountability for managing and coordinating the separate service center IT modernization projects and ensuring that critical tasks are completed on time, within budget, and in accordance with the Clinger-Cohen mandates. Although USDA has a CIO, the CIO is not responsible for the service center IT modernization. Instead, responsibility, accountability, and authority for control of the four service center IT modernization projects and resources is fragmented and ineffective. Three of the four IT modernization projects have managers who report to their service center agency, while the fourth reports to the executive officer. Because each service center agency controls its own project resources, effective joint planning and execution in the interest of USDA as a whole has not occurred and completion of key tasks has been delayed.

For example, although the executive officer planned to complete a Service Center Implementation initiative plan by September 1997, he could not effectively prioritize the tasks involved in staff reporting to the service center agencies. As a result, the plan had still not been completed as of May 31, 1998. Likewise, the executive officer could not reallocate the resources necessary to begin implementing the recommendations for improvements made under the business process reengineering project.

Conclusions

USDA’s effort to modernize business processes and IT for its service centers is expected to be the biggest, most costly and complex IT modernization effort in its history, with estimated costs ultimately exceeding $3 billion. USDA has failed in past efforts to plan and manage IT modernization, and some of the same fundamental planning and management weaknesses that caused past failures threaten this effort. Until the department corrects these weaknesses, it is unlikely to achieve an adequate return on its investment, meet the needs of its customers, or achieve the Secretary’s vision of one-stop service.

Matters for Congressional Consideration

Until the department resolves its critical weaknesses and institutionalizes the processes needed to manage its service center IT modernization in accordance with the mandates of the Clinger-Cohen Act, the Congress may wish to limit IT funding for the USDA service centers to only that necessary to (1) bring mission-critical systems into compliance with Year 2000 requirements, (2) implement cost-effective efforts that support ongoing operations and maintenance, and (3) develop and document a concept of operations and the new mission-critical business processes necessary to provide one-stop service at all sites and integrate the service center business process reengineering project with the county-based study.

Recommendations

We recommend that the Secretary of Agriculture ensure that the following actions are completed before investing in any effort to modernize USDA’s IT beyond that necessary for making mission-critical systems Year 2000 compliant and cost- effectively supporting ongoing operations and maintenance.

Develop and document a concept of operations and the new mission-critical business processes necessary to provide one-stop service at all sites. Integrate the service center business process reengineering project with the county-based study.

One approach for ensuring completion of these actions would be to assign accountability to the Deputy Secretary who would need to work with the Under Secretaries and Assistant Secretaries for the service center agencies and the CIO.

We also recommend that the Secretary hold the CIO accountable, and provide her requisite authority and responsibility for managing and implementing the service center IT modernization, and direct that she complete the following additional actions: Identify, assess, and document the risks, costs, benefits, and performance measures for each service center IT project before providing additional funding to ongoing projects and approving any new projects, and then use this information to review, control, and evaluate these projects at specific milestones of the project’s lifecycles.

Develop a comprehensive plan for the service center IT modernization that documents and tracks all critical milestones, dependencies among major segments, and resources needed to complete them, taking into account the resources that will be needed to make the service center agencies’ systems Year 2000 compliant.

Develop an acquisition strategy that focuses on buying technology in manageable increments, where cost justification and performance measures are developed and documented for each increment.

We further recommend that the Deputy Secretary report on a regular basis to the Secretary on the progress the department is making to implement each of these recommendations, and notify the Secretary when all of the identified weaknesses have been fully addressed and resolved.

Agency Comments and Our Evaluation

USDA’s Deputy Secretary provided written comments on a draft of this report. They are summarized below, along with our responses, and reproduced in their entirety as appendix II.

USDA agreed with some of our findings and recommendations. Specifically, USDA agreed to integrate the service center business process reengineering project with the county-based study. USDA also agreed to complete a comprehensive plan identifying critical milestones, project dependencies, and resources required for the modernization. Further, USDA agreed that the Deputy Secretary should report on a regular basis to the Secretary on progress the department is making to implement each of our recommendations.

USDA also agreed with two other recommendations, but stated it was already performing consistent with these recommendations. First, the department agreed that IT-related projects should be managed as investments, but said that it was already accomplishing this. For example, the department stated that “service center IT projects are subjected to the evolving USDA capital investment and control process just as any other investment.” The department also said that its Executive Information Technology Investment Review Board has “devoted considerable effort to examining these activities and monitoring progress” and that “USDA management is provided information regarding the progress of the investment in the Service Center Implementation initiative by means of monthly Program Management Reviews.”

Our work showed, however, that the department does not have the process or the information to effectively manage the service center IT projects as investments. Although the Clinger-Cohen mandate requires that agencies use a capital planning and investment control process to assess and manage the risks of IT acquisitions, USDA has neither completely developed nor implemented such a process. Also, the department’s senior executives have not been substantively involved in systematically controlling and evaluating the projects. For example, USDA’s Executive Information Technology Investment Review Board has met only once since October 1997, when it approved the service center IT modernization plans and budgets. Minutes from that meeting, held on June 16, 1998, show no indication that the board discussed or evaluated information on service center IT modernization costs, benefits, risks, or performance measures. Regarding the monthly Program Management Reviews, the CIO’s May 15, 1998, review found “irregular attendance” at the monthly meetings and that monthly progress reports provided to the Deputy Secretary “are often not timely, complete, or in a format to clearly communicate whether or not major initiatives are on target or behind.”

Second, the department agreed with our recommendation that technology should be acquired in manageable increments, each of which provides documented mission-related return on investment, but stated it was already doing so. We do not agree that this is being accomplished adequately. As discussed in the report, USDA began implementing the entire $129 million telecommunications project on a nationwide basis 5 months before it completed the cost/benefit analysis. By the time the cost/benefit analysis was completed, USDA had already obligated over half the $129 million for this project. No project increments were defined, no incremental cost/benefit analyses were prepared, and no incremental mission-related performance measures were developed.

In addition, USDA disagreed with several of our recommendations. Specifically, USDA disagreed that it should define and document a concept of operations for providing one-stop service in all of its service centers before investing in new IT. USDA stated that it can simultaneously reengineer business processes and purchase IT, and said that “because the business process reengineering process will take several years to complete, the investments cannot wait until the full process is completed.” The department further stated that it objected to the “premise that every process inherent in delivering service must be fully reengineered before implementation can begin,” and asserted that “an incremental and parallel approach is the best way to proceed given the massive business processes involved and the changing technology which will allow USDA to achieve efficiencies and savings as we move through the reengineering process.”

USDA’s position is not consistent with the Clinger-Cohen mandate that agencies reengineer mission-related and administrative processes before making significant investments in supporting IT. If USDA continues making major IT purchases before determining how it will do business in its service centers, it risks repeating past failures, i.e., investing millions of dollars on IT that does not effectively satisfy its needs. The department needs to understand clearly how it is going to operate before it acquires supporting technology. This does not mean that every process must be fully reengineered before any investments can be made. It means that every process that is being automated must be fully reviewed and changes understood before technology is acquired to support it.

USDA also disagreed with our recommendation that the CIO be given responsibility for managing the service center IT modernization. The department considered this a reversal of our earlier recommendations related to Info Share, that pointed out as a weakness that it was being driven by IT personnel rather than program personnel. USDA said its strategy has been to assign the responsibility and accountability for service center initiatives to agency program leadership. It further said that separating IT modernization from program change initiatives would invite “repeating mistakes of the past.” USDA agreed that “much needs to be done to improve the project management structure” and said it is taking steps to do so, but said it will continue to implement this initiative under its current approach of “assigning day-to-day leadership and accountability to agency heads, acting collectively as the NFAC, and assigning the IT policy and oversight function to the CIO to ensure the effort is successful.”

USDA organizational weaknesses, in particular the fact that its CIO does not have the responsibility and authority needed to effectively manage major IT acquisitions agencywide, have contributed to past failures like Info Share. To correct the weaknesses, we recommended in past reports, and continue to recommend in this report, that the senior business managers in USDA be responsible for business process reengineering, but that the CIO be held accountable and responsible for managing the service center IT modernization. As currently planned, this IT modernization will be the biggest and most costly in USDA’s history. If USDA is to avoid repeating past mistakes, it cannot insist on maintaining the status quo, i.e., having no senior-level official with overall responsibility, authority, and accountability for managing and coordinating the separate service center IT modernization projects and for ensuring that the Clinger-Cohen mandates have been met and that critical tasks are completed on time and within budget.

In addition, USDA stated that it is not funding IT projects without preparing the requisite data and analyses, and that the “common computing environment has not been approved by USDA for procurement and deployment, and the CIO has conditioned any such approval on meeting capital investment planning and control requirements and other factors.”

Based on the results of our audit work, USDA claims that service center IT project approval is conditioned on “meeting capital investment planning and control requirements and other factors” are not convincing and are not supported by facts. USDA does not define what its “planning and control requirements and other factors” are, and has not completed development of, nor implemented, a capital investment process. Nonetheless, USDA plans to spend over $200 million in fiscal years 1998 and 1999, which includes investments for the common computing environment. These plans were approved by the department’s Executive Information Technology Investment Review Board and the CIO.

Finally, the department said it strongly opposes our suggestion that the Congress limit funding until the weaknesses we identified are resolved. The department stated that it believed limiting IT funding at this critical juncture would shut down much of the reengineering and technical development work that is underway and would cause USDA to forego implementation of improvements.

USDA’s view that our recommendations related to limiting its IT funding would “shut down much of the reengineering . . . work” is not correct. Our recommendation allows for funding to help USDA develop and document a concept of operations and the new mission-critical business processes necessary to provide one-stop service at all sites and integrate the service center business process reengineering project with the county-based study, and we have amplified the wording in our matters for congressional consideration to reflect this.

While USDA does not take issue with most of our recommendations, it does not explain whether or how it plans to implement them. Rather, USDA cites actions that it already has underway and believes these are sufficient to mitigate risks. Although some of the steps being taken by USDA are helpful, they will not and do not correct the persistent weaknesses we identified.

USDA also raised several additional matters that do not affect our conclusions and recommendations and thus are not discussed here. These matters and our responses are discussed in appendix II.

As agreed with your office, unless you publicly announce its contents earlier, we will not distribute this report until 30 days from the date of this letter. At that time, we will send copies to the Secretary of Agriculture; the Chairmen and Ranking Minority Members of the Senate Committee on Governmental Affairs, the Senate and House Committees on Appropriations, and the House Committee on Government Reform and Oversight; the Director, Office of Management and Budget; and other interested parties. Copies will also be made available to others upon request.

Please contact me at (202) 512-6408 if you or your staff have any questions concerning this report. I can also be reached by e-mail at willemssenj.aimd@gao.gov. Major contributors to this report are listed in appendix IV.

Scope and Methodology

To obtain information on USDA’s current plans and ongoing efforts to modernize IT for its service centers, we analyzed relevant plans and studies for the department’s service center IT modernization, including USDA’s Service Center Business Process Reengineering Business Case and supporting documentation on the business process reengineering and geospatial data projects; the Service Center Business Need and Technical Alternative Evaluation Study; the Service Centers Strategic Plan; the Service Centers Modernization Strategy; Business Integration Center Project Plan; the Service Center IT Procurement Plan; and the Service Center Common Computing Environment Implementation Strategy. We also interviewed the Executive Officer and his deputy from the Service Center Implementation team and those individuals leading IT modernization major projects to determine how these plans and efforts were being managed and undertaken.

Using the Service Center Business Process Reengineering Business Case, Service Center Business Need and Technical Alternative Evaluation Study, and telecommunications planning documents, we identified the department’s estimated costs for the service center IT modernization. We also obtained information from the Service Center Implementation team budget officer on expenditures the department has incurred since 1996, as well as planned expenditures for fiscal years 1998 and 1999. We used the agency’s OMB A-11 submissions to identify expenditures that service center agencies had made and planned to make. We did not validate the accuracy of agency-provided data on cost or benefit estimates, or actual costs.

To identify significant risks in USDA’s service center IT modernization activities and plans, we compared them with requirements under the Clinger-Cohen Act and with generally accepted sound management practices as outlined in GAO guidance—Executive Guide: Improving Mission Performance Through Strategic Information Management and Technology (GAO/AIMD-94-115) and Executive Guide: Measuring Performance and Demonstrating Results of Information Technology Investments (GAO/AIMD-98-89) and OMB’s Circular A-130, Management of Federal Information Resources. We also determined whether recommendations made in past GAO reports, particularly those related to USDA’s Info Share Program, had been implemented.

In addition, we met with USDA officials and obtained information on the two other major initiatives the department has underway that could affect the service center IT modernization effort—the county-based study evaluating options for delivering services at the service center and the Year 2000 conversion of all of the agencies’ IT systems.

Finally, we interviewed senior CIO officials to discuss their roles in overseeing the service center IT modernization, and met with OMB officials to discuss their reviews of related funding requests by USDA. We performed our work at USDA headquarters in Washington, D.C., and at service centers in Higginsville and Richmond, Missouri. Our work was performed from September 1997 through May 1998 in accordance with generally accepted government auditing standards.

Comments From the Department of Agriculture

The following are GAO’s comments on the Department of Agriculture’s letter dated July 21, 1998.

GAO Comments

1. Reporting USDA’s $3 billion life-cycle estimate figure is not misleading. We explain on page 8 that personnel costs are included in the $3 billion life-cycle figure. In addition, appendix III provides a detailed breakout of the life-cycle costs estimated by USDA for each of the major projects and the cost elements for the business process reengineering and common computing environment projects. 2. Our report clearly states that the new technology we are referring to is technology that USDA acquired as part of the nearly $145 million the department spent on its service center IT modernization in fiscal years 1996 and 1997. In contrast, the “moderate investment” that USDA discusses refers to the nearly $100 million that FSA, NRCS, and RD reported spending over this same time period on hardware and software within each agency and independent of the modernization. 3. We clarified the report to emphasize that configuration and integration problems were not the only cause of the delays. However, the department’s characterization of the configuration and integration problems is misleading. A major reason for these problems was a failure by the department to properly test and pilot the telecommunications equipment and promptly correct the problems that were identified as early as October 1996 in the first two pilot sites. Instead, the department began installing equipment with known problems nationwide, thus complicating, delaying, and increasing the cost of correction. 4. USDA’s position that the overall cost of the project remains under budget is misleading. The department originally set a budget of $132.5 million, but it was revised to $111.3 million, according to USDA’s records, once the actual cost of the telecommunications equipment was determined. At the time of our review, however, the department expected the costs of the overall project to reach $128.8 million. 5. The report recognized that the 38,000 personal computers included not only workstations and laptops but also personal data assistants. Nevertheless, we modified the report to specify the number of workstations (7,000), laptops (21,000), and personal data assistants (10,000) making up the overall figure. We included the number of personal data assistants because these are computers. 6. Our statement is accurate. The estimated billions of dollars in productivity gains discussed refers to gains USDA said it expects to achieve by reengineering program processes, not gains achieved by reengineering administrative processes or consolidating administration. Our report makes this clear by noting that USDA currently has no plans to make additional staff reductions (i.e., beyond those already planned as part of the administrative consolidation) on the basis of expected productivity gains. In addition, USDA agrees that it has no plans to further reduce staff. 7. The statement accurately reflects information provided to us by the department on the number of computers RD and NRCS acquired and the reported costs of those computers. 8. While IT purchases that are not part of the service center IT modernization are reviewed by agency administrators, Office of the Chief Information Officer (OCIO) staff, and “other reviewers,” neither the agencies nor the department has the process, the information, or the continual, substantive involvement of senior executives needed to ensure that the investments are judicious. Further, since the department has not formulated its concept of operations and has not yet reengineered its business processes to support “one-stop” service, it does not know what its new environment will be and has no analytical basis for determining whether interim purchases will “fit into it.” 9. At the conclusion of our review, the department could not describe clearly (either orally or in writing) how it would operate and deliver services at all service center sites. The department notes in its comments that it is currently updating a concept of operations document. 10. USDA has misread the clear language of the report which correctly states that the department plans to spend over $200 million in fiscal years 1998 and 1999. The report does not discuss whether the service center agencies have been provided departmental “approval” for specific amounts. 11. We modified the report to recognize that USDA had identified risks for its telecommunications project. 12. USDA’s statement is incorrect. The information used in our report was developed independent of any of the department’s cited reviews, including the May 15, 1998, OCIO report. Moreover, USDA did not provide us with a copy of its May 15 report until after we had met with departmental officials to review and discuss a draft copy of our report. While some of the problems identified in the department’s reviews are similar to some of our findings, none are the same. For example, USDA’s internal review notes that delays in business process reengineering schedules have occurred, whereas we report that USDA is acquiring IT before reengineering its business processes. Further, several of our findings, such as those related to not managing IT projects as investments or not acquiring IT incrementally, were not discussed in USDA’s reviews at all. 13. USDA’s assertion is not supported by the facts. Information on mission-related performance measures was not used because it had not yet been developed for any of the projects, and risk information has only been developed for the telecommunications project. Also, information on estimated benefits and costs for some projects (e.g., life-cycle costs and benefits for the telecommunications project) was not available. Further, USDA does not dispute the fact that OMB capital asset criteria and worksheets were not used. 14. USDA’s statement is not accurate, as the document cited by the department has no information on risks.

Detailed Breakout of Life-Cycle Costs Estimated for Each Major Project

Major Contributors to This Report

Accounting and Information Management Division, Washington, D.C.

Kansas City Field Office

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