Each year, OMB and federal agencies work together to determine how much the government plans to spend on IT projects and how these funds are to be allocated. Planned federal IT spending in fiscal year 2009 totaled about $71 billion—of which $22 billion was planned for IT system development work, and the remainder was planned for operations and maintenance of existing systems. OMB plays a key role in overseeing federal agencies’ IT investments and how they are managed, stemming from its functions of assisting the President in overseeing the preparation of the federal budget and supervising budget preparation in executive branch agencies. In helping to formulate the President’s spending plans, OMB is responsible for evaluating the effectiveness of agency programs, policies, and procedures; assessing competing funding demands among agencies; and setting funding priorities. To carry out these responsibilities, OMB depends on agencies to collect and report accurate and complete information; these activities depend, in turn, on agencies having effective IT management practices. To drive improvement in the implementation and management of IT projects, Congress enacted the Clinger-Cohen Act in 1996, expanding the responsibilities delegated to OMB and agencies under the Paperwork Reduction Act. The Clinger-Cohen Act requires agencies to engage in performance- and results-based management, and to implement and enforce IT management policies and guidelines. The act also requires OMB to establish processes to analyze, track, and evaluate the risks and results of major capital investments in information systems made by executive agencies. Over the past several years, we have reported and testified on OMB’s initiatives to highlight troubled projects, justify IT investments, and use project management tools. We have made multiple recommendations to OMB and federal agencies to improve these initiatives to further enhance the oversight and transparency of federal IT projects. As a result, OMB recently used this body of work to develop and implement improved processes to oversee and increase transparency of IT investments. Specifically, in June 2009, OMB publicly deployed a Web site that displays dashboards of all major federal IT investments to provide OMB and others with the ability to track the progress of these investments over time. 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 (DOD) 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 August 2005, OMB issued guidance outlining steps that agencies must take for all major and high-risk development projects to better ensure improved execution and performance and to promote more effective oversight through the implementation of EVM. 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’s or agency’s in-house EVM system complies with the national standard; (4) conduct periodic surveillance reviews; and (5) conduct integrated baseline reviews on individual programs to finalize their cost, schedule, and performance goals. Building on OMB’s requirements, in March 2009, we issued a guide on best practices for estimating and managing program costs. This guide highlights the policies and practices adopted by leading organizations to implement an effective EVM program. Specifically, in the guide, we identify the need for organizational policies that establish clear criteria for which programs are required to use EVM, specify compliance with the ANSI standard, require a standard product-oriented structure for defining work products, require integrated baseline reviews, provide for specialized training, establish criteria and conditions for rebaselining programs, and require an ongoing surveillance function. In addition, we identify key practices that individual programs can use to ensure that they establish a sound EVM system, that the earned value data are reliable, and that the data are used to support decision making. We have previously reported on the weaknesses associated with the implementation of sound EVM programs at various agencies, as well as on the lack of aggressive management action to correct poor cost and schedule performance trends based on earned value data for major system acquisition programs: In July 2008, we reported that the Federal Aviation Administration’s EVM policy was not fully consistent with best practices. For example, the agency required its program managers to obtain EVM training, but did not enforce completion of this training or require other relevant personnel to obtain this training. In addition, although the agency was using EVM to manage IT acquisitions, not all programs were ensuring that their earned value data were reliable. Specifically, of the three programs collecting EVM data, only one program adequately ensured that its earned value data were reliable. As a result, the agency faced an increased risk that managers were not getting the information they needed to effectively manage the programs. In response to our findings and recommendations, the Federal Aviation Administration reported that it had initiatives under way to improve its EVM oversight processes. In September 2008, we reported that the Department of the Treasury’s EVM policy was not fully consistent with best practices. For example, while the department’s policy addressed some practices, such as establishing clear criteria for which programs are to use EVM, it did not address others, such as requiring and enforcing EVM training. In addition, six programs at Treasury and its bureaus were not consistently implementing practices needed for establishing a comprehensive EVM system. For example, when executing work plans and recording actual costs, a key practice for ensuring that the data resulting from the EVM system are reliable, only two of the six investments that we reviewed incorporated government costs with contractor costs. As a result, we reported that Treasury may not be able to effectively manage its critical programs. In response to our findings and recommendations, Treasury reported that it would release a revised EVM policy and further noted that initiatives to improve EVM-related training were under way. In a series of reports and testimonies from September 2004 to June 2009, we reported that the National Oceanic and Atmospheric Administration’s National Polar-orbiting Operational Environmental Satellite System program was likely to overrun its contract at completion on the basis of our analysis of contractor EVM data. Specifically, the program had delayed key milestones and experienced technical issues in the development of key sensors, which we stated would affect cost and schedule estimates. As predicted, in June 2006 the program was restructured, decreasing its complexity, delaying the availability of the first satellite by 3 to 5 years, and increasing its cost estimate from $6.9 billion to $12.5 billion. However, the program has continued to face significant technical and management issues. As of June 2009, launch of the first satellite was delayed by 14 months, and our current projected total cost estimate is approximately $15 billion. We made multiple recommendations to improve this program, including establishing a realistic time frame for revising the cost and schedule baselines, developing plans to mitigate the risk of gaps in satellite continuity, and tracking the program executive committee’s action items from inception to closure. While the eight agencies we reviewed have established policies requiring the use of EVM on their major IT investments, none of these policies are fully consistent with best practices, such as standardizing the way work products are defined.