Information Technology: OMB and Agencies Need to Focus Continued Attention on Eliminating Duplicative Investments
Released: 2013-06-11T00:00:00

Letter

Background

Information technology should enable government to better serve the American people. However, according to OMB, despite spending more than $600 billion on IT over the past decade, the federal government has achieved little of the productivity improvements that private industry has realized from IT.Too often, federal IT projects run over budget, behind schedule, or fail to deliver promised functionality. In combating this problem, proper oversight is critical. Both OMB and federal agencies have key roles and responsibilities for overseeing IT investment management. OMB is responsible for working with agencies to ensure investments are appropriately planned and justified. Additionally, each year, OMB and federal agencies work together to determine how much the government plans to spend on IT projects and how these funds are to be allocated. As reported to OMB, federal agencies plan to spend more than $82 billion on IT investments in fiscal year 2014, which is the total expenditure for not only acquiring such investments, but also to operate and maintain them.

Opportunities to Reduce Duplication and Achieve Cost Savings Exist in Critical IT-related Areas

Over the past several years, we have reported that overlap and fragmentation among government programs or activities could be harbingers of unnecessary duplication.of duplication, overlap, or fragmentation could potentially save billions of tax dollars annually and help agencies provide more efficient and effective services. Many of the government programs or activities with opportunities to reduce duplication and the cost of government operations are related to critical IT areas, including the following: Thus, the reduction or elimination IT Dashboard. Given the importance of transparency, oversight, and management of the government’s IT investments, in June 2009 OMB established a public web site, referred to as the IT Dashboard, that provides detailed information on approximately 700 major IT investments at 27 federal agencies, including ratings of their performance against cost and schedule targets. The public dissemination of this information is intended to allow OMB; other oversight bodies, including Congress; and the general public to hold agencies accountable for results and performance. As of August 2012, 190 of the federal government’s approximately 700 major IT investments—totaling almost $12.5 billion—were in need of management attention.

Federal data centers. As federal agencies have modernized their operations, put more of their services online, and increased their information security profiles, they have demanded more computing power and data storage resources. According to OMB, the number of federal data centers grew from 432 in 1998 to more than 2,000 in 2010. The growth in the number of federal data centers, many offering similar services and resources, has resulted in overlap and duplication among the centers. In addition, according to OMB, in August 2009 the average utilization rate for servers ranged from 5 percent to 15 percent.

IT investment management. OMB and agencies need to address potentially duplicative IT investments to avoid investing in unnecessary systems. In fiscal year 2011, there were approximately 7,200 reported investments (includes major and nonmajor investments) totaling at least $79 billion. The Department of Defense (Defense) reported the largest number of IT investments (2,383 investments at $37 billion), followed by the Department of Energy (Energy) (876 investments and $2 billion).

Geospatial investments. The federal government collects, maintains, and uses geospatial information—information linked to specific geographic locations—to help in decision making and to support many functions, including national security, law enforcement, health care, and environmental protection. Many activities, such as maintaining roads and responding to natural disasters—floods, hurricanes, and fires—can depend on critical analysis of geospatial information. Multiple federal agencies may provide services at the same geographic locations and may independently collect similar geospatial information about those locations. In August 2012, the Department of the Interior estimated that the federal government invests billions of dollars in geospatial data annually and reported that duplication among investments is common. Better coordination among these agencies could help reduce duplication of geospatial investments and provide the opportunity for potential savings of millions of dollars.

Cloud computing. As an emerging approach to delivering IT services, cloud computing provides on-demand access to a shared pool of scalable computing resources. According to OMB, cloud computing has the potential to address IT inefficiencies by providing services both more quickly and at a lower cost. OMB further noted that IT services costing billions of dollars annually could potentially be migrated to cloud computing. Accordingly, agencies have reported saving millions of dollars from implementing cloud-based solutions. In particular, the Department of Homeland Security (DHS) reported that its implementation of enterprise content delivery services avoids an estimated $5 million in costs annually.

Enterprise architecture. An enterprise architecture is a modernization blueprint that is used by organizations to describe their current state and a desired future state and to leverage IT to transform business and mission operations. In light of the importance of developing well- defined enterprise architectures, we issued a seven-stage enterprise architecture management maturity framework that defines actions needed to effectively manage an architecture program.alternative, as our work has shown, is the perpetuation of the kinds of operational environments that burden most agencies today, where a lack of integration among business operations and the IT resources supporting them leads to systems that are duplicative, poorly integrated, and unnecessarily costly to maintain.

OMB Initiated Recent Major Initiatives for Reducing Duplication and Achieving Cost Savings

OMB has implemented a series of initiatives to manage IT more effectively, reduce duplication, and achieve cost savings. These efforts include the following:

TechStat reviews. In January 2010, the Federal Chief Information Officer (CIO) began leading reviews—known as “TechStat” sessions—of selected IT investments involving OMB and agency leadership to increase accountability and transparency and improve performance. Subsequently, OMB empowered agency CIOs to hold their own TechStat sessions within their respective agencies. As of April 2013, OMB reported that it had led 79 sessions that resulted in improvements to or termination of IT investments with performance problems. According to the former Federal CIO, the efforts of OMB and federal agencies to improve management and oversight of IT investments have resulted in almost $4 billion in savings.

Federal Data Center Consolidation Initiative. In February 2010, the Federal CIO established the Federal Data Center Consolidation Initiative to address the growing number of federal data centers. This initiative’s four high-level goals are to promote the use of “green IT” by reducing the overall energy and real estate footprint of government data centers; reduce the cost of data center hardware, software, and operations; increase the overall IT security posture of the government; and shift IT investments to more efficient computing platforms and technologies. OMB believes that this initiative has the potential to provide about $3 billion in savings by the end of 2015.

PortfolioStat reviews. In March 2012, OMB launched the PortfolioStat initiative, which requires agencies to conduct an annual agency-wide IT portfolio review to, among other things, reduce commodity IT spending and demonstrate how their IT investments align with the agency’s mission and business functions. PortfolioStat is designed to assist agencies in assessing the current maturity of their IT investment management process, making decisions on eliminating duplicative investments (such as geospatial information), and moving to shared solutions (such as cloud computing) in order to maximize the return on IT investments across the portfolio. While OMB’s TechStat reviews are intended to examine IT performance at the specific project or investment-level, PortfolioStat reviews are intended to examine the portfolio as a whole and draw on the agency's enterprise architecture to help identify and eliminate areas of duplication and waste. OMB believes that the PortfolioStat effort has the potential to save the government $2.5 billion over the next 3 years by, for example, consolidating duplicative systems.

GAO Has Previously Reported on IT Investment Management at Selected Agencies

During the past few years, we have reported on IT investment management—an important mechanism for identifying and analyzing duplicative investments—at key agencies. For example, in July 2011, we reported that the Internal Revenue Service (IRS) had established most of the foundational practices needed to manage its IT investments, but that additional improvements were needed. Specifically, the agency had executed 30 of the 38 key practices identified by GAO’s Information Technology Investment Management frameworksuccessful IT investment management, including all the practices needed to provide investment oversight and capture investment information. For as foundational for instance, IRS had defined and implemented a tiered governance structure to oversee its projects and had several mechanisms for the boards to regularly review IT investments’ performance. However, we reported that, despite these strengths, IRS could improve its investment management process in two key areas. First, IRS did not have an enterprisewide IT investment board with sufficient representation from IT and business units that was responsible for the entire investment management process, and as a result may not have been optimizing its decision-making process. Second, IRS did not have a process, including defined criteria, for reselecting (i.e., deciding whether to continue funding) ongoing projects. We concluded that, given the size of its IT budget, IRS could be spending millions of dollars with no assurance that the funds are being used wisely. Accordingly, we made recommendations to IRS to, among other things, assign responsibilities for implementing the investment management process to optimize decision making, and define and implement a process for deciding whether to continue funding ongoing projects; the agency concurred with our recommendations.

More recently, in July 2012, we reported that DHS was making progress in developing and implementing a new IT governance process that focused on portfolio management and eliminating duplication. Specifically, we found that DHS had developed a new governance framework and that the associated policies and procedures were generally consistent with recent OMB guidance and with best practices for managing projects and portfolios identified in GAO’s Information Technology Investment Management framework. For example, DHS’s new governance framework included the establishment of portfolio governance boards to oversee functional portfolios with the goals of eliminating duplication and leveraging services and programs across the department. However, the agency had not yet finalized most policies and procedures and was not fully using best practices for the implementation. Accordingly, we made recommendations to DHS to, among other things, strengthen its new governance process and related IT management capabilities; the agency agreed to implement the recommendations.

OMB and Agencies Have Taken Steps to Reduce Duplicative IT Investments, but More Remains to Be Done

GAO, Data Center Consolidation: Strengthened Oversight Needed to Achieve Cost Savings Goal, GAO-13-378 (Washington, D.C.: Apr. 23, 2013).

PortfolioStat and found that key performance metrics were not yet fully defined. More specifically, OMB’s March 2013 memorandum stated that, to more effectively measure the efficiency of an agency’s data center assets, agencies would also be measured by the extent to which their data centers are optimized for total cost of ownership by incorporating metrics for data center energy, facility, labor, and storage, among other things. However, we found that although OMB had indicated which performance measures it planned to use going forward, it had not documented the specific metrics for agencies to report against. OMB’s March 2013 memorandum indicates that these would be developed by the Data Center Consolidation Task Force, but did not provide a time frame for when this will be completed.

Further, our report noted that OMB’s integration of the Federal Data Center Consolidation Initiative with PortfolioStat also included a modification to the previous data center consolidation goal of closing approximately 40 percent of the total number of agency data centers. Specifically, OMB stated an agency’s data center population will now be placed into one of two categories—core and non-core data centers—but for which the memorandum did not provide specific definitions. OMB further stated that its new goal is to close 40 percent of non-core data centers but, as noted, the definition of a core and non-core data center was not provided. Therefore, the total number of data centers to be closed under OMB’s revised goal could not be determined.

We also reported that, although OMB had previously stated that PortfolioStat was expected to result in savings of approximately $2.5 billion through 2015, its March 2013 memorandum did not establish a new cost savings goal that reflected the integration of the Federal Data Center Consolidation Initiative. Instead, OMB stated that all cost savings goals previously associated with the Federal Data Center Consolidation Initiative would be integrated into broader agency efforts to reshape their IT portfolios, but did not provide a revised savings estimate. We concluded that the lack of a new cost savings goal would limit OMB’s ability to determine whether or not the new combined initiative is on course toward achieving its planned objectives. As a result, we recommended that OMB track and annually report on key data center consolidation performance measures, such as the size of data centers being closed and cost savings to date. OMB agreed with our recommendation.

We have ongoing work looking at OMB’s PortfolioStat initiative, including determining whether agencies completed key required PortfolioStat actions, evaluating selected agencies' plans for making portfolio improvements and achieving associated cost savings, and describing OMB's plans to improve the PortfolioStat process.

In summary, while OMB and agencies have taken steps to improve their ability to identify and categorize IT investments, duplicative IT investments still exist at federal agencies. Because these investments account for billions of dollars in spending, it will be important for OMB and agencies to implement our prior recommendations to better ensure that duplicative investments are identified and eliminated.

To help agencies better address duplicative IT investments, OMB established PortfolioStat as a means of assisting agencies with the assessment of the maturity of their IT investment management processes and eliminating areas of duplication and waste. OMB recently released additional guidance that expanded this important initiative’s scope and reported that significant progress had been made to date, including more than 100 opportunities to consolidate or eliminate commodity IT investments. Moving forward, it will be important for OMB to be transparent on agencies’ progress against key performance metrics, such as cost savings, in order to ensure that the PortfolioStat initiative is meeting its established objectives.

Chairman Carper, Ranking Member Coburn, and Members of the Committee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time.

GAO Contact and Staff Acknowledgments

If you or your staffs have any questions about this testimony, please contact me at (202) 512-9286 or at pownerd@gao.gov. Individuals who made key contributions to this testimony are Dave Hinchman (Assistant Director), Justin Booth, Kate Feild, Rebecca Eyler, Valerie Hopkins, Sabine Paul, Colleen Phillips, Bradley Roach, Jonathan Ticehurst and Kevin Walsh.

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