According to HUD’s budget  request, these funds are to support new investments intended to deliver  modernized enterprise capabilities that better support the department’s  mission. Disciplined processes include establishing guidance that can be used for  developing reliable cost estimates that project realistic life-cycle costs. HUD’s Cost Estimates for Selected IT Investments Exhibited Significant Weaknesses That Made Them Unreliable

The cost estimates that HUD developed for each of the four selected  investments exhibited significant weaknesses in that they did not meet or  substantially meet best practices for each characteristic. As such, the  estimates were unreliable and did not provide a sound basis for informing  the department’s investment and budgetary decisions. Specifically, none  of the estimates exhibited all of the characteristics of a reliable estimate,  as they were not substantially or fully comprehensive, well-documented,  accurate, and credible. Only one estimate—for the Customer Relationship Management  investment—more than minimally met best practices associated with any  of the four characteristics because it partially met the practices for a  comprehensive and accurate estimate. The remaining three investments  minimally met or did not meet the best practices associated with the four  characteristics. For example, the Enterprise Data Warehouse estimate  minimally met all four characteristics; the Enterprise Voucher  Management System estimate did not meet the characteristic for being  accurate, and minimally met the other three characteristics; and the  Federal Housing Administration Automation and Modernization estimate  did not met the characteristic for being credible, while minimally meeting  the rest of the characteristics. Of the cost estimates for the four selected investments,  none were comprehensive. HUD officials responsible for the selected investments’  estimates stated that department guidance had not yet been established  and that IT investments were not required to develop estimates that  exhibit the four characteristics of a reliable estimate. As a result,  according to these officials, cost estimating practices are inconsistently  implemented across the department and are decentralized because of the  reliance on the efforts and experience of various subject matter experts  and contractors. Following this review, the department drafted guidance in June  2015 that was intended to conform to best practices in the Cost Guide. Until HUD establishes guidance that calls for the implementation of best  practices identified in the Cost Guide, the department is less likely to  develop reliable cost estimates for its IT investments that can serve as  the basis for informed investment decision making. Many of the  weaknesses found in the investments can be attributed to the lack of  established cost-estimating guidance, which the department has not yet  finalized because it has focused on addressing management weaknesses  and taking action to establish an infrastructure to support improved cost  estimation practices. Until HUD finalizes and ensures the implementation  of guidance to improve its cost estimating practices, the department is at  risk of continuing to make investment decisions based on unreliable  information. Recommendation for Executive Action

To increase the likelihood that its IT investments develop reliable cost  estimates, we recommend that the Secretary of HUD finalize, and ensure  the implementation of, guidance that incorporates the best practices  called for in the GAO Cost Estimating and Assessment Guide.
Why GAO Did This Study

HUD relies extensively on IT to deliver services and manage programs in support of its mission. For fiscal year 2017, HUD requested $36 million for IT investments intended to deliver modernized enterprise-level capabilities that better support the department's mission. Critical to the success of such efforts is the department's ability to develop reliable cost estimates that project life-cycle costs and provide the basis for, among other things, informed decision making and realistic budget formulation.
The joint explanatory statement that accompanied the Consolidated and Further Continuing Appropriations Act, 2015, included a provision for GAO to evaluate HUD's cost estimating practices. This review determined the extent to which HUD implemented cost estimating best practices for selected IT investments. GAO selected four IT modernization investments with the largest portion of requested funding for fiscal year 2017, interviewed relevant agency officials, and analyzed and compared each investment's cost estimate to best practices in the Cost Guide . This guide states that, when most or all of the practices are “fully” or “substantially” met, an estimate is considered reliable.

What GAO Found

The cost estimates that the Department of Housing and Urban Development (HUD) developed for the four selected information technology (IT) investments were unreliable and, thus, lacked a sound basis for informing the department's investment and budgetary decisions. GAO's Cost Estimating and Assessment Guide ( Cost Guide ) defines best practices that are associated with four characteristics of a reliable estimate—comprehensive, well documented, accurate, and credible. However, none of the cost estimates for the selected investments exhibited all of these characteristics. Only one estimate—for the Customer Relationship Management investment—more than minimally met best practices associated with any of the four characteristics because it partially met the practices for a comprehensive and accurate estimate. The remaining three investments minimally or did not meet the best practices associated with the four characteristics. For example, the Enterprise Data Warehouse estimate minimally met all four characteristics; the Enterprise Voucher Management System estimate did not meet the characteristic for being accurate and minimally met the other three characteristics; and the Federal Housing Administration Automation and Modernization estimate did not meet the characteristic for being credible, while minimally meeting the remaining characteristics (see table).
The significant weaknesses in the cost estimates for the selected investments can largely be attributed to the department's lack of guidance for developing reliable cost estimates. HUD officials responsible for the selected investments stated that the department had not required the development of estimates that exhibit the four characteristics of a reliable estimate. As a result, according to these officials, cost estimating practices have been decentralized and inconsistent across the department. While HUD drafted guidance in June 2015 that was intended to conform to the best practices in GAO's Cost Guide , the department has not yet finalized the guidance because it has focused on establishing the infrastructure needed to support improved cost estimation practices. Until HUD finalizes and ensures the implementation of guidance to improve its cost estimating practices, the department is at risk of continuing to make investment decisions based on unreliable information.

What GAO Recommends

To improve cost estimating practices, GAO recommends that HUD finalize and implement guidance that incorporates best practices called for in the Cost Guide . HUD concurred with this recommendation.