Electronic Records Archive: National Archives Needs to Strengthen Its Capacity to Use Earned Value Techniques to Manage and Oversee Development
Released: 2011-02-04T00:00:00

Letter

Background

The ability to find, organize, use, share, appropriately dispose of, and save records—the essence of records management—is vital for the effective functioning of the federal government. In the wake of the transition from paper-based to electronic processes, records are increasingly electronic, and the volumes of electronic records produced by federal agencies are vast and rapidly growing, providing challenges to NARA as the nation’s record keeper and archivist.

Furthermore, the Presidential Records Act gives the Archivist of the United States responsibility for the custody, control, and preservation of presidential records upon the conclusion of a President’s term of office. The act states that the Archivist has an affirmative duty to make such records available to the public as rapidly and completely as possible consistent with the provisions of the act.

In response to these widely recognized challenges, NARA began a research and development program to develop a modern archive for electronic records. The final operational ERA system is to consist of the following six key functions: Ingest enables the transfer of electronic records from federal agencies.

Archival storage enables stored records to be managed in a way that guarantees their integrity and availability.

Records management supports scheduling, appraisal, description, and requests to transfer custody of all types of records, as well as ingesting and managing electronic records, including the capture of selected records data (such as origination date, format, and disposition).

Preservation enables secure and reliable storage of files in formats in which they were received, as well as creating backup copies for off-site storage.

Local services and control regulates how the ERA components communicate with each other, manages internal security, and enables telecommunications and system network management.

Dissemination enables users to search descriptions and business data about all types of records and to search the content of electronic records and retrieve them.

ERA Acquisition Strategy

In 2001, NARA began developing policies and plans to guide the overall acquisition of an electronic records system. Upon completion of the design phase, the agency awarded a cost-plus-award-fee contract to Lockheed Martin Corporation in September 2005, worth $317 million, to develop the ERA system.

The development contract is composed of six option periods—the first option lasting 2 years and all subsequent options each lasting 1 year (to cover any uncompleted planned work and/or additional new work). The ERA contract is currently in the fifth option period.

Within this contract structure, NARA is to deliver ERA system capabilities in five separate increments. Each period of performance includes specific capabilities associated with one or more increments to be delivered. Increments will overlap to allow the analysis and design activities for the next increment to begin while the testing of the final release of the current increment is under way. Figure 1 illustrates the ERA program plan schedule prior to the recent change in program direction in July 2010 (as discussed later in this report).

Table 1 summarizes the planned system capabilities to be delivered by increment.

Since awarding the contract, NARA has made several modifications to the program schedule including, among other things, extending the first two option periods by 2 months and 7 months, respectively. NARA also reduced the period of performance for option period four by 6 months. Additionally, NARA stated that Increment 3 was completed in October 2010 and that they expect to complete Increment 4 by early-2011, both of which are later than the milestones established in program planning documents. Table 2 shows a comparison of the original and revised ERA schedules.

Prior GAO Reviews Have Identified Cost and Schedule Issues in ERA’s Progress

Since 2002, we have reported and testified on the technical and programmatic challenges that NARA has experienced in acquiring the ERA system, as well as on additional key risks facing the program. Our most recent report, in June 2010, reported that the estimated cost for ERA through March 2012 increased to more than $567 million. For example, NARA reportedly spent about $80 million on the base increment, compared with its planned cost of about $60 million. According to agency and contractor officials, factors contributing to the increase include unanticipated complexity of the system being developed. In order to enhance NARA’s ability to complete the ERA development within reasonable funding and time constraints, we recommended that the agency ensure adequate executive-level oversight by maintaining documentation of investment review results, including changes to the program’s cost and schedule baseline and any other corrective actions taken as a result of changes in ERA cost, schedule, and performance.

We further reported that, although NARA initially planned for the system to be capable of ingesting federal and presidential records in September 2007, the two system increments to support those records did not achieve initial operating capability until June 2008 and December 2008, respectively. In addition, a number of functions originally planned for the base increment were deferred to later increments, including the ability to delete records and to ingest redacted records. More notably, we reported that NARA had not detailed what system capabilities would be delivered in the final two increments; it also had not effectively defined or managed ERA’s requirements to ensure that the functionality delivered satisfies the objectives of the system. Although NARA established an initial set of high- level requirements, it lacked firm plans to implement about 43 percent of them. As a result, we recommended that NARA ensure that ERA’s requirements are being managed using a disciplined process.

OMB Directed Recent Changes to the ERA Program

As a result of our most recent report, OMB is working with NARA to remedy the problems we highlighted related to the cost, schedule, and performance of the ERA system. Specifically, in July 2010, OMB directed NARA to halt all development activities by the end of fiscal year 2011 and develop an action plan to address our finding on the lack of defined system functionality for the final two increments of the ERA program and the need for improved strategic planning.

In response, NARA has work under way to revise its program implementation plans and enter the operations and maintenance phase beginning in fiscal year 2012. For development work to be accomplished prior to this date, NARA is to prioritize existing requirements and develop realistic cost and schedule estimates to determine what can be accomplished by the deadline. In addition, NARA also plans to prioritize remaining outstanding requirements (that are to be accomplished under the ERA contract); identify other requirements not yet met by the system; and determine ERA operations and maintenance requirements.

Despite changes in program direction, the Archivist noted that the essential goals of ERA would remain unchanged. He stated that, beginning in fiscal year 2012, ERA would fully support the transfer of electronic records to an archival repository, as well as access to and preservation of electronic archival records. To do this, the Archivist stated that the agency would work on those elements determined to be the highest priorities in fiscal year 2011. According to NARA, this may lead to a second phase of the ERA development in the future.

EVM Provides Insight on Program Cost and Schedule

Given the size and significance of the government’s investment in IT, it is important that projects be managed effectively to ensure that public resources are wisely invested. Effectively managing projects entails, among other things, pulling together essential cost, schedule, and technical information in a meaningful, coherent fashion so that managers have an accurate view of the program’s development status. Without meaningful and coherent cost and schedule information, program managers can have a distorted view of a program’s status and risks. To address this issue, in the 1960s, the Department of Defense developed the EVM technique, which goes beyond simply comparing budgeted costs with actual costs. This technique measures the value of work accomplished in a given period and compares it with the planned value of work scheduled for that period and with the actual cost of work accomplished.

Differences in these values are measured in both cost and schedule variances. Cost variances compare the value of the completed work (i.e., the earned value) with the actual cost of the work performed. For example, if a contractor completed $5 million worth of work, and the work actually cost $6.7 million, there would be a negative $1.7 million cost variance. Schedule variances are also measured in dollars, but they compare the earned value of the completed work with the value of the work that was expected to be completed. For example, if a contractor completed $5 million worth of work at the end of the month, but was budgeted to complete $10 million worth of work, there would be a negative $5 million schedule variance. Positive variances indicate that activities are costing less or are completed ahead of schedule. Negative variances indicate activities are costing more or are falling behind schedule. These cost and schedule variances can then be used in estimating the cost and time needed to complete the program.

Without knowing the planned cost of completed work and work in progress (i.e., the earned value), it is difficult to determine a program’s true status. Earned value allows for this key information, which provides an objective view of program status and is necessary for understanding the health of a program. As a result, EVM can alert program managers to potential problems sooner than using expenditures alone, thereby reducing the chance and magnitude of cost overruns and schedule slippages. Moreover, EVM directly supports the institutionalization of key processes for acquiring and developing systems and the ability to effectively manage investments—areas that are often found to be inadequate on the basis of our assessments of major IT investments.

In 2005, OMB began requiring agencies, such as NARA, to fully implement EVM on major IT investments. Specifically, this guidance directs agencies to (1) develop comprehensive policies to ensure that their major IT investments are using EVM to plan and manage development; (2) include a provision and clause in major acquisition contracts or agency in- house project charters directing the use of an EVM system that is compliant with the American National Standards Institute (ANSI) standard; (3) provide documentation demonstrating that the contractor’ or agency’s in-house EVM system complies with the national standard; ( conduct periodic surveillance reviews; and (5) conduct integrated base reviews on individual programs to finalize their cost, schedule, and performance goals. s 4)

Building on OMB’s requirements, in March 2009, we issued a guide on best practices for estimating and managing program costs. This guide highlights the policies and practices adopted by leading organizations to implement an effective EVM program. Specifically, in the guide, we identify 11 key practices that are implemented on acquisition programs of leading organizations. These practices include the need for organizational policies that establish clear criteria for which programs are required to use EVM, specify compliance with the ANSI standard, require a standard product-oriented structure for defining work products, require integrated baseline reviews, provide for specialized training, establish criteria and conditions for rebaselining programs, and require an ongoing surveillance function. In addition, we identify key practices that individual programs can use to ensure that they establish a sound EVM system, that the earned value data are reliable, and that the data are used to support decision making.

NARA’s Chief Information Officer Is Responsible for EVM Implementation

In October 2002, NARA established the ERA Program Management Office, which has primary responsibility for managing the ERA acquisition. The ERA program falls within the oversight of the NARA IT Executive Committee and the Chief Information Officer (CIO). Specifically, the executive committee is comprised of senior NARA decision makers who manage NARA’s IT capital planning and investment control process and the NARA IT investment portfolio, which includes the ERA investment. The NARA CIO oversees management of the ERA program and is responsible for EVM implementation across the agency’s IT acquisitions.

To support project managers in the execution of EVM, among other things, the CIO established the Capital Planning and Administration Branch to establish policy and guidance, analyze monthly project status reports, identify earned value trends, provide corrective action recommendations, and disseminate project information as appropriate. Furthermore, the ERA Program Director, who reports to the CIO, is responsible for the operational scope of work, performance, budget, and schedule of the program. Additionally, the NARA senior staff, which includes the Archivist and the Deputy Archivist, provide oversight and risk management as required. Figure 2 illustrates the organizational structure for the ERA program.

NARA Has Yet to Fully Establish Most EVM Practices to Manage the ERA Acquisition

NARA has, to varying degrees, established certain best practices needed to manage the ERA acquisition through EVM. Our work on best practices in EVM identified 11 key practices that are implemented on acquisition programs of leading organizations. These practices can be organized into three management areas: establishing a comprehensive EVM system, ensuring reliable earned value data, and using those data to make decisions. The ERA program fully met 2 of the 11 key practices for implementing EVM, partially met 7 practices, and did not meet 2 others. These weaknesses exist in part because NARA lacks a comprehensive EVM policy, as well as training and specialized resources. NARA also frequently replans the ERA program. Without effectively implement EVM, NARA has not been positioned to identify potential cost and schedule problems early and thus not been able to take timely actions to correct problems and avoid program schedule delays and cost in creases. Table 3 lists the 11 key EVM practices by management area and summarizes the status of NARA’s implementation of each practice.

Define the scope of effort using a work breakdown stru cture.

Identify who in the organization will perform the work.

Schedule the work.

Estimate the labor and material required to perform the w authorize the budgets, including management reserve.

Determine objective measure of earned value.

Develop the performance measurement baseline.

Execute the work plan, and record all costs.

Analyze EVM performance data, and record performance measurement baseline plan.

Forecast estimates at completion.

Take management action to mitigate risks. formance measurement baseline as changes occur. ●: The agency addressed all aspects of this EVM practice. ◐: The agency addressed some, but not all, aspects of this EVM practice. ◌: The agency did not address any aspects of this EVM practice. ources: GAO analysis of NARA and contractor data.

NARA Did Not Fully Establish a Co EVM System

The ERA program did not fully establish a comprehensive EVM system. Of the six key practices in this management area, the program fully implemented one, and partially met five. Specifically, the agency’s organization charts and contract work breakdown structure fully identified the personnel responsible for performing the defined work. However, critical weaknesses remain in the following other key practices: program Define the scope of effort using a work breakdown structure. The ERA program maintains a work breakdown structure that is consistent with work planned in the project schedule; however, this structure neither reflects the entire scope of the program, nor is it defined in such a way to provide meaningful understanding of the products or deliverables being developed. Specifically, the work breakdown structure did not include work planned for Increment 4 and beyond. Furthermore, the struc defined by program increment rather than by major program/system component (e.g., ERA base, EOP), and the work planned in these increments was not broken down in a standardized fashion, thus making i difficult to track common work elements across increments. Without a work breakdown structure that is comprehensive, product-oriented, and standardized, ERA cannot efficiently track and measure progress made on contractor deliverables.

Schedule the work. The ERA project schedule had activities that were adequately sequenced; however, it also had a number of weaknesses tha undermined the quality of the established performance baseline. These weaknesses included an invalid critical path (the sequence of activities that, if delayed, impacts the planned completion date of the project); a lack of resources assigned to all activities; and the excessive or unjustified use of constraints, which impairs the program’s ability to forecast the impact of ongoing delays on future planned work activities.

To the contractor’s credit, it is aware of many of the deviations from scheduling best practices and has controls in place to monitor them. However, these weaknesses remain a concern because the schedule se as the performance baseline against which earned value is measured, and any weaknesses impair the use of the schedule as a management tool.

Estimate the labor and material required and authorize the budgets. The establishment of a sound baseline plan, which would include estima the labor and materials required to perform the work, was not thorough completed through an integrated baseline review. Although NARA performed integrated baseline reviews prior to exercising each option period, as well as after a major rebaseline, the most recent review, held i December 2009, showed that none of the corrective actions needed to mitigate program risks—including reducing a large amount of work not being measured objectively—had been taken. Without a fully completed integrated baseline review, NARA has not taken the proper steps to determine whether the baseline plan contains an acceptable level of risk and that significant risks have been mitigated. While the contractor has established management reserves to cover realized risks in the baseline plan and reports reserve levels to NARA on a monthly basis, the lack of a n sufficient review makes it diff reserve set aside is justified. icult to determine whether the amount of Determine objective measure of earned value. Objective measures were not always used for determining a majority of work planned. For example as of February 2010, approximately 17 percent of the program’s baseline budget was classified as nonobjective (also called level-of-effort). Our research shows that, if more than 15 percent of the baseline is measured using level-of-effort, then that amount should be scrutinized because it does not allow schedule performance to be measured. NARA identified use of nonobjective metrics as a concern in its most recent integrated baseline review; however, it did not take action to address this concern. Until NARA ensures that metrics used to measure the progress made on that ERA’s planned work elements are appropriate, it cannot be assured measurements of accomplishments are sufficiently credible.

Program Did Not Adequately Ensure That EVM Data Were Reliable

The ERA program did not adequately ensure that ERA’s earned value d were reliable. Of the three key practices in this management area, the program fully implemented one, partially met one, and did not meet the remaining one. Specifically, the program has processes in place to iden and record cost and schedule variances and review earned value data using monthly contractor EVM performance reports. In addition, the ERA program office reviews contractor EVM data on a regular basis to track contractor performance, including incorporating EVM data into monthly program management reviews. However, the program has not adequately tify recorded variances from the performance baseline or been able to forecas estimates at completion using EVM: Analyze EVM performance data and record variances. The contractor’s art of Increment 3, did not discuss the impact of the problem and monthly reports include justifications for cost and schedule var however, these justifications are not sufficiently detailed for NARA program management to fully understand the reasons for the varian and the contractor’s plan for resolving them. In particular, the justifications of variances for the base system a p comprehensive corrective actions to be taken. As a result, the program office cannot track and mitigate related risks. ugmentation work, a major Furthermore, the monthly reports also showed a number of anomalies that s raise questions regarding the reliability of the earned value data. Example are as follows: work was removed from the baseline without also removing s corresponding budget. This is an inappropriate EVM practice and it results in the appearance of favorable cost and schedule performa trends.

Work was shown as fully completed in one month’s report but, in subsequent reports, the same work was reported as less than 100 percent complete. For example, Increment 3 development work was reported as 100 percent complete in July 2009, but 2 months later, in September 2009, it was reported as 10 percent complete. In another example, program support activities for Increment 3 were reported as 100 percent complete in August 2009, but in the subsequent month 49 percent complete.

Dollars were reported as spent in a given month, but no work was reported as scheduled or completed.

NARA program and contractor officials provided justifications for these anomalies, such as extension of the period of performance. However, these justifications were not always valid. In particular, program official s cited lagging invoices as a major contributor to these anomalies. As such, the reconciliation of estimated costs to actual costs was not reflected in the earned value reports until, in some cases, up to 15 months after the fact. Lagging invoices can create false positive or negative variances and, as such, the timely reconciliation of these costs is necessary for obtain reliable data. Until NARA resolve anomalies, it risks using inaccurate data to manage the program, improves its ability to assess contractor data and potentially resulting in additional cost overruns, schedule delays, and performance shortfalls.

Forecast estimates at completion. The ERA pr ogram is unable to forecast osts at program completion based on the earned value data it receives c because these data reflect contractor performance trends in one increment, not the full development program.

Program Management Team Did Not Effectively Use Earned Value Data to Make Decisions

orm The ERA program did not effectively use earned value data to inf programmatic decisions. Of the two key practices, the program partia met one and did not meet the other practice. Specifically, the progr office included earned value performance trend data in monthly performance management review briefings. In addition, the cost and schedule drivers causing poor trends (as identified in the monthly contracto contained in the program risk registers. Nevertheless, critical weaknesses remain in this management area. Examples of those weaknesses are as follows: r reports) were generally consistent with the risks and issues Take management action to mitigate risks. NARA management did not take all necessary actions to mitigate risks. First, according to NARA officials, the CIO, Program Director, and contractor executives meet weekly and discuss cost and schedules issues when appropriate. However, NARA does not document the results of these briefings, and thus there i little evidence that this body has reviewed and approved cost and schedule issues. There is also little evidence that it identified corrective actions an d tracked them to closure. Second, the briefings to senior executives are inconsistent. For example, in January 2010, the program team reported the Program Director that unless Increment 3 work was replanned into In other briefings to senior NARA management and OMB, it was reported that the cost performance remained steady. crement 4, they anticipated a cost overrun of $2.0 million. However, in Moreover, while ERA earned value data trends are included in briefing materials provided to NARA senior executives, these cost and schedule performance trends are not Until NARA uses earned value data to make program decisions, it will be unable to effectively identify areas of concern and make recommendati to reverse negative trends. discussed in these management meetings.

Weaknesses in EVM Implementation Are Due in Part to Key Factors at the Program and Agency Levels

The weaknesses we identified in the three management areas exist, in part, because of a number of key factors: NARA-wide EVM policy: As we have previously reported, a comprehensive EVM policy is an important aspect of instituting a sound EVM program. NARA’s policy, established in 2005, outlines clear criteria for which IT programs are to use EVM. However, it does not require EVM training for senior executives with oversight responsibility, program managers, or relevant program staff responsible for contract management. The policy also does not require annual EVM system surveillance to program compliance with the industry standard. The ERA program offic provided documentation that a surveillance review was performed in April 2009; however, a number of outstanding corrective action items resulting from this review were not closed. Moreover, the program could not provide documentation to show that regular surveillance reviews were performed in past years. Without such policies, NARA is not positioned to ensure that ERA’s program staff have the appropriate skills to validate and interpret EVM data, and that its executives fully understand the data the y are given in order to ask the right questions and make informed decisions.

Specialized program resources: The program office lacks the appropriate levels of skilled EVM personnel. In a past governmentwide review, we reported on successful EVM implementation on major IT projects at the Department of Homeland Security and the Federal Aviation Administration; these projects, all similar in size to ERA, had between and eight EVM specialists on staff to complete such activities. At this time the ERA program has two resident specialists on staff to oversee and monitor contractor performance for all components of the program; however, their responsibilities also extend beyond EVM to other areas of program control. Given the extent of earned value data anomalies we found, and the frequency with which the performance baseline is replanned, it is essential that the program office have the appropriate l of personnel in place to perform EVM analysis and oversight activities. Without an appropriate level of staffing, the program office will likely continue to experience issues in obtaining reliable earned value data.

Acquisition strategy approach: Our body of work has shown that frequent rebaselines on a systems acquisition program allow real performance to be hidden, leading to distorted EVM data reporting. Th weaknesses associated with ERA’s performance baseline are largely due to frequent rebaselining. Program and contractor officials attributed this to ERA’s current acquisition strategy approach, which calls for NARA to renegotiate the contract (or replan the baseline) with every option As such, NARA is unable to produce a stable and comprehensive b that reflects all development work planned for the system. Instead, a baseline is crea ted for each option period—so work that was not completed in one option period gets replanned or removed in the subsequent one, thus resetting all past contractor cost and schedule performance.

We agree that the program’s current implementation of the acquisition strategy is inherently incompatible with the use of EVM. Moreover, this environment sets the contractor up to be favorably positioned to receive a high award fee for each period of performance because the constant rebaselining makes it easier for the contractor to excel at achieving the objectives measured by the award fee evaluation process. In addition, it also makes the program highly inefficient because it must focus significant effort on program replanning instead of on the ERA system de work.

Until NARA changes its acquisition strategy and establishes a comprehensive baseline for the program, its EVM practices will continue to be hampered with weaknesses, and its ability to obtain the insight needed to effectively manage the contractor will be impeded.

ERA’s Earned Value Data Do Not Reflect True Program Sta tus or the Magnitude of Future Cost and Schedule Increases

ERA’s earned value performance trends do not accurately portray prog status, and our analysis of historical program trends indicate that future cost and schedule increases will likely be significant. Due to the limited implementation of EVM practices and the presence of data anomalies (both previously discussed), ERA’s earned value data reflect only a small portion of the work actually being performed. As such, we relied on historical ERA program performance data to construct a projected range n of costs at completion (see app. I for details). We previously reported, i June 2010, that NARA completed about 60 percent of ERA’s system requirements. If NARA pursues its original set of requirements, and the contractor maintains its current rate of productivity, it is unlikely that more tha end date of September 2011. We further project that the total cost overrun incurred at contract end could roughly be between $285 million and $33 million. n 65 percent of them will be completed by the revised contract Plans for the completion of the remaining development work once t contract ends are being reevaluated by NARA at the direction of OMB (as previously discussed). According to the Archivist, the essential goals of ERA will remain unchanged and may lead to a second phase of the development in the future. If NARA were to complete the full ERA system as originally designed, we project the development phase to be complete by March 2017 with a total cost overrun between $195 million and $433 million. We further project that the total cost overrun incurred at the end of the program life cycle will likely be between $205 million and $405 million. Table 4 shows our cost and schedule estimates as compared with NARA’s estimates for the program.

Our projection assumes that past trends are indicative of future performance and does not take into account the degree of difficulty of the work being performed. This is critical because the work that remains includes system integration and testing activities that are complex and often the most challenging to complete based on our review of similar IT programs. Furthermore, in making our projection of total life cycle cost, we applied the same estimated operations and maintenance cost used b NARA. We did not validate the credibility of the operations and maintenance cost estimate. Based on these assumptions, we believe our rough estimates are conservative and that the final costs at completion could be even higher.

In contrast, contractor-provided data from January 2009 to June 2010, show that the contractor has exceeded its cost target by $1.6 mi has not completed about $2 million worth of planned work. The contrac reported that the negative cost and schedule variances are largely due t unanticipated development work required to integrate specific commercial-off-the-shelf products into the base system and unplanned software code growth in key areas, including ingest orchestration and archive search capability. Based on current performance trends, the contractor estimates it will incur a $2.7 million overrun at the end of Increment 3.

Conclusions

Overall, NARA has fallen short in its implementation of EVM to over and manage the ERA system acquisition. Most of the earned va controls needed for sound im Specifically, lue process plementation have yet to be fully established. the baseline for measuring contractor performance lacks sufficien accuracy and completeness to provide a meaningful basis for understanding performance; the performance data measured against a flawed baseline are not reliable and are further impaired by the extent of anomalies found in the contractor performance reports; taken together, this hampers NARA’s ability to produce reliable estimates of cost at completion; and e ability to take timely action to correct unfavorable results and trends is th constrained. Moreover, because senior executives do not discuss and use earned value trends to oversee this investment, the production of reliable EVM performance reports will continue to be a low priority to the progr office and ultimately the contractor.

Many of the weaknesses found can be traced back to NARA’s inadequate l as agency-level EVM policies, training, and specialized resources, as wel to its acquisition strategy for the ERA program. Until NARA addresses these underlying issues, it is not positioned to optimize EVM as a management tool on this program.

In addition, the program’s historical cost and schedule performance suggest that the ERA system, at full operational capability, will likely be deployed at least 67 months behind schedule (in March 2017) and that th total life cycle cost for the program could be at least $1.2 billion (a 21 percent increase).

Recommendatio Executive Action

To improve NARA’s ability to effectively implement EVM on its ERA system acquisition program, we recommend that the Archivist of theU the current system development contract is active: nited States direct the NARA CIO to take the following five actions while RA program to establish a comprehensive baseline (through n integrated master schedule) for all remaining work on contract.

Ensure that the ERA program obtains reliable EVM performance repo rts, taking into consideration the data anomalies and weaknesses identified in this report.

Engage senior NARA and contractor leadership/oversight officials to direct attention to reversing current negative performance trends, as shown in the earned value data, and take action to mitigate the pote cost and schedule overruns.

Include as part of its acquisition policy governing EVM requirements for (1) EVM training for senior executives and program staff re sponsible for E program’s EVM system to ensure its compliance with industry standardRA investment oversight and (2) ongoing surveillance of the ERA s.

Ensure that the ERA program in place to perform EVM analysis and oversight activities. has the appropriate level of specialized staff Taking into consideration the new ERA program direction, we furthe recommend that the Archivist of the United States direct the CI the following three actions: Using a gap analysis of the work completed through fiscal year 2011, and the original ERA requirements set, determine and clearly define the remaining work that will be pursued in the future ERA system development phase (Phase 2). irect the ERA program to develop new cost and schedule estimates for a comprehensive Phase 2 baseline, as well as for the total program l In combination with the above action, this should provide the program with enough information to disclose to the Congress the exact work tha will be accomplished and the cost of that work. ife cycle.

Upon completion of the above action, direct the ERA program to implement the EVM practices that address the detailed weaknes we identified in this report, taking i including nto consideration the criteria used, establishing a comprehensive Phase 2 baseline (through an integrated master schedule) that has been validated through an integrated baseline review and limits the use of nonobjective metrics; nsuring that reliable reports of EVM performance are being produced, e including records of work completed, forecasts of estimates at completion, and explanations/corrective actions for variances an anomalies; and engaging senior NARA leadership/oversight officials to ensure that earned value data are being used for decision-making purposes, cluding holding and documenting executive meetings to ensure that in cost and schedule risks/issues have been tracked to closure, negative performance trends are mitigated, and major updates made to the baseline have been validated through an integrated baseline review.

Agency Comments and Our Evaluation

In written comments on a draft of this report, which are reprinted in appendix II, the Archivist of the United States generally concurred with our recommendations and stated that NARA plans to address most of them in a near-term action plan. He further stated that NARA would be unable to address the final three recommendations in this plan since those were specific to a future ERA development effort. In addition, the Archivist shared two perspectives regarding our methodology used to project ERA program costs.

First, NARA stated that it believes the true cost of ERA’s system development to be only $282 million, rather than our reported cost of $567 million, because NARA looks at total costs as two distinct parts: developmental costs versus nondevelopmental costs. Specifically, NAR considers costs such as project management, research and develop concept exploration and planning activities, and operations of the syst em to be nondevelopmental and thus excludes them from its projections. We disagree that this reflects the true cost of developing the system. True system development cost should include the costs for all program a ept cycle, including project management, research and development, conc exploration and planning activities. The projections we have made in the report reflect this. ctivities performed in the development phase of an acquisition’s life Second, NARA stated that our cost projections’ assumption that past trends are indicative of future performance does not hold true because of its cost category distinction (developmental versus nondevelopmental) and the impact of OMB’s July 2010 memo, which redirected the scope of the entire program and ends the current development work in September 2011. NARA further stated that, as a result, the agency cannot know now when new development efforts may start, or the scope or cost of such development. As discussed above, NARA’s cost distinction does not provide for a comprehensive estimation of system development costs; therefore, we believe our cost projections are sound. We agree with NARA concerning the impact of the change in program direction and believe the appropriate caveats pertaining to ERA’s p th reevaluated and that our projections were based on the completion of the full ERA system as originally intended. future were placed on our cost rojections in the report. Specifically, our report states that the plans for e completion of the remaining 35 percent of development work are being As agreed with your offices, unless you publicly announce the contents this report earlier, we plan no further d report date. At that time, we will send copies to the appropriate congressional committees, the Archivist of the United States, and other interested parties. The report also will be available at no charge on the GAO Web site at http://www.gao.gov. istribution until 30 days from the If you or your staff members have questions on matters discussed in report, please contact David Powner at (202) 512-9286 or pownerd@gao.gov. 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 III.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) assess whether the National Archives and Records Administration (NARA) is adequately using earned value management (EVM) techniques to manage the Electronic Records Archives (ERA) acquisition and (2) evaluate the earned value data to determine ERA’s cost and schedule performance.

To accomplish our first objective, we analyzed program documentation, including project work breakdown structures, project schedules, integrated baseline review briefings, risk registers, contractor performance reports, and monthly program management review briefings for the ERA program. Specifically, we compared program documentation with EVM and scheduling best practices as identified in GAO’s cost guide. We characterized the extent to which the program met each of the 11 practices as either fully implemented (all sub-elements of the practice were met), partially implemented (some but not all sub-elements were met), or not implemented (none of the sub-elements were met). To have fully implemented a key practice, the program must have implemented all characteristics of the practice. We also interviewed program and contractor officials (and observed program status review meetings) to obtain clarification on how EVM practices are implemented and how the data are used for decision-making purposes.

To accomplish our second objective, we analyzed earned value data contained in contractor EVM performance reports, program budget reports sent to the Office of Management and Budget (OMB), as well as past GAO work on ERA costs and system requirements. To perform this analysis, we compared the cost of work completed with budgeted costs for scheduled work in the contractor performance reports over an 18-month period to show trends in cost and schedule performances.

We determined that the earned value cost data were not sufficiently reliable to estimate the likely costs at contract completion. As a result, we developed an alternative methodology by using other historical ERA performance data to make cost projections at contract completion, as well as to make further cost and schedule projections about the system development phase beyond the contractor’s baseline plan. To do so, we used our past work to identify the percentage of ERA requirements completed through September 2010. Our alternative methodology was as follows: Completed requirements estimate: We divided the total number of completed requirements by the duration (in months) it took to complete them to calculate a productivity factor. We then multiplied this factor by the remaining duration of the contract to calculate our estimate of the percentage of requirements that will likely be completed at contract end.

Low end of contract completion cost estimate range: We used the cost overrun incurred to complete the amount of requirements described above by the duration (in months) it took to complete them to calculate a burn rate of overrun dollars. We then multiplied the burn rate by the remaining duration to determine an estimated total overrun beyond what had already been incurred.

High end of contract completion cost estimate range: We divided the current contract value by the total number of completed requirements to calculate an efficiency factor. We then multiplied this factor by our estimate of completed requirements at contract end (calculated as described in the first bullet) to determine our estimate.

Development phase schedule estimate: We used the productivity factor to estimate the duration to complete 100 percent of the requirements (i.e., the development phase).

Development phase cost estimate range: We applied the same general methodology as described above to determine both the low-end and high- end estimates.

To generate our total life cycle cost estimates, we added the NARA- provided cost estimate for operations and maintenance to our estimated development phase costs.

To assess the reliability of the budget cost data, we compared them with other available supporting documents (including financial reports to OMB); performed limited testing of the data to identify obvious problems with completeness or accuracy; and interviewed agency and contractor officials about the data. For the purposes of this report, we determined that the budget cost data were sufficiently reliable. We did not test the adequacy of the agency or contractor cost-accounting systems. Our evaluation of these cost data was based on what we were told by the agency and the information they could provide.

We conducted this performance audit from March 2010 to January 2011 at NARA offices in the Washington, D.C., metropolitan area. Our work was done 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.

Appendix II: Comments from the National Archives and Records Administration

.Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the individual named above, those making contributions to this report included Carol Cha, Assistant Director; Neil Doherty; Ronalynn Espedido; Jason Lee; Lee McCracken; Karen Richey; and Niti Tandon.