We at GAO use the term human capital because (unlike traditional terms such as personnel and human resource management) it focuses on two principles that are critical in a modern, results-oriented management environment: First, people are assets whose value can be enhanced through investment. As the value of people increases, so does the performance capacity of the organization and therefore its value to clients and other stakeholders. As with any investment, the goal is to maximize value while managing risk. Second, an organization’s human capital approaches must be aligned to support the mission, vision for the future, core values, goals and objectives, and strategies by which the organization has defined its direction and its expectations for itself and its people. An organization’s human capital policies and practices should be designed and implemented to achieve these goals, and assessed accordingly. capital strategies are not appropriate to meet the needs of the nation’s government and its citizens. As agencies wrestle with human capital management, they face a significant challenge in the information management and technology areas. The rapid pace of technological change in these areas is reflected in the investments in information technologies made both in the United States as a whole and by the federal government. By 2004, information technology investments are expected to account for more than 40 percent of all capital investment in the United States. The federal government’s IT investment is conservatively estimated in fiscal year 2002 to be $44 billion—an increase in federal IT spending of 8.6 percent from fiscal year 2000. This substantial investment should provide opportunities for increasing productivity and decreasing costs. For example, the public sector is increasingly turning to the Internet to conduct paperless acquisitions, provide interactive electronic services to the public, and tailor or personalize information. As we testified in July, there are over 1,300 electronic government initiatives throughout the federal government, covering a wide range of activities involving interaction with citizens, business, other governments, and government employees. In addition, the Government Paperwork Elimination Act (GPEA) of 1998 requires that by October 21, 2003, federal agencies provide the public (when practicable) the option of submitting, maintaining, and disclosing required information electronically. We have found that agencies plan to provide an electronic option for 3,048 eligible activities by the GPEA deadline. almost double between 1998 and 2008, and the demand for computer programmers will increase by 30 percent during the same time period. In April 2001, the Information Technology Association of America (ITAA) released a study on the size of the private-sector IT workforce, the demand for qualified workers, and the gap between the supply and demand.Among the study’s findings were the following: Information technology employment directly accounts for approximately 7 percent of the nation’s total workforce. Over 10.4 million people in the United States are IT workers, an increase of 4 percent over the 10 million reported for last year. Overall estimated demand for IT workers is down from last year’s forecast (by 44 percent), partially because of the slowdown in the high-tech sector and the economy in general. However, the demand for IT workers remains high, as employers attempt to fill over 900,000 new IT jobs in 2001. Hiring managers reported an anticipated shortfall of 425,000 IT workers in 2001 because of a lack of applicants with the requisite technical and nontechnical skills. The ITAA also reported that despite softening in overall demand, skills in technical support, database development/administration, programming/ software engineering, web development/administration, and network design/administration remain most in demand by IT and non-IT companies alike. These positions represent nearly 86 percent of the demand for IT workers expected in 2001. The study further notes that the demand for enterprise systems professionals and network designers and administrators is expected to increase by 62 and 13 percent, respectively, over the 2000 forecast. For the IT workforce in particular, agencies are beginning to take action by initiating strategies and plans to attract, retain, and/or train skilled workers. Nevertheless, much remains to be done, as agencies generally lack comprehensive strategies for IT human capital management. To date, we have issued several products on IT human capital management, including studies of practices at four agencies: the Small Business Administration, the United States Coast Guard, the Social Security Administration, and the Centers for Medicare and Medicaid Services. These evaluations focused on agency practices needed to maintain and enhance the capabilities of IT staff. These practices fall in four key areas: Requirements—assessing the knowledge and skills needed to effectively perform IT operations to support agency mission and goals Inventory—determining the knowledge and skills of current IT staff so that gaps in needed capabilities can be identified Workforce strategies and plans—developing strategies and implementing plans for hiring, training, and professional development to fill the gap between requirements and current staffing Progress evaluation—evaluating progress made in improving IT human capital capability, and using the results of these evaluations to continuously improve the organization’s human capital strategies In July, we reported that agencies’ progress in addressing IT human capital strategies had been sluggish. Specifically, we stated that although agencies were initiating strategies and plans to attract, retain, and/or train a skilled IT workforce, key issues in each of the four areas mentioned above were not being effectively addressed. In the area of requirements, several of the agencies we reviewed had begun evaluating their short and longer term IT needs. However, none of them had completed these efforts. For instance, we found that the Small Business Administration did not have any policies or procedures to identify requirements for IT skills. Also, although the U.S. Coast Guard had conducted an assessment of the knowledge and skills needed by its IT officers and enlisted personnel, it had not done so for its civilian workforce. Although an IT inventory identifying the knowledge and skills of current staff is essential to uncovering gaps between current staff and requirements, our work to date has revealed that none of the reviewed agencies had a complete knowledge and skills inventory. For example, the U.S. Coast Guard and the Small Business Administration maintained a limited amount of information on IT knowledge and skills, and the Social Security Administration lacked an IT-specific knowledge and skills inventory. In addition to establishing requirements and creating an inventory, an agency needs to develop a workforce plan that is linked to its strategic and program planning efforts. The workforce plan should identify its current and future human capital needs, including the size of the workforce, its deployment across the organization, and the knowledge, skills, and abilities needed for the agency to pursue its shared vision. The workforce planning strategy should specifically outline the steps and processes that an agency should follow when hiring, training, and professionally developing staff to fill the gap between requirements and current staffing. Among the four agencies we reviewed, none had developed comprehensive IT-specific workforce strategies or plans. For example, although the Social Security Administration did have a broad workforce transition plan that includes actions to improve its processes (for projecting workforce needs, for recruiting, and for training and developing employees), these actions were not specific to IT staff. Finally, meaningful progress evaluation systems are necessary to determine whether agency human capital efforts are effective and to ensure that the results of these evaluations are used to make improvements. While agencies we reviewed did track various human capital efforts, such as progress in filling IT positions, none of the agencies had fully analyzed or reported on the effectiveness of their workforce strategies and plans. Shortcomings in IT human capital management have serious ramifications. Without complete assessments of requirements, agencies will lack assurance that they have identified the number of staff and the specific knowledge and skills needed or that they have developed strategies to fill these needs. Also, without an inventory of knowledge and skills, agencies will not have assurance that they are optimizing the use of their current IT workforce, nor will they have data on the extent of skill gaps. This information is necessary for developing effective workforce strategies and plans. If they cannot analyze and document the effectiveness of workforce strategies and plans, senior decisionmakers will lack assurance that they are effectively addressing knowledge and skill gaps. Judging from trends, the shortage of qualified IT professionals is likely to lead to greater reliance on contracted workers, so that agencies can supplement their existing workforces with external expertise. Indeed, from fiscal year 1990 to 2000, federal spending on contracted IT services increased from $3.7 billion to about $13.4 billion. Relying on contracting to fill workforce gaps is not a panacea. We have previously reported that some procurements of services are not being done efficiently, putting taxpayer dollars at risk. In particular, agencies were not clearly defining their requirements, fully considering alternative solutions, performing vigorous price analyses, or adequately overseeing contractor performance. Also, agencies appear to be at risk of not having enough of the right people with the right skills to manage service procurements. Following a decade of downsizing and curtailed investments in human capital, federal agencies currently face skills, knowledge, and experience imbalances that, without corrective action, will worsen, especially in light of the numbers of federal workers becoming eligible to retire in the coming years. Consequently, a key question we face in the federal government is whether we have today, or will have tomorrow, the ability to acquire and manage the procurement of the increasingly sophisticated services that the government needs. Department of Defense (DOD) found that its workforce reductions had led to a serious shortfall in the acquisition workforce. To improve the efficiency of contracting operations—and in part to help offset the effects of this shortfall—the department instituted streamlined acquisition procedures. However, the DOD Inspector General reported that the efficiency gains from the streamlined procedures had not kept pace with acquisition workforce reductions. The Inspector General reported that while the workforce had been reduced by half, DOD’s contracting workload had increased by about 12 percent and that senior personnel at 14 acquisition organizations believed that workforce reductions had led to such problems as less contractor oversight. Unless these reductions in the acquisition workforce are addressed, they could undermine the government’s ability to efficiently acquire contract services, including IT services.