Federal Real Property: DHS and GSA Need to Strengthen the Management of DHS Headquarters Consolidation
Released: 2014-09-19T00:00:00

Letter

Background

The Homeland Security Act of 2002 combined 22 federal agencies specializing in various missions under DHS. Numerous departmental offices and seven key operating components are headquartered in the NCR.its various components were not physically consolidated, but instead were dispersed across the NCR in accordance with their history. For example, in 2007, DHS employees in the NCR were located in 85 buildings and 53 locations, accounting for approximately 7 million gross square feet of government-owned and -leased office space. As of July When the department was formed, the headquarters functions of 2014, DHS employees were located in 94 buildings and 50 locations, accounting for approximately 9 million gross square feet of government- owned and -leased office space.

GSA, the landlord for the civilian federal government, acquires space on behalf of the federal government through new construction and leasing, and acts as a caretaker for federal properties across the country. Federal agencies give GSA information on their program and mission requirements and GSA then works with those agencies to develop and refine their real estate space needs. As such, GSA had the responsibility to select the specific site for a new, consolidated DHS headquarters facility, based on DHS needs and requirements. In addition, GSA is responsible for awarding and managing contracts for design and construction. DHS began planning the consolidation of its headquarters in 2005. According to DHS, increased colocation and consolidation were critical to achieve the following objectives: (1) improve mission effectiveness, (2) create a unified DHS organization, (3) increase organizational efficiency, (4) size the real estate portfolio accurately to fit the mission of DHS, and (5) reduce real estate occupancy costs. DHS and GSA developed a number of capital planning documents to guide the DHS headquarters consolidation process. To start, DHS identified its original housing requirements in 2006 during the development of the DHS National Capital Region Housing Master Plan. In the housing master plan, DHS identified a requirement for approximately 7.1 million square feet of total office space in the NCR to accommodate DHS headquarters operations, with 4.5 million square feet on a secure campus. DHS also developed a program of requirements for DHS headquarters components that included a listing of current and projected space needs. In June 2007, DHS released its Consolidated Headquarters Collocation Plan. The colocation plan summarized component functional requirements and the projected number of seats needed on- and off-campus for NCR headquarters personnel. According to DHS, the colocation plan is based on the idea that the consolidated headquarters campus serves as a central hub for leadership, operations coordination, policy, and program management in support of the department’s strategic goals. Table 1 summarizes DHS and GSA key planning documents.

According to GSA’s planning documents, the West Campus of St. Elizabeths, held by GSA, was the preferred site for DHS headquarters consolidation because (1) it could accommodate the 4.5 million square feet of office space, plus parking, and (2) was available immediately—two key requirements for DHS. GSA developed a Master Plan in 2009 that was to guide the overall development at the St. Elizabeths site. The plan was vetted through numerous stakeholders and received final approval in 2009. Construction started at the campus in 2009. Figure 1 depicts the campus as envisioned in the 2009 Master Plan.

The full development of the St. Elizabeths Campus was intended to occur in three phases, with subphases, over 8 years. Table 2 shows the original planned construction for each of the project’s three phases, including the subphases, and their original and current estimated completion dates.

From fiscal years 2006 through 2014, the St. Elizabeths consolidation project had received $494.8 million through DHS appropriations and $1.1 billion through GSA appropriations, for a total of over $1.5 billion. As part of this total, the DHS headquarters consolidation project received $650 million from the American Recovery and Reinvestment Act of 2009 (ARRA). In general, GSA funding was used for building construction and renovation, and other major infrastructure; DHS funding was used for tenant-specific capabilities, such as information technology (IT) infrastructure, furniture, and secure spaces, among other things. From fiscal year 2009—when construction began—through the time of the fiscal year 2014 appropriation, however, the gap between requested and received funding was over $1.6 billion. Figure 2 compares funds requested and received for the project for fiscal years 2006 through 2014.

In 2007, DHS and GSA estimated that the total cost of construction at St. Elizabeths was $3.26 billion, with construction to be completed in 2015, with potential savings of $1 billion attributable to moving from leased to owned space. However, according to DHS and GSA officials, the lack of consistent funding has affected cost estimates, estimated completion dates, and savings. Table 3 shows changes over time to GSA cost estimates and scheduled completion dates, as well as projected savings associated with moving DHS staff from leased space into federally owned space.

The majority of funding for the St. Elizabeths consolidation project through fiscal year 2013 has been allocated to the construction of a new consolidated headquarters for the U.S. Coast Guard (USCG) on the campus. In 2006, DHS and GSA projected that USCG would move to St. Elizabeths in 2011, but the move was delayed because sufficient funding for Phase 1 of the project was not available until fiscal year 2009. In 2009, DHS and GSA updated the projected completion date to the summer of 2013. Subsequently, USCG moved to the new building in August 2013. Figure 3 shows schedule slippage for the overall project.

According to DHS and GSA officials, beginning in calendar year 2009, when construction commenced, Phase 1 of the overall project was successfully executed on schedule despite funding delays and shortfalls during fiscal years 2011 and 2012. GSA officials told us that, from fiscal years 2009 through 2013, DHS and GSA had requested about $1.6 billion to complete Phase 1 of the project but received only about $933 million for this purpose over the period. They said that they completed this phase of the project by deferring work planned to be completed in Phase 1 so that the USCG building could be occupied in 2013. GSA officials said that their efforts to save money by deferring work included reducing the scope of work needed to complete access road stonework and deferring landscaping and construction work on one building and the visitors’ center to future years. Figure 4 shows the entrance to the new U.S Coast Guard Headquarters Building on the St. Elizabeths Campus.

Congress, the Office of Management and Budget (OMB), and GAO have all identified the need for effective capital decision-making among federal agencies. In addition, budgetary pressures and demands to improve performance in all areas put pressure on agencies to make sound capital acquisition choices. OMB’s Capital Programming Guide, a supplement to OMB Circular A-11, provides guidance to federal agencies in conducting capital decision-making. GAO also developed its Executive Guide: Leading Practices in Capital Decision-Making, which provides detailed guidance to federal agencies on leading practices for the four phases of capital programming—planning, budgeting, acquiring, and managing capital assets. These practices are, in part, intended to provide a disciplined approach or process to help federal agencies effectively plan and procure assets to achieve the maximum return on investment.

DHS and GSA Consolidation Plans Do Not Fully Conform with Leading Capital Decision-Making Practices

DHS and GSA’s overall plans for headquarters consolidation do not fully conform with leading capital decision-making practices related to planning. DHS and GSA officials reported that they have taken some initial actions that could affect consolidation plans, such as adopting recent workplace standards at the department level and assessing DHS’s leasing portfolio. These types of actions may facilitate consolidation planning in a manner consistent with leading practices. However, the current collection of plans, which DHS and GSA finalized between 2006 and 2009, have not been updated to address these changes and funding instability that could affect future headquarters needs and capabilities. DHS and GSA have not conducted a comprehensive assessment of current needs, identified capability gaps, or evaluated and prioritized alternatives that would help officials adapt consolidation plans to changing conditions and address funding issues as reflected in leading practices. In addition, DHS has not consistently applied its acquisition guidelines to review and approve the project’s development. According to DHS and GSA officials, they have begun to work together to consider changes to the DHS headquarters consolidation plans. However, DHS and GSA have not announced when new plans will be issued, and it is unclear if they will fully conform with leading capital decision-making practices to help plan project implementation.

In the overall capital decision-making framework, planning is the first phase—and arguably the most important—since it drives the remaining phases of budget, procurement, and management. The results from this phase are used throughout the remaining phases of the process; therefore, if key practices during this phase are not followed, there may be repercussions on agency operations if poor capital investment decisions are made. Given that some aspects of the project are complete, we compared DHS and GSA headquarters consolidation efforts to date with the 5 of 12 capital decision-making practices that are most applicable to planning for the remaining segments of the consolidation.practices are evaluating alternatives to best decide how to meet any gaps, prioritizing and selecting projects based on established criteria, and establishing a review and approval framework supported by analysis. conducting comprehensive assessments of needs to achieve results, identifying gaps between current and needed capabilities, Appendix II lists these 5 planning practices along with the remaining practices that focus on other aspects of the overall capital decision- making framework not included in the scope of this review, such as budgeting, procurement, and management. In addition to the above, one important aspect of capital decision-making is recognition of the dynamic nature of capital plans and the planning process.

The following compares DHS and GSA planning and oversight for the remainder of the DHS headquarters consolidation project with the leading capital decision-making practices identified above.

DHS and GSA Assessment of Needs and Capability Gaps for Headquarters Consolidation Have Not Been Updated to Reflect Changing Conditions

DHS and GSA capital planning efforts for DHS headquarters consolidation have not been updated to reflect changing workplace standards and inconsistent project funding. Leading practices in capital decision-making call for agencies to assess requirements and determine gaps between current and needed capabilities based on the results- oriented goals and objectives that flow from the organization’s mission. A comprehensive assessment of needs considers the capability of existing resources and makes use of an accurate and up-to-date inventory of capital assets and facilities, as well as current information on asset condition. Using this information, an organization can make decisions about where and how to invest in facilities. During the early stages of planning for the project, DHS and GSA developed various reports and planning documents (see table 1) to comprehensively assess DHS needs for a consolidated headquarters. DHS planning documents identified office space and DHS program requirements, and discussed which DHS functions needed to be colocated to achieve DHS’s mission. However, the plans, which were developed prior to the release of GSA’s Master Plan in 2009, have not kept pace with changes since then in workplace standards and do not account for delays attributable to inconsistent funding.

Workplace standards. Leading organizations we studied developed comprehensive needs assessments that usually cover 5 or 6 years into the future and are updated frequently—for example, as a part of the organizations’ budget cycles. A needs assessment is to examine, among other things, external factors that affect or influence the organizations’ operations, such as workplace standards. However, the current plans for St. Elizabeths do not reflect changes in the workplace, such as telework and smaller standard work areas that could reduce the volume of space needed to house DHS employees. Furthermore, leading practices state that utilizing current and accurate information is essential when taking an inventory of current capabilities and assessing future needs. While DHS and GSA’s original plans called for a certain size and configuration to house employees at St. Elizabeths, changes in workplace standards could affect the overall footprint of the St. Elizabeths project or increase the number of staff designated to occupy space at the site, or both. This could ultimately reduce the number of DHS headquarters employees housed in leased space. Recent federal initiatives have been introduced to reduce federal agency space. For example, a June 2010 presidential memorandum directed agencies to explore how innovative approaches to space management and alternative work arrangements, such as telework, could help reduce the need for real estate and office space. Another alternative work arrangement, hoteling, would allow employees to work at multiple sites and use non-dedicated, nonpermanent workspaces assigned for use by reservation on an as-needed basis. Implementing hoteling could also reduce an agency’s need for office space. Subsequently, in May 2012, OMB issued a memorandum that, among other things, establishes the Freeze the Footprint policy. This policy directs agencies to restrict growth in their civilian real estate inventory. OMB supplemented that policy in March 2013 with implementing guidance for Freeze the Footprint that required agencies not to increase the total square footage of their office and warehouse inventory, using fiscal year 2012 as a baseline. OMB’s implementing guidance also directs agencies to use various strategies to maintain the baseline, including consulting with GSA about using technology and space management to consolidate, increasing occupancy rates in facilities, and eliminating lease arrangements that are not cost- or space effective.

Inconsistent project funding. In addition to workplace standards, current funding for the St. Elizabeths project has not aligned with what DHS and GSA initially planned. As discussed earlier, from fiscal year 2009—when construction began—through the time of the fiscal year 2014 appropriation, the gap between what DHS and GSA requested and what was received was over $1.6 billion. According to DHS and GSA officials, this funding gap has created cost escalations of over $1 billion and schedule delays of 10 years, relative to their original estimates. DHS and GSA officials cited funding shortfalls as being disruptive in sequencing work, such as excavating soil for the DHS Operations Center and enabling repairs on the foundation of the St. Elizabeths Center Building.According to these officials, if funding had been available, excavation work associated with the new USCG building could have been extended to these other parts of the project without interruption. Officials said that if they had funds to do the excavation, they could have completed it while the site was under construction, instead of having to work around the full occupation and operation of the USCG building. DHS and GSA deemed this as a lost opportunity to purposely sequence the work to maximize construction efficiency and reduce the overall cost of development.

OMB, Capital Programming Guide, Supplement to OMB Circular A-11. changes in workplace standards and delays attributable to funding shortfalls.

A senior DHS project official stated that the basis of the consolidation plan remains the same and that it would be illogical to discard the plan mid-stream in favor of some unspecified alternative, given the years of comprehensive analysis that underpin the development and approval of the original 2009 Master Plan. However, DHS and GSA officials reported that they have begun to work together to consider changes to DHS headquarters consolidation plans. Specifically, in January 2014, DHS and GSA officials stated that they are currently reassessing requirements and alternatives for consolidation and colocation in recognition that workplace conditions have changed since the plan was formulated, beginning in 2006. The agencies have not announced when new plans will be issued. Furthermore, because final documentation of agency deliberations or analyses have not yet been developed, it is unclear if any new plans will be informed by an updated comprehensive needs assessment and capability gap analysis as called for by leading capital decision-making practices. Until DHS and GSA update their capital planning documents related to DHS headquarters consolidation—showing how DHS and GSA asset portfolios for the consolidation efforts meet the goals and objectives of the agencies’ strategic and annual performance plans and how these assets will be used to help agencies achieve their goals and objectives— agency managers and Members of Congress will be limited in their ability to fully understand how DHS and GSA intend to accomplish the consolidation and, consequently make informed decisions about future multi-billion dollar investments. Utilizing an updated comprehensive needs assessment and gap analysis of current and needed capabilities to inform revised headquarters consolidation plans can better position DHS and GSA to assure decision makers within both agencies and in Congress that consolidation is justified.

Changing Conditions Call for DHS and GSA to Reevaluate Alternative Approaches and Prioritize Projects for Headquarters Consolidation

Changes to workplace standards and funding instability provide GSA a commensurate opportunity to evaluate and prioritize alternative construction and leasing options to meet DHS space needs in the NCR. As stated earlier, leading capital decision-making practices call for agencies to determine how best to bridge performance gaps by identifying and evaluating alternative approaches. Before choosing to purchase or construct a capital asset or facility, leading organizations are to carefully consider a wide range of alternatives, such as using existing assets, leasing, or undertaking new construction. After evaluating alternatives, leading practices call for organizations to select projects based on a relative ranking of investment proposals. This prioritization of projects is important because limited resources require organizations to choose alternatives with the highest benefit or return. In the years leading up to 2009, when GSA issued the project Master Plan, DHS and GSA conducted alternatives analyses and used the results of these efforts to support the existing DHS headquarters consolidation plan and prioritize the individual projects that encompass the larger consolidation effort. For example, in 2007, we found that DHS examined various scenarios for housing DHS employees, such as a “campus” scenario, which would entail consolidation resulting in several campuses, including one large campus. Likewise, in 2008, GSA analyzed the feasibility of consolidating DHS headquarters at a variety of sites throughout the NCR, and determined that the only site with space available to accommodate DHS needs was the St. Elizabeths campus. After the site was selected, DHS and GSA worked together to prioritize the multiple construction phases that constitute the overall St. Elizabeths campus development.

Given changes in workplace standards, among other things, as well as cost escalation and schedule slippage associated with funding instability, DHS and GSA would benefit from updating their alternatives evaluation and prioritizing the range of leasing and construction alternatives. One potential alternative, for example, would be for DHS to consider moving entire components from currently leased space to St. Elizabeths, rather than only the leadership of particular components as originally envisioned. Moving more staff than currently planned to the campus from leased space could potentially increase long-term cost savings and facilitate more effective collaboration. If DHS and GSA were to take such an action, this would require an overall change in their approach to housing staff in government-owned and -leased space—a change beyond that already considered within the context of DHS’s 2007 colocation plan. Even if DHS were to consider moving smaller portions of its workforce rather than entire components—for example, certain offices within components—to St. Elizabeths, DHS would need to consider the cascading effect of those changes and develop updated plans to reflect that. This would entail a reconsideration of space needs in both owned and leased space, and a commensurate reevaluation of funding needs, depending on, among other things, the volume and type of available or projected owned and leased space, and associated costs and benefits, as well as alternative estimates showing when owned or leased space might be available.

DHS and GSA officials acknowledged that new workplace standards could create a number of new development options to consider, as the new standards would allow for more staff to occupy the current space at St. Elizabeths than previously anticipated. DHS officials told us that when the St. Elizabeths project was conceived, the standard office workspace was 200 square feet per person. In response to the 2012 Freeze the Footprint initiative described earlier, where applicable, DHS intends to reduce the average space per person for its employees across the department to 150 square feet of space per person. However, this potential change is not reflected in current headquarters consolidation plans. As a result, if DHS and GSA choose to keep the original 4.5 million square foot footprint they initially planned, they could increase the number of staff occupying the 14,000 seats at St. Elizabeths from 14,000 to about 20,000. Conversely, if DHS and GSA decide to keep 14,000 staff they initially planned to work at St. Elizabeths, they could shrink the overall footprint to about 3.7 million square feet. According to DHS and GSA, the agencies have taken steps to adapt to the changes in workplace standards. For example, flexible workspaces were incorporated into the build-out of the Coast Guard headquarters building during construction. Specifically, the internal build-out of the space has flexible configurations that can be easily and inexpensively changed to support changes in the workplace environment, in the event that DHS decided to expand or reduce the workforce or space. Table 4 shows the original estimates, and the effect of increasing the number of staff occupying 14,000 seats from 14,000 to 20,000 (scenario A), or reducing the footprint to about 3.7 million square feet by keeping the estimated number of staff at 14,000 (scenario B).

Adopting either scenario or some variation between the two could have a significant impact on the scope and cost of the project and could change how DHS and components perform their missions. The following is a description of potential alternatives that DHS and GSA could consider in light of new workplace standards. DHS and GSA officials said they are considering these types of options, although they have not yet developed final documents or analysis. For example:

Keep the current estimated number of staff (14,000) with a reduced square footage (3.7 million). GSA and DHS could, over the short term, reduce the overall cost of the project with a decrease in construction costs. Furthermore, DHS and the components slated to move to St. Elizabeths would likely carry out their mission at the new location as originally intended.

Maintain the current square footage projection (4.5 million square feet) while increasing the number of staff occupying the 14,000 seats (from 14,000 to 20,000). This change could result in an increase of the overall short-term cost of the project because GSA might have to build out additional office space and meet requirements for additional services, such as computer and telecommunication lines and technological services. However, the increased staff at St. Elizabeths could also increase long-term savings because DHS would not need to lease space for an increased number of employees should DHS decide to move more to St. Elizabeths.

In addition, as discussed earlier, from fiscal years 2009 to 2014, the gap between requested funding and funding received was over $1.6 billion. According to DHS and GSA officials, this funding gap has created cost escalations of over $1 billion. To help address the variation in funding requested and received, DHS and GSA have revised their funding strategy to focus on developing smaller construction segments that are intended to be more financially viable and less subject to uncertainty. For example, DHS and GSA may request full funding for a construction segment that will result in a functional, usable building and not be dependent on additional future funding to complete. This funding strategy is consistent with a leading practice related to the budgeting phase of capital decision-making, which calls for agencies to budget for projects in useful segments. Specifically, DHS and GSA would allocate funding for the remaining work at St. Elizabeths into usable segments that are independent of the overall consolidation, rather than incrementally over the length of the project, as has been done in the past. Developing a funding strategy into segments may be a viable approach in managing and overseeing a project with a scope and potential cost as large as St. Elizabeths, particularly in a constrained budgetary environment.

Schedule delays—up to 10 years relative to original estimates, according to DHS officials—have also resulted from the gap between funding requested and funding received. These delays have posed challenges for DHS in terms of its current leasing portfolio. Specifically, DHS’s long-term leasing portfolio was developed based on the original expected completion date for St. Elizabeths development in 2016. However, according to DHS leasing data, 52 percent of DHS’s current NCR leases will expire in 2014 and 2015, accounting for almost 39 percent of its usable square feet. See figure 5 for DHS’s annual leasing costs and usable square feet by year of lease expiration for 2013 through 2023.

DHS officials told us that, given delays moving the project forward and the expiration of existing leases, DHS is currently working with GSA to renegotiate leases where staff of individual components are currently housed. However, DHS acknowledged that a comprehensive analysis of its real property and leasing options in the NCR—which has a direct bearing on development options at St. Elizabeths—is ongoing, but not complete, and documents related to the analysis have not been finalized.

Given uncertainties about the size, scope, and timing of the project moving forward as well as the overall cost of the project to the government—DHS and GSA would be better positioned to make choices about capital investments if they were to identify and analyze a broader range of alternatives and use this alternatives analysis to inform their prioritization and selection of efforts related to headquarters consolidation. For example, a comprehensive alternatives analysis could take into account (1) DHS’s actual and projected leasing costs for locations where employees are currently housed; (2) DHS and GSA costs to develop additional segments of the St. Elizabeths Campus, as well as any transportation and infrastructure improvements; and (3) a range of leasing and construction alternatives and their associated costs for the St. Elizabeths site, depending on a determination of usable square footage needed. After identifying and analyzing a range of alternatives that better reflects current conditions, DHS and GSA would be better positioned to prioritize the individual steps or projects that will compose the larger headquarters consolidation effort. Given that $1.5 billion has already been invested in the headquarters consolidation, a comprehensive analysis and prioritization of alternatives, including cost and benefit analyses for each of the alternatives being considered, that accounts for the complete costs and benefits to the federal government as a whole, would improve transparency and allow for more informed decision making by DHS and GSA leadership and Members of Congress.

Project Review and Approval Process Does Not Consistently Follow DHS Acquisition Standards

DHS has not consistently applied its major acquisition guidance for reviewing and approving the headquarters consolidation project. Leading practices call for agencies to establish a formal process for senior management to review and approve proposed capital assets. The cost of a proposed asset, the level of risk involved in acquiring the asset, and its importance to achieving the agency mission should be considered when defining criteria for executive review. Leading organizations have processes that determine the level of review and analysis based on the size, complexity, and cost of a proposed investment or its organization- wide impact. DHS has guidelines in place to provide senior management the opportunity to review and approve its major projects, but DHS has not consistently applied these guidelines to its efforts to work with GSA to plan and implement headquarters consolidation. As discussed below, DHS has sometimes, but not always, classified the consolidation project as a major acquisition, which has affected the extent to which the department has oversight of the project. By not consistently applying this review process to headquarters consolidation, DHS management risks losing insight into the progress of the St. Elizabeths project, as well as how the project fits in with its overall acquisitions portfolio.

DHS programs designated as major acquisitions are governed by the policies and processes contained in DHS Acquisition Management Directive 102-01 (MD 102) and the accompanying DHS Instruction Manual 102-01-001. MD 102 establishes an acquisition life-cycle consisting of four phases. According to MD 102, an acquisition program is considered a Level 1 Major Acquisition if its life-cycle cost is at or above $1 billion, and a Level 2 Major Acquisition if its life-cycle cost is $300 million or more, but less than $1 billion. At predetermined points throughout the life-cycle—known as Acquisition Decision Events—a program deemed to be a major acquisition undergoes review by a designated senior official, referred to as the Acquisition Decision Authority, to assess whether the program is ready to proceed through each of the four phases. An important aspect of this process is the review and approval of key acquisition documents that, among other things, establish the need for a major program, its operational requirements, and an acquisition baseline and plan. MD 102 also requires that a DHS Investment Review Board (IRB) review major acquisitions programs at Acquisition Decision Events and other meetings, as needed. The IRB is chaired by the Acquisition Decision Authority and made up of other senior officials from across the department responsible for managing DHS mission objectives, resources, and contracts. DHS’s Office of Program Accountability and Risk Management (PARM) is responsible for DHS’s overall acquisition governance process, supports the IRB, and reports directly to the DHS Chief Acquisition Officer. PARM is to develop and update program management policies and practices, oversee the acquisition workforce, provide support to program managers, and collect program performance data. Our prior work has assessed MD 102 and found that it establishes a knowledge-based acquisition policy for program management that is largely consistent with key practices.

DHS has designated the headquarters consolidation project as a major acquisition in some years but not in others. In 2010 and 2011, DHS identified the headquarters consolidation project as a major acquisition and included the project on DHS’s Major Acquisition Oversight List. Thus, the project was subject to the oversight and management policies and procedures established under MD 102. In 2012, the project as a whole was dropped from the list, and in 2013 DHS included the IT acquisition portion of the project on the list. DHS issued the 2014 list in June 2014, which again included the IT portion of the project, but not the entire project. Figure 6 shows the extent to which the headquarters consolidation project has or has not been considered a major acquisition by DHS under MD 102.

PARM officials explained that they considered the St. Elizabeths project to be more of a GSA acquisition than a DHS acquisition because GSA owns the site and the majority of building construction is funded through GSA appropriations. Furthermore, they stated that DHS appropriations for the project are largely transferred to GSA through interagency mechanisms so that, in effect, GSA is responsible for managing contracts procured with DHS funding. PARM officials also explained that they did not believe that the IT portion of the St. Elizabeths project should be classified as a DHS major acquisition. They said that although the IT acquisitions are a DHS responsibility and funded with DHS appropriations, GSA is managing the IT contracts and therefore they believe those acquisitions’ oversight should reside with GSA. They said that the reason the IT component was placed on the Major Acquisition Oversight List in 2013 was because the DHS Office of Inspector General (OIG) recommended its inclusion. When asked why the overall headquarters consolidation program was previously identified by DHS as a major acquisition in earlier years, and what had changed, PARM officials said that it was likely included on past acquisition lists because it was a new program and DHS and GSA roles and responsibilities had yet to be firmly established.

We recognize that GSA has responsibility for managing contracts associated with the headquarters consolidation project. However, a variety of factors, including the overall cost, scope, and visibility of the project, as well as the overall importance of the project in the context of DHS’s mission, make the consolidation project a viable candidate for consideration as a major acquisition. As noted above, an acquisition program is considered a Level 1 Major Acquisition if its life-cycle cost is at or above $1 billion. DHS and GSA were unable to provide an estimate of the life-cycle cost for the St. Elizabeths project. However, under the current plan, DHS reports it will need about $1.7 billion to complete the project by 2026, not including life-cycle cost, well above the normal threshold required for a major acquisition classification called for by MD 102. Furthermore, per MD 102, the Acquisition Review Board may consider a project a candidate for oversight under MD 102 if the project’s importance to DHS’s strategic and performance plans is disproportionate to its size, or if the project has high executive visibility, impacts more than one DHS component, has significant program or policy implications, or if the Deputy Secretary, Chief Acquisition Officer or Acquisition Decision Authority recommends an increase to a higher acquisition level. Given the size and scope of the project and the extent to which the completion of the project could impact the performance of DHS’s mission, the headquarters consolidation project should be considered a candidate for treatment as a major acquisition under MD 102. If DHS were to consider the headquarters consolidation project a major acquisition, consistent with MD 102 requirements, DHS would be better positioned to oversee the project and provide decision makers in DHS and Congress, and the taxpayer greater assurance that the project is being acquired on-time and on-budget.

We also observed that, during the years (2010, 2011, 2013, and 2014) that the headquarters consolidation project, or portions of it, was on DHS’s major acquisition list and therefore subject to MD 102 requirements, the project did not comply with major acquisition requirements as outlined by DHS guidelines. Specifically, the project has not produced any of the required key acquisition documents requiring department-level approval: (1) mission need statement, (2) capability development plan, (3) operational requirements document, (4) integrated logistics support plan, (5) life-cycle cost estimate, (6) acquisition program baseline, and (7) test and evaluation master plan. Furthermore, one role of PARM is to conduct independent evaluations of major programs’ health and risks, but PARM has not assessed the St. Elizabeths project as of March 2014. PARM officials stated, however, that they informally monitor the project through regular communication with DHS officials who oversee the St. Elizabeths project and have no concerns about the project’s management. In accordance with MD 102, the IRB’s predecessor body—the Acquisition Review Board—reviewed the headquarters consolidation program with a focus on ARRA funding in 2009 and 2010, but has not reviewed the program since then, even though the program as a whole was considered a major acquisition in 2011, and likewise with the IT component in 2013 and 2014. In May 2010, the board generally expressed concern about the level of DHS oversight given that the project was highly visible and important for the department, and recommended senior leadership meetings between DHS and GSA. In September 2010, DHS and GSA signed a memorandum of understanding that defined certain roles for both agencies regarding project oversight. As noted earlier, DHS officials stated the headquarters consolidation has not undergone review by the IRB since 2010 because they viewed it as primarily a GSA project.

DHS officials also stated that the program was under way before MD 102 was issued and that the directive requirements were not applicable. In addition, officials stated that they regularly briefed leadership on the status of the project and have produced some documentation, such as a needs assessment and baseline, which officials said are similar to documents required by MD 102. For example, the St. Elizabeths baseline contains some cost and schedule information for the project as required by MD 102. However, it does not contain other required information to help measure program performance. In addition, a 2010 update to MD 102 stated the directive requirements are to be applied to the maximum extent possible to all major acquisitions in existence when the update was issued. According to DHS acquisition officials, since 2010, the DHS Acquisition Officer has issued waivers for some legacy programs, but not for the headquarters consolidation program or its IT component. Although the St. Elizabeths program managers may provide visibility of the project to leadership and may have similar key documentation, this falls short of the requirements contained in MD 102. The MD 102 process provides a more consistent, transparent review process that would involve a greater cross section of departmental stakeholders, among other things, especially given the magnitude of the project and the numbers of components that would occupy space at St. Elizabeths.

DHS has established through MD 102 an acquisitions policy for major capital assets that provides the agency with tools to better manage large projects. For example, regular project review and approval by a cross section of departmental leadership, along with having standardized project documentation, can help mitigate significant acquisitions challenges such as funding instability and capability changes. Furthermore, the MD 102 process provides oversight and facilitates program accountability. If the entire headquarters consolidation program were designated as a major acquisition, DHS would be better positioned to follow its own acquisition policy. Utilizing the MD 102 review framework could provide the structure for more efficient program management and provide DHS, Congress, and taxpayers greater assurance that government funds are being spent in a way that is consistent with sound acquisition practices, and the project is moving forward as intended.

DHS and GSA Cost and Schedule Estimates for the St. Elizabeths Project Do Not Conform with Leading Practices

DHS and GSA cost and schedule estimates for the headquarters consolidation project at St. Elizabeths do not or only minimally or partially conform with leading estimating practices, and are therefore unreliable. Furthermore, in some areas, the cost and schedule estimates do not fully conform with GSA guidance relevant to developing estimates. Developing cost and schedule estimates consistent with leading practices could promote greater transparency and provide decision makers needed information about the St. Elizabeths project and the larger DHS headquarters consolidation effort.

St. Elizabeths Cost and Schedule Estimates Are Unreliable

DHS and GSA cost and schedule estimates for the headquarters consolidation project at St. Elizabeths contain numerous deficiencies that do not reflect leading practices, which render the estimates unreliable. In 2013, DHS and GSA updated earlier estimates to produce the current St. Elizabeths cost and schedule estimates summarized in figure 7. These DHS and GSA estimates showed a total project cost of about $4.5 billion—$2.8 billion funded through GSA appropriations and the remaining $1.7 billion funded through DHS appropriations. According to the 2013 estimates provided by DHS and GSA, based on this level of funding, the project would be completed in 2026.

We compared the 2013 cost estimate and the 2008 and 2013 schedule estimates with leading practices for developing such estimates and found that the estimates do not or only minimally or partially conform with key characteristics for developing reliable estimates. Specifically, we compared DHS and GSA overall project cost estimates with the GAO Cost Estimating and Assessment Guide (Cost Guide), which defines leading practices related to four characteristics—comprehensive, well documented, accurate, and credible—that are important to developing high-quality, reliable cost estimates. We also compared DHS and GSA overall schedule estimates with the GAO Schedule Assessment Guide, which defines leading practices related to four characteristics— comprehensive, well constructed, credible, and controlled—that are important to developing high-quality, reliable schedule estimates.5 and 6 describe the characteristics of high-quality, reliable cost and schedule estimates that served as the foundation of our comparative analysis.

We have applied our leading cost and schedule estimation practices in past work involving federal construction projects, and the leading practices were developed in conjunction with numerous stakeholders from government and the private sector, including DHS and GSA. Furthermore, GSA acknowledged the value of our leading cost estimation practices in 2007 and issued an order to apply the principles to all cost estimates prepared in every GSA project, process, or organization.

We established five descriptions for our assessments of leading practices and cost estimate characteristics: fully meets, substantially meets, partially meets, minimally meets, and does not meet. We consider a leading practice to be fully met when the associated tasks are completely satisfied, substantially met when a large portion of the associated tasks are satisfied, partially met when about half of the associated tasks are satisfied, minimally met when a small portion of the associated tasks are satisfied, and not met when none of the associated tasks are satisfied. Our assessment method weights each leading practice equally and bases the assessment of each characteristic on the average score of underlying leading practices. We assign each description a numerical value (5 for fully meets to 1 for does not meet) and round scores to the higher numerical value (i.e., a score of 4.5 would round up to 5). Assessments were conducted by an individual analyst, and then the results were independently traced and verified by a second analyst. reflect the characteristics of a high-quality estimate and cannot be considered reliable. The following two sections provide an overview of the results of our comparison of DHS and GSA cost and schedule estimates with the four characteristics for each of GAO’s cost- and schedule- estimating guidelines.

St. Elizabeths Cost Estimate Partially or Minimally Conforms with Leading Practices

Our overall comparison of the 2013 cost estimate for St. Elizabeths development with leading cost-estimating best practices showed that the estimate partially or minimally conforms with leading practices. Specifically, we found that the cost estimate for the headquarters consolidation at St. Elizabeths partially conforms with leading practices associated with the characteristics of comprehensive and well- documented estimates, and minimally conforms with leading practices associated with characteristics of accurate and credible estimates.

We assessed the DHS and GSA cost estimate using the framework of the four characteristics above associated with high-quality, reliable cost estimates. Table 7 shows the overall results of our comparison along with examples of selected leading practices under each characteristic and our rationale for assessment. Appendix V provides greater detail on our comparison of the estimate with specific leading practices that constitute the four cost-estimating characteristics.

A reliable cost estimate is critical to the success of any program. Such an estimate provides the basis for informed investment decision making, realistic budget formulation and program resourcing, meaningful progress measurement, proactive course correction when warranted, and accountability for results. Accordingly, DHS and GSA would benefit from maintaining current and well-documented estimates of project costs at St. Elizabeths—even if project funding is not fully secured—and these estimates should encompass the full life-cycle of the program and be independently assessed. Among other things, OMB states that generating reliable program cost estimates is a critical function necessary to support OMB’s capital programming process. Without this capability, DHS and GSA are at greater risk of experiencing cost overruns, missed deadlines, and performance shortfalls related to the headquarters consolidation program.

St. Elizabeths Schedule Estimates Minimally Conform with Leading Practices

Our overall comparison of DHS and GSA schedule estimates with leading schedule-estimating practices showed that the most recent schedule estimate DHS and GSA prepared with sufficient detail for the entire project—in 2008—minimally conforms with leading practices. Specifically, the 2008 estimate minimally conforms with leading practices related to each of the characteristics of comprehensive, well-constructed, credible, and controlled estimates.

We assessed DHS and GSA schedule estimates using the framework of the four characteristics above associated with high-quality, reliable schedule estimates. Table 8 shows the overall results of our analysis of the 2008 schedule estimate, along with examples of select leading practices under each characteristic and our rationale for assessment. We highlighted the results of the 2008 schedule comparison because the 2008 schedule was the most recent schedule that included logic necessary for identifying a critical path. As noted above, at the request of GSA, we also analyzed a schedule estimate updated in 2013. However, the 2013 estimate was incomplete and did not cover the overall consolidation program in sufficient detail. For example, the schedule depicts only high-level activities and does not provide details needed to understand the sequence of events, including work to be performed in fiscal years 2014 and 2015. As a result, the 2013 schedule satisfied fewer leading practices than the 2008 schedule, and is also unreliable. Appendix VI provides greater detail on our comparison of both the 2008 and 2013 estimates with 10 specific leading practices that compose the four schedule estimating characteristics.

In accordance with leading schedule estimation practices, the success of a major program such as the consolidation project at St. Elizabeths depends in part on having an integrated and reliable master schedule that defines when work will occur and how long it will take and how each activity is related to the others. For example, the program schedule provides not only a road map for systematic project execution but also the means by which to gauge progress, identify and resolve potential problems, and promote accountability at all levels of the program. A program schedule is also a vehicle for developing a time-phased budget baseline and an essential basis for managing trade-offs among cost, schedule, and scope. Accordingly, and despite current funding uncertainty for the project, DHS and GSA would benefit from developing a comprehensive schedule for the St. Elizabeths consolidation project in accordance with leading practices. DHS and GSA officials, as discussed in more detail below, generally did not agree with this overall assessment because they believe the leading practices are not well-suited for the type of complex construction projects occurring at the St. Elizabeths site.

St. Elizabeths Cost and Schedule Estimates Do Not Always Conform with GSA Project-Estimating Guidance

We compared the cost and schedule estimates prepared by DHS and GSA for the St. Elizabeths project with relevant GSA guidance and found that the estimates do not always conform with agency estimating requirements. In commenting on our assessments of the St. Elizabeths cost and schedule estimates, DHS and GSA officials acknowledged that the estimates do not fully conform with our leading practices, but said that the estimates do conform with GSA project estimation policies. GSA officials agreed with the underlying objectives of our leading cost- and schedule-estimating practices, but noted that other methodologies are valid and better suited to GSA projects like construction at St. Elizabeths. GSA officials cited GSA’s Project Estimating Requirements for the Public Buildings Service, also called P-120, and GSA’s Facilities Standards for the Public Buildings Service, also called P-100, as the key documents for estimating and managing building construction programs within GSA. Because P-120 and P-100 focus on cost estimation requirements and do not fully describe schedule estimation, GSA officials subsequently provided us with GSA’s Global Project Management (gPM) guidance as an additional source as it includes the Scheduling Fundamental Guide.

We reviewed the GSA guidance listed above and noted several areas where GSA cost and scheduling-estimating policies align with our leading practices. More specifically, 8 of the 12 steps of a high-quality cost estimate were at least partially reflected in GSA guidance, and 5 of our 10 leading schedule-estimating practices were at least partially reflected. For example, GSA’s P-100 guidance fully reflects our leading cost estimation practice of “defining the program’s characteristics,” as it contains formal, detailed design standards and criteria for construction of new facilities and repairs or alterations to existing buildings. GSA’s gPM guidance fully reflects our leading schedule estimation practice of “capturing all activities,” as it states that the first step in building a schedule is to identify all activities required to complete the project and recommends incorporating the activities to the project’s Work Breakdown Structure (WBS)—a framework for documenting certain activities like estimating costs, identifying resources, determining where risks may occur, and providing the means for measuring program status.

In cases where GSA guidance and our leading practices align, we compared the St. Elizabeths cost estimates with GSA guidance and found some areas where the project estimates were developed consistent with the guidance. For example, P-120 and P-100 call for GSA to establish a set of ground rules for estimating GSA construction projects, such as how inflation is applied or how budget constraints might affect the project. Our comparison of the St. Elizabeths project cost estimate with GSA guidance showed that the project estimate documents the ground rules consistent with the guidance. Likewise, P-120 recommends using a WBS for projects to be funded over more than 1 year. Our comparison showed that the estimate included a WBS that outlined the end product and major program effort.

In contrast, we also found areas where the 2013 St. Elizabeth cost estimate was not prepared consistent with GSA guidelines. Specifically, our comparison showed that the project cost estimate:

Does not include a life-cycle cost analysis. P-120 and P-100 both require that a life-cycle cost analysis be conducted to help determine the value of a project beyond just the cost of acquiring it, such as the cost of repairs, operations, preventive maintenance, logistic support utilities, and depreciation over the useful lifetime of the facility. P-100 states, for example, that “three characteristics distinguish GSA buildings from buildings built for the private sector: longer life span, changing occupancies, and the use of a life-cycle cost approach to determine overall project cost.” No life-cycle cost analysis for St. Elizabeths is reflected in the estimate, including the cost of repair, operations, and maintenance. Is not regularly updated to reflect significant changes in the program. P-120 guidance states that the cost estimates for design projects should be updated throughout the design process, and furthermore, where costs are included, design assumptions must be addressed in order to completely define the scope of the estimate. We found that the estimate was updated based on available funding, but was not regularly updated to reflect significant changes to the program including actual costs.

Does not include an independent cost estimate. P-100 states that GSA will develop two separate independent government estimates (IGE) to aid in effective project controls and assist in tracking the budget. The GSA definition of IGE does not completely align with the GAO definition of an independent cost estimate, but no IGEs were conducted for the entire St. Elizabeths project.

With regard to St. Elizabeths 2008 and 2013 schedule estimates, we found some instances where the project schedule estimates were partially consistent with GSA guidelines—the estimates covered elements of the guidance—and others where they did not. For example, P-120 states that schedules should realistically reflect how long each activity should take. Our comparison of the St. Elizabeths schedule estimates with GSA guidance showed that the project estimates partially establish the duration of all activities—a factor that is reflected in both the 2008 and 2013 schedule estimates. Likewise, GSA’s gPM states that activities should be sequenced after they have been defined and their duration has been estimated, tracked according to start and finish dates, and structured to show relationships between them to reflect their dependency on each other. Our comparison showed that the 2008 schedule estimate (not the 2013 estimate) partially reflected these gPM guidelines. In those instances where schedule estimates were not prepared in a manner consistent with GSA guidelines, we found that the 2008 and 2013 schedule estimates:

Do not capture all project activities. GSA’s gPM states that the first step in building a schedule is to identify all activities required to complete the project. GSA scheduling guidance also recommends incorporating the activities into the project’s WBS as this feature helps to organize and define the total scope of the project. However, we observed that the St. Elizabeths schedules did not define in detail the work necessary to accomplish a project’s objectives, including activities both the government and contractors are to perform.

Do not contain an updated Integrated Master Schedule (IMS).

GSA’s gPM stresses the importance of regularly updating the schedule so that it represents the most up-to-date information on planned and completed activities, but we found no evidence that DHS and GSA maintained and regularly updated an IMS for the entire project. This includes providing a review of missed milestones, current expected completion dates, and actions needed to maintain/regain schedule progress.

Do not include a complete schedule baseline document. GSA’s gPM states that establishing a baseline schedule that should be changed only with formal approvals from both the project team and the client is one of the four steps to establish a schedule. The gPM guidance also states that the baseline schedule should be maintained and that it should serve as the record of the “approved” schedule to allow the project manager to calculate variance. We found no evidence of a schedule baseline document that described the overall schedule, the sequencing of events, and the basis for activity durations, among other things, to help measure performance.

Reliable cost and schedule estimates are critical to providing overall project transparency and also in providing information to a variety of decision makers. However, in commenting on our analysis of St. Elizabeths cost and schedule estimates, DHS and GSA officials said that it would be difficult or impossible to create reliable estimates that encompass the scope of the entire St. Elizabeths project. Officials said that given the complex, multiphase nature of the overall development effort, specific estimates are created for smaller individual projects, but not for the campus project as a whole. Therefore, in their view, leading estimating practices and GSA guidance cannot reasonably be applied to the high-level projections developed for the total cost and completion date of the entire St. Elizabeths project. In addition, DHS and GSA officials stated that given funding uncertainty for the St. Elizabeths project as a whole, they were reluctant to allocate resources to conduct more detailed cost and schedule estimates until additional appropriations were received. They described future project phases as “not real” until they are funded. They added that once funding for a project phase is secured, more complete estimates would be created as part of that segment’s design. For example, regarding the schedule estimates, a senior DHS official said that at the programmatic level, since future phases of construction have not been authorized, funded, or designed, it would be illogical to develop anything beyond a generalized milestone schedule. GSA officials also commented that planning estimates for future unfunded work is conceptual and milestone based and therefore is sufficient for planning Phases 2 and 3. GSA stated that the higher-level, milestone schedule currently being used to manage the program is more flexible than the detailed schedule GAO proposes, and has proven effective even with the highly variable funding provided for the project.

We found, however, that this high-level schedule is not sufficiently defined to effectively manage the program. For example, our review of the schedule showed that project bars in the schedule that represent the two active Phase 1 and Phase 2A efforts do not contain detailed schedule activities that include current government, contractor, and applicable subcontractor effort. Specifically, there is no detailed program schedule that enables the tracking of key deliverables, and the activities shown in the schedule address only high-level agency square footage segments, security, utilities, landscape, and road improvements. While we understand the need to keep future effort contained in high-level planning packages, in accordance with leading practices, near-term work occurring in fiscal years 2014 and 2015 should have more detailed information. Further, there are no milestones identified that are consistent with the contract dates and other key dates established by management in the baseline schedule, and the project bars for near-term work are not mapped to a statement of work to ensure all effort is accounted for in the schedule. Finally, the project bars for near-term work also do not contain any risk mitigation activities. We recognize the challenges of developing reliable cost and schedule estimates for a large-scale, multiphase project like St. Elizabeths, particularly given its unstable funding history and that incorporating GAO’s cost- and schedule-estimating leading practices may involve additional costs. However, unless DHS and GSA invest in these practices, Congress risks making funding decisions and DHS and GSA management risk making resource allocation decisions without the benefit that a robust analysis of levels of risk, uncertainty, and confidence provides.

In addition to stating that it is not feasible to develop cost and schedule estimates for the entire St. Elizabeths project that conform with leading practices, DHS and GSA officials pointed to the project’s performance to date as an indicator of sound overall management. Specifically, DHS and GSA officials maintained that Phase 1 of the overall consolidation project—primarily the USCG headquarters—was completed “on-schedule and near on-budget,” after taking into account delays in the project start and smaller than expected annual appropriations, thus proving that their estimation practices were sound. As noted earlier, some of the work that was originally planned for Phase 1, such as utility installation; security measures; landscaping; and work on the visitors’ center, historic auditorium, and access road, was deferred to later project stages. According to DHS and GSA officials, reducing the scope of Phase 1 enabled the project team to shift resources to more critical capabilities required for USCG occupancy, which resulted in on-schedule and near on-budget completion for the portion of Phase 1 funded by Congress. DHS and GSA officials maintained that the execution of Phase 1 was successful and that this should have factored into our analysis of cost and schedule estimates. However, our analysis of estimates is focused on the remaining work in the project, not the actual performance of work completed. Phase 1 results cannot be the sole basis used to forecast the reliability of cost and schedule estimates for the remaining phases of development at St. Elizabeths. As our analyses showed, the estimates were deficient in several areas, including comprehensiveness, accuracy, and credibility, which renders them unreliable in the context of future work.

In addition to the planned work deferrals and reductions in scope described above, other unanticipated obstacles affected Phase 1 project cost and schedule as well, but DHS and GSA officials did not document these impacts. For example, GSA officials noted that the original design for the Coast Guard fitness center was complete and construction was set to begin, but the building had to be redesigned and sunk farther underground after a historic preservation stakeholder objected to the structure’s sight-lines. Also, toxic ash was unexpectedly discovered in the walls of one of the historic buildings, which required additional funds and time to remove. DHS and GSA officials were not able to tell us how much additional funding and time were required to redesign and construct the fitness center and to remediate the toxic ash. Overall, without documentation, we could not quantify the specific effects of these types of actions on Phase 1 cost growth and delays. Because DHS and GSA project cost and schedule estimates inform Congress’s funding decisions and affect the agencies’ abilities to effectively allocate resources across competing projects in their capital programs, there is a risk that funding decisions and resource allocations could be made based on information that is not reliable.

Conclusions

Several factors have changed since DHS began planning its consolidated headquarters in 2005. New workplace standards allow more people to work in less space, and recent government-wide initiatives like Freeze the Footprint have prompted agencies to rethink their real property portfolios and lease arrangements. In addition, the DHS headquarters consolidation effort has not received the level of funding that DHS and GSA officials originally envisioned. By taking into account changing workplace standards and funding instability, assessing alternatives, prioritizing projects, and using the results of these analyses to inform the revised project plan in accordance with leading practices, DHS and GSA would be better positioned to assure decision makers within both agencies and in Congress that the consolidation project is justified. In addition, DHS has an acquisitions policy that generally aligns with leading capital decision-making practices, which applies to major acquisitions, as determined by cost criteria and other factors such as project visibility. However, DHS has moved the headquarters consolidation project or elements of the project on and off its list of major acquisitions over the last several years. Furthermore, during the periods when the project was identified by DHS as a major acquisition, the program did not fully comply with acquisition policy requirements, such as obtaining department-level approval of certain documents. Although GSA owns the site, funds the majority of the building construction, and oversees other contracts on behalf of DHS, given DHS’s significant monetary investment, along with the project’s visibility and potential impact on DHS missions, treating headquarters consolidation as a major acquisition and applying the policy to the maximum extent possible would provide greater assurance that government funds are being spent in a way that is consistent with sound acquisition practices and that the project is moving forward as intended.

Creating reliable cost and schedule estimates for the headquarters consolidation project should be an integral part of DHS and GSA efforts to reassess the project. DHS and GSA current estimates do not conform with several leading practices, which make the estimates unreliable. Furthermore, in several instances, the cost and schedule estimates do not fully conform with GSA’s estimation policies. Although DHS and GSA maintain that more comprehensive estimates will be conducted as the project advances and funding is secured, decision makers could benefit now from accurate estimates that encompass the life-cycle of the project. Without this information, it is difficult for agency leadership and Members of Congress to make informed decisions regarding resource allocations and compare competing priorities. Pending the development of reliable cost and schedule estimates, the project risks potential cost overruns, missed deadlines, and performance shortfalls.

Recommendations for Executive Action

In order to improve transparency and allow for more informed decision making by congressional leaders and DHS and GSA decision-makers, we recommend that, before requesting additional funding for the DHS headquarters consolidation project, the Secretary of Homeland Security and the Administrator of the General Services Administration work jointly to take the following two actions: conduct the following assessments and use the results to inform updated DHS headquarters consolidation plans: a comprehensive needs assessment and gap analysis of current and needed capabilities that take into consideration changing conditions, and an alternatives analysis that identifies the costs and benefits of leasing and construction alternatives for the remainder of the project and prioritizes options to account for funding instability.

After revising the DHS headquarters consolidation plans, develop revised cost and schedule estimates for the remaining portions of the consolidation project that conform to GSA guidance and leading practices for cost and schedule estimation, including an independent evaluation of the estimates.

We further recommend that the Secretary of Homeland Security designate the headquarters consolidation program a major acquisition, consistent with DHS acquisition policy, and apply DHS acquisition policy requirements.

Matter for Congressional Consideration

Congress should consider making future funding for the St. Elizabeths project contingent upon DHS and GSA developing a revised headquarters consolidation plan, for the remainder of the project, that conforms with leading practices and that (1) recognizes changes in workplace standards, (2) identifies which components are to be colocated at St. Elizabeths and in leased and owned space throughout the NCR, and (3) develops and provides reliable cost and schedule estimates.

Agency Comments and Our Evaluation

We provided a draft of this report to DHS and GSA for review and comment. In written comments, DHS concurred with all three of the recommendations, and GSA concurred with the two recommendations that applied to it. DHS and GSA comments are summarized below and reprinted in appendix VII and appendix VIII respectively.

DHS and GSA concurred with our first recommendation that DHS and GSA conduct a comprehensive needs assessment and alternatives analysis. DHS and GSA commented that DHS and GSA have already completed a draft enhanced consolidation plan which DHS believes includes the needs assessment and gap analysis envisioned by GAO. In addition, DHS stated that that the cost-benefit analysis of leasing versus construction completed during development of the original project master plan has been updated to reflect current conditions and included as part of this draft plan. GSA reported that it is working closely with DHS and will share this plan with stakeholders upon completion.

DHS and GSA concurred with our second recommendation that DHS and GSA develop revised cost and schedules that conform to GSA guidance and leading practices. DHS commented that a revised programmatic schedule and estimate was created in conjunction with development of the draft enhanced plan, which, according to DHS, is currently with the Office of Management and Budget for approval. DHS stated that it defers to GSA as to whether this estimate conforms to GSA or other criteria for cost and schedule estimation, since the project is being managed and executed by GSA and not DHS. GSA commented that it plans to update the cost and schedule estimates upon completion of the Enhanced Plan, and may adopt some of the leading practices referenced by GAO.

DHS concurred with our third recommendation that DHS designate the headquarters consolidation program a major acquisition and apply DHS acquisition policy requirements. DHS reported that the Acting Under Secretary for Management determined in September 2014 that the DHS-funded portions of the St. Elizabeths project will come under the purview of the DHS Acquisition Review Board for oversight effective immediately to assure senior leadership visibility over DHS funds executed by GSA. DHS also requested that we consider this recommendation resolved and closed. Designating the DHS-funded portions of the St. Elizabeths project a major acquisition partially addresses our recommendation. It is still too early to assess the extent to which DHS is applying its acquisition policy to the project. As stated in our report, the St. Elizabeths headquarters consolidation project has been moved off and on the DHS master acquisition oversight list in prior years and in the years that it has been on the list, the project did not comply with major acquisition requirements as outlined by DHS guidelines. We will continue to monitor DHS’s actions to apply its acquisition policy to the project as part of our normal recommendation follow-up process.

In its comments, DHS also expressed concern that our report did not sufficiently describe the roles and responsibilities of DHS and GSA. Specifically, DHS stated that, as a tenant agency, its role is to establish programmatic requirements; budget for and fund tenant responsible items; provide oversight on GSA's use of DHS funds; validate that GSA managed design and construction activities meet DHS operational and program requirements; and coordinate with GSA and other stakeholders throughout the process, as appropriate. DHS also noted that other activities are managed by GSA in accordance with GSA policies and under GSA supervision and oversight. DHS stated that, while DHS cooperates with GSA and helps facilitate completion of these activities as appropriate, DHS does not have any supervisory control over the activities. Specifically, DHS stated that it did not select the St. Elizabeths site, nor does not award or manage contracts for design and construction. We agree that GSA has responsibility for these activities and have added more detailed discussion of DHS and GSA roles to the report. However, cooperation and collaboration between DHS and GSA is essential for a variety of reasons, including the overall cost, scope, and visibility of the project; the overall importance of the project in the context of DHS’s mission; and in light of the fact that DHS has received $494.8 million to date for the project. This does not include the additional $1.2 billion that DHS expects that it will need to ensure that the project is completed by 2026. In this context, we believe that the management and implementation of the St. Elizabeths project is a shared responsibility between DHS and GSA, requiring them to work closely together to help provide greater assurance to decision makers in Congress, DHS, and GSA—as well as taxpayers—that the project is being appropriately managed and acquired on-time and on-budget.

DHS also expressed concern that the report is overly focused on “leading practices” as opposed to being more outcome and results oriented. We believe that applying the leading practice cited in our draft report would better position DHS and GSA to manage the St. Elizabeths’ project and help ensure better outcomes and results. DHS stated that GSA, in concert with DHS, has already conducted sufficient analysis to support the best practices in our report. We disagree. As we note in the report, cost and schedule estimates for the project were deficient in several areas, including comprehensiveness, accuracy, and credibility. Estimates also failed to comply with GSA’s internal guidance for cost and schedule.

In its written response, GSA also commented that several of the leading practices GAO identifies are better suited to non-real estate investments such as weapons systems, spacecraft, aircraft carriers, and software systems. We disagree. As stated in our report, we have applied our leading cost and schedule estimation practices in past work involving federal construction projects, and the leading practices were developed in conjunction with numerous stakeholders from government and the private sector, including DHS and GSA. Furthermore, GSA acknowledged the value of our leading cost estimation practices in 2007 and issued an order to apply the principles to all cost estimates prepared in every GSA project, process, or organization.

We are sending copies to the Secretary of Homeland Security, Administrator of GSA, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staffs have questions about this report, please contact either David Maurer at (202) 512-9627 or maurerd@gao.gov, or David Wise at (202) 512-2834 or wised@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report are listed in appendix IX.

Appendix I: Objectives, Scope, and Methodology

We conducted our review to examine (1) the extent to which the Department of Homeland Security (DHS) and the General Services Administration (GSA) developed DHS headquarters consolidation plans in accordance with leading capital decision-making principles, and (2) the extent to which DHS and GSA have estimated the costs and schedules of the DHS headquarters consolidation project at St. Elizabeths in a manner that is consistent with leading practices.

To determine the extent to which DHS and GSA developed DHS headquarters consolidation plans in accordance with leading capital decision-making principles, we reviewed and analyzed DHS and GSA capital planning documents and interviewed DHS and GSA officials responsible for the planning and management of the St. Elizabeths project, as well as DHS and GSA senior leadership. We compared DHS and GSA capital planning actions against Office of Management and Budget (OMB) and GAO leading practices (see app. II). Our analysis of DHS and GSA efforts using criteria for leading capital decision-making focused on planning for the remaining segments or phases of the project because, as we stated in previous reports, the planning phase is the crux of the capital decision-making process. The results from this phase are used throughout the remaining phases of the process; therefore, if key practices during this phase are not followed there may be repercussions on agency operations if poor capital investment decisions are made. To determine the extent to which DHS planned and implemented the DHS headquarters consolidation project at St. Elizabeths in accordance with departmental acquisition guidelines, we interviewed officials from DHS’s Office of Program Accountability and Risk Management (PARM) as well as DHS project managers. We reviewed and analyzed DHS Acquisition Management Directive 102-01 (MD 102) and DHS’s Major Acquisitions Oversight List for fiscal years 2010 through 2014. We then compared the acquisition standards detailed in MD 102 with DHS’s efforts to acquire a consolidated headquarters facility at the GSA-owned St. Elizabeths Campus.

To determine the extent to which DHS and GSA have estimated the costs and schedules of the DHS headquarters consolidation project at St. Elizabeths in a manner that is consistent with leading practices, we interviewed DHS and GSA program officials and compared DHS and GSA overall project cost and schedule estimates with GAO leading practices. Specifically, the GAO Cost Estimating and Assessment Guide (Cost Guide) identifies leading practices that represent work across the federal government and are the basis for a high-quality, reliable cost estimate. A cost estimate created using the leading practices exhibits four broad characteristics: it is accurate, well documented, credible, and comprehensive. That is, each characteristic is associated with a specific set of leading practices. In turn, each leading practice is made up of a number of specific tasks (see app. III). Similarly, we compared DHS and GSA overall schedule estimates with the GAO Schedule Assessment Guide, which defines leading practices related to four characteristics— comprehensive, well constructed, credible, and controlled—that are important to developing high-quality, reliable schedule estimates (see app. IV). For our evaluations of the cost and schedule estimates, when the tasks associated with the leading practices that define a characteristic were mostly or completely satisfied, we considered the characteristic to be substantially or fully met. When all four characteristics were at least substantially met, we considered a cost or schedule estimate to be reliable. To analyze the St. Elizabeths schedule estimate, we asked DHS and GSA to provide the most recent Integrated Master Schedule (IMS) that included all related embedded project schedules. Although the 2013 cost estimate provided by DHS and GSA was complete, the 2013 schedule estimate did not cover the entire consolidation project in sufficient detail. As a result, we initially analyzed the most recent complete schedule available, which was created in 2008. The 2008 schedule estimate listed project completion in 2016. Subsequently, at the request of GSA, we also applied our leading practices criteria to the incomplete 2013 schedule. We shared our analysis with DHS and GSA officials to review, comment on, and provide additional information, and we adjusted our analysis where appropriate. Finally, we reviewed GSA guidance that DHS and GSA officials stated was relevant to cost and schedule estimating for the St. Elizabeths project: P-120: Project Estimating Requirements for the Public Buildings Service (PBS); P-100: Facilities Standards for the Public Buildings Service; and GSA’s Global Project Management (gPM) guidance, which includes the PBS Scheduling Fundamentals Guide. In areas where GSA estimating guidance aligned with our leading cost and schedule-estimating leading practices, we evaluated the extent to which the St. Elizabeths cost and schedule estimates conformed with GSA guidance.

We conducted our work from August 2013 to September 2014 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: Leading Practices in Capital Decision-Making

Congress, the Office of Management and Budget (OMB), and GAO have all identified the need for effective capital planning among federal agencies. GAO developed its Executive Guide: Leading Practices in Capital Decision-Making, which provides guidance to federal agencies on planning, budgeting, acquiring, and managing capital assets. Figure 8 illustrates how capital decision-making principles fit together.

Appendix III: The Leading Practices for Developing High-Quality Cost Estimates

We developed the GAO Cost Estimating and Assessment Guide in order to establish a consistent methodology that is based on best practices and that can be used across the federal government for developing, managing, and evaluating capital program cost estimates. We have identified 12 steps under 4 characteristics that, followed correctly, should result in reliable and valid cost estimates that management can use for making informed decisions.

Appendix IV: 10 Leading Practices for Developing High-Quality Schedule Estimates

The GAO Schedule Assessment Guide is a companion to the Cost Guide. A consistent methodology for developing, managing, and evaluating capital program cost estimates includes the concept of scheduling the necessary work to a timeline, as discussed in the Cost Guide. A well- planned schedule is a fundamental management tool that can help government programs use public funds effectively by specifying when work will be performed in the future and measuring program performance against an approved plan. Table 10 represents the 10 leading practices associated with a high-quality and reliable schedule and their concepts.

Appendix V: Summary Assessment of St. Elizabeths 2013 Cost Estimate Compared with Leading Practices

We assessed the Department of Homeland Security (DHS) and General Services Administration (GSA) cost estimate using the framework of the four characteristics—comprehensive, well documented, accurate, and credible—associated with high-quality, reliable cost estimates. Table 11 provides greater detail on our comparison of the estimate with leading practices that constitute the four cost-estimating characteristics.

Appendix VI: Summary Assessment of St. Elizabeths 2008 and 2013 Schedule Estimates Compared with Leading Practices

We assessed Department of Homeland Security (DHS) and General Services Administration (GSA) schedule estimates using the framework of the four characteristics—comprehensive, well constructed, credible, and controlled—associated with high-quality, reliable schedule estimates. Table 12 provides greater detail on our comparison of both the 2008 and 2013 estimates with 10 specific leading practices that constitute the four schedule estimating characteristics.

Appendix VII: Comments from the Department of Homeland Security

Appendix VIII: Comments from General Services Administration

Appendix IX: GAO Contacts and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments:

In addition to the contacts named above, John Mortin (Assistant Director), Karen Richey (Assistant Director), Juana Collymore, Giselle Cubillos, Daniel Hoy, Abishek Krupanand, Jennifer Leotta, and David Lutter made key contributions to this report. Also contributing to this report were Charles Bausell, Susan Hsu, Eric Hauswirth, Tracey King, Linda Miller, Jan Montgomery, and Cynthia Saunders.