In the current environment of making government work better and cost less, there are high expectations of information technology to change old, inefficient ways of running programs and delivering taxpayer services. Most federal agencies are largely dependent on information systems to deliver services, maintain operations, track outlays and costs, manage programs, and support program decisions. Technology offers government a means to revolutionize the way it interacts with citizens to streamline service, improve quality, and curtail unnecessary costs. Demonstrating these critical linkages to top government executives is paramount to achieving the necessary attention, understanding, and support necessary for long-term success. Several facts are well known. The expectations for technology are set in a challenging federal environment. Increasingly, pressure is being brought to bear on shrinking the size of the federal deficit, not only by reducing spending but by getting better service for lower ongoing costs. IT-related obligations in the federal budget, exceeding $25 billion annually, may be put under increasing scrutiny as part of overall discretionary spending. Further, technology itself is evolving at a rapid pace. The industry reports on this issue are consistent. Every few years, the performance-to-price ratio of computer hardware doubles. New product cycles in the information technology industry now average months rather than years. This rapid evolution produces new challenges—such as the security of global networks—before current problems can be fully resolved—such as the replacement of aging, legacy systems that can no longer meet requirements. In this environment of demanding requirements, close scrutiny, and rapid change, more attention needs to be focused on what is not known about the government’s technology investments. First, the government really does not know exactly how much it is spending on IT. The $25 billion figure represents specific IT obligations reported to OMB by federal agencies through a special budget exhibit. This information is not comprehensive or collected on a governmentwide basis; therefore, the total amount of annual spending for IT is unknown. For example, agencies are not required to report IT obligations under $50 million. The legislative and judicial branches of government are not required to report IT obligation data to OMB. Additionally, IT obligations embedded in weapon systems and federally funded research on computers are also not part of the reporting requirement. If included, these figures could significantly alter the size of the governmentwide IT investment portfolio. The Department of Defense, for example, has estimated it spends $24 billion to $32 billion annually for software embedded in weapon systems. Second, most agencies do not capture or maintain reliable information on projected versus actual costs and benefits of IT investments. Without this type of information, it is virtually impossible to construct a return on investment calculation as a way of demonstrating positive net gains in cost reductions, improvements in quality, and reduced cycle time for service delivery. The promise of new information technologies is compelling in the federal environment where aging systems prevail that are often ill-designed for changing business or mission requirements. There are inherent risks associated with not acting to address these technology deficiencies, including potential operational disruptions to vital government services such as air traffic control, income tax collection, and benefit payments to recipients of health care or social security. The opportunities for using technology to improve cost effectiveness and service delivery in government are immense. While the return of these investments are not yet proven, examples of how technology can be a powerful tool include: reducing public burden, such as IRS’ Telefile project that allows taxpayers to file 1040EZ tax returns via touch-tone phones; reducing operating costs, such as data center and telecommunications consolidation projects being conducted by the Department of Defense and now OMB on a governmentwide basis, as well as post-FTS 2000 implementation, and governmentwide E-mail; creating choices and alternatives for the delivery of government services, such as electronic benefit transfer payments, information Kiosks, agency home pages on the Internet, and electronic data interchange between government vendors and agencies; increasing the responsiveness and timeliness of services, such as the Social Security’s highly rated telephone customer service program. improving the value and impact of government information, such as the international trade and environmental data index projects being conducted under the auspices of the National Performance Review; and increasing the integrity and reliability of government information systems, such as reducing health care fraud through better software detection methods and enhancing the security of federal data through implementation of better internal controls. But there are also risks associated with taking action to implement new information systems. Our reviews of major modernization efforts have shown that the introduction of newer, faster, cheaper technology is not a panacea for flawed management practices or poorly designed business processes. Business needs must dictate the requirements and justification for the type of technology to be used. To ensure this occurs, program units in agencies must carefully analyze the processes or procedures that are being modernized. When processes are reengineered in concert with the power of information technology, significant results can be achieved. Let me illustrate with a few select examples from both the public and private sector. Liberty Mutual reports that cycle time for the issuance of insurance policies averaged 62 days, even though the actual determination time took less than 3 days. Upon close inspection, management discovered inherent process and support inefficiencies, such as up to 24 different handoffs of the policy paperwork, separate appeals processes for both sales and underwriting, and separate computer systems for each department. By combining process redesign with a more powerful, integrated information system, Liberty was able to reduce cycle times by one-half, eliminated virtually all policy handoffs, and was able to significantly reduce appeals to policy denials. IBM Credit Corporation reports that the process to approve credit for IBM customers of computers, software, and services was redesigned from five steps and an average cycle time of seven days to a one-person, four hour process — a 90 percent improvement in cycle time and hundredfold improvement in productivity. Again, better designed and integrated information systems were part of the total solution. Eastman Chemical found that maintenance staff were spending as much as 50 percent of their time finding and ordering equipment parts. By combining process redesign with a computerized maintenance information system, Eastman Chemical reports it was able to cut by 80 percent the time needed to find and order materials. As a result, maintenance productivity has risen sharply and the company is saving more than $1 million every year in duplicate inventory costs. The Department of Interior’s Bureau of Reclamation has concluded that mission rescoping has resulted in a focus on water resources management rather than building large public works projects. The Bureau reports that reengineering and better use of technology has resulted in a grants approval process being reduced from 15 steps over 6 months to 5 steps and one week. Similarly, fish ladder design and funding approval processes have been streamlined from 21 steps taking over 3 years to eight steps taking just 6 months. Nonetheless, just as technology can help produce impressive success stories, it can also become the focus of costly business failures. Dramatic, captured results can be few and far between. A recent research study conducted by The Standish Group on private and public sector organizations in the United States confirms this troubling trend.According to the research, IT executives report that one-third of all systems development projects are cancelled before they are ever completed. This statistic highlights the reality of the complexity in planning, designing, and managing successful IT projects. IT executives participating in the Standish Group research also reported that only 16 percent of all IT projects were considered successful—that is, judged to have accomplished what was expected within the budget anticipated at the outset. In addition, of those IT projects that are completed, only about 42 percent of the largest companies are successful in meeting their initial objectives. In addition, the study’s participants reported that over 50 percent of IT projects exceed their original cost estimates by almost 200 percent. These statistics serve as a stark reminder that information systems projects carry high risks of failure if not carefully managed and controlled. Although no comparable data is available that focuses exclusively on the federal government, our work on specific systems projects has found a cascade of problems—ranging from poorly defined requirements, poor contractor oversight, and inadequate system design to managerial and technical skill deficiencies—have led to project terminations, delays, or suspensions of procurement authority. In addition, three agencies with oversight responsibility—GAO, OMB, and GSA—have identified problems that selected systems development efforts or IT operations are having. Each agency has constructed a corresponding “high-risk” list to help focus top management attention on the problems and implement effective remedial actions. Of the 18 agencies and departments representing over 90 percent of total federal spending on information management and technology, nine have IT projects or areas of IT management on one or more of these high risk lists. Table 1 lists the eleven agencies and projects that are currently on high risk lists. GAO has testified regularly on the urgent need for basic management reforms in the federal government. Systems development efforts often fail due to inadequate management attention and controls. Despite the visibility and oversight focus on many large systems development efforts, agency management has often been ineffective in reducing the risks associated with large, multi-year projects. For example, in our July 1995 review of IRS’ Tax System Modernization, we found an absence of effective information management practices—such as IT investment selection, control, and evaluation processes—which were placing selected modernization projects at risk of failing to meet critical business needs.The absence of these practices places executive level understanding and support of the technology project in jeopardy and reduces accountability for project success. Inadequate project management, poor contractor oversight, and a shortage of staff with appropriate technical skills have also contributed greatly to systems development problems. After investing over 12 years and more than $2.5 billion, the Federal Aviation Administration (FAA) chose to cut its losses in its problem-plagued $6-billion Advanced Automation System (AAS) by either cancelling or extensively restructuring elements of this effort to modernize our nation’s air traffic control system.