The ability to find, organize, use, share, appropriately dispose of, and save records—the essence of records management—is vital for the effective functioning of the federal government. In the wake of the transition from paper-based to electronic processes, records are increasingly electronic, and the volumes of electronic records produced by federal agencies are vast and rapidly growing, providing challenges to NARA as the nation’s record keeper and archivist. Furthermore, the Presidential Records Act gives the Archivist of the United States responsibility for the custody, control, and preservation of presidential records upon the conclusion of a President’s term of office. The act states that the Archivist has an affirmative duty to make such records available to the public as rapidly and completely as possible consistent with the provisions of the act. In response to these widely recognized challenges, NARA began a research and development program to develop a modern archive for electronic records. The final operational ERA system is to consist of the following six key functions: Ingest enables the transfer of electronic records from federal agencies. Archival storage enables stored records to be managed in a way that guarantees their integrity and availability. Records management supports scheduling, appraisal, description, and requests to transfer custody of all types of records, as well as ingesting and managing electronic records, including the capture of selected records data (such as origination date, format, and disposition). Preservation enables secure and reliable storage of files in formats in which they were received, as well as creating backup copies for off-site storage. Local services and control regulates how the ERA components communicate with each other, manages internal security, and enables telecommunications and system network management. Dissemination enables users to search descriptions and business data about all types of records and to search the content of electronic records and retrieve them. In 2001, NARA began developing policies and plans to guide the overall acquisition of an electronic records system. Upon completion of the design phase, the agency awarded a cost-plus-award-fee contract to Lockheed Martin Corporation in September 2005, worth $317 million, to develop the ERA system. The development contract is composed of six option periods—the first option lasting 2 years and all subsequent options each lasting 1 year (to cover any uncompleted planned work and/or additional new work). The ERA contract is currently in the fifth option period. Within this contract structure, NARA is to deliver ERA system capabilities in five separate increments. Each period of performance includes specific capabilities associated with one or more increments to be delivered. Increments will overlap to allow the analysis and design activities for the next increment to begin while the testing of the final release of the current increment is under way. Figure 1 illustrates the ERA program plan schedule prior to the recent change in program direction in July 2010 (as discussed later in this report). Table 1 summarizes the planned system capabilities to be delivered by increment. Since awarding the contract, NARA has made several modifications to the program schedule including, among other things, extending the first two option periods by 2 months and 7 months, respectively. NARA also reduced the period of performance for option period four by 6 months. Additionally, NARA stated that Increment 3 was completed in October 2010 and that they expect to complete Increment 4 by early-2011, both of which are later than the milestones established in program planning documents. Table 2 shows a comparison of the original and revised ERA schedules. Since 2002, we have reported and testified on the technical and programmatic challenges that NARA has experienced in acquiring the ERA system, as well as on additional key risks facing the program. Our most recent report, in June 2010, reported that the estimated cost for ERA through March 2012 increased to more than $567 million. For example, NARA reportedly spent about $80 million on the base increment, compared with its planned cost of about $60 million. According to agency and contractor officials, factors contributing to the increase include unanticipated complexity of the system being developed. In order to enhance NARA’s ability to complete the ERA development within reasonable funding and time constraints, we recommended that the agency ensure adequate executive-level oversight by maintaining documentation of investment review results, including changes to the program’s cost and schedule baseline and any other corrective actions taken as a result of changes in ERA cost, schedule, and performance. We further reported that, although NARA initially planned for the system to be capable of ingesting federal and presidential records in September 2007, the two system increments to support those records did not achieve initial operating capability until June 2008 and December 2008, respectively. In addition, a number of functions originally planned for the base increment were deferred to later increments, including the ability to delete records and to ingest redacted records. More notably, we reported that NARA had not detailed what system capabilities would be delivered in the final two increments; it also had not effectively defined or managed ERA’s requirements to ensure that the functionality delivered satisfies the objectives of the system. Although NARA established an initial set of high- level requirements, it lacked firm plans to implement about 43 percent of them. As a result, we recommended that NARA ensure that ERA’s requirements are being managed using a disciplined process. As a result of our most recent report, OMB is working with NARA to remedy the problems we highlighted related to the cost, schedule, and performance of the ERA system. Specifically, in July 2010, OMB directed NARA to halt all development activities by the end of fiscal year 2011 and develop an action plan to address our finding on the lack of defined system functionality for the final two increments of the ERA program and the need for improved strategic planning. In response, NARA has work under way to revise its program implementation plans and enter the operations and maintenance phase beginning in fiscal year 2012. For development work to be accomplished prior to this date, NARA is to prioritize existing requirements and develop realistic cost and schedule estimates to determine what can be accomplished by the deadline. In addition, NARA also plans to prioritize remaining outstanding requirements (that are to be accomplished under the ERA contract); identify other requirements not yet met by the system; and determine ERA operations and maintenance requirements. Despite changes in program direction, the Archivist noted that the essential goals of ERA would remain unchanged. He stated that, beginning in fiscal year 2012, ERA would fully support the transfer of electronic records to an archival repository, as well as access to and preservation of electronic archival records. To do this, the Archivist stated that the agency would work on those elements determined to be the highest priorities in fiscal year 2011. According to NARA, this may lead to a second phase of the ERA development in the future. Given the size and significance of the government’s investment in IT, it is important that projects be managed effectively to ensure that public resources are wisely invested. Effectively managing projects entails, among other things, pulling together essential cost, schedule, and technical information in a meaningful, coherent fashion so that managers have an accurate view of the program’s development status. Without meaningful and coherent cost and schedule information, program managers can have a distorted view of a program’s status and risks. To address this issue, in the 1960s, the Department of Defense developed the EVM technique, which goes beyond simply comparing budgeted costs with actual costs. This technique measures the value of work accomplished in a given period and compares it with the planned value of work scheduled for that period and with the actual cost of work accomplished. Differences in these values are measured in both cost and schedule variances. Cost variances compare the value of the completed work (i.e., the earned value) with the actual cost of the work performed. For example, if a contractor completed $5 million worth of work, and the work actually cost $6.7 million, there would be a negative $1.7 million cost variance. Schedule variances are also measured in dollars, but they compare the earned value of the completed work with the value of the work that was expected to be completed. For example, if a contractor completed $5 million worth of work at the end of the month, but was budgeted to complete $10 million worth of work, there would be a negative $5 million schedule variance. Positive variances indicate that activities are costing less or are completed ahead of schedule. Negative variances indicate activities are costing more or are falling behind schedule. These cost and schedule variances can then be used in estimating the cost and time needed to complete the program. Without knowing the planned cost of completed work and work in progress (i.e., the earned value), it is difficult to determine a program’s true status. Earned value allows for this key information, which provides an objective view of program status and is necessary for understanding the health of a program. As a result, EVM can alert program managers to potential problems sooner than using expenditures alone, thereby reducing the chance and magnitude of cost overruns and schedule slippages. Moreover, EVM directly supports the institutionalization of key processes for acquiring and developing systems and the ability to effectively manage investments—areas that are often found to be inadequate on the basis of our assessments of major IT investments. In 2005, OMB began requiring agencies, such as NARA, to fully implement EVM on major IT investments. Specifically, this guidance directs agencies to (1) develop comprehensive policies to ensure that their major IT investments are using EVM to plan and manage development; (2) include a provision and clause in major acquisition contracts or agency in- house project charters directing the use of an EVM system that is compliant with the American National Standards Institute (ANSI) standard; (3) provide documentation demonstrating that the contractor’ or agency’s in-house EVM system complies with the national standard; ( conduct periodic surveillance reviews; and (5) conduct integrated base reviews on individual programs to finalize their cost, schedule, and performance goals.