Some private and public sector organizations, on the other hand, have designed and managed IT to improve their organizational performance. However, managing IT projects as investments works most effectively when implemented as part of an integrated set of management practices. However, none of these five agencies had implemented a complete, institutionalized investment approach that would fulfill requirements of PRA and ITMRA. While all four weaknesses may not have been present at each agency, in comparison to leading organizations, the case study agencies lacked a consistent process (used at all levels of the agency) for uniformly selecting and managing systems investments; focused their selection processes on selected efforts, such as justifying new project funding or focusing on projects already under development, rather than managing all IT projects—new, under development, and operational—as a portfolio of competing investments; made funding decisions without giving adequate attention to management control or evaluation processes, and made funding decisions based on negotiations or undefined decision criteria and did not have the up-to-date, accurate data needed to support IT investment decisions. One of the agencies we reviewed—the Coast Guard—used common investment criteria for making cross-agency IT decisions. They do this by conducting project postimplementation reviews (PIRs) to compare actual to planned cost, returns, and risks. GAO Comments

1. 2. It is based upon analysis of the IT management best practices found in leading private and public sector organizations and is explained in greater detail in OMB’s Evaluating Information Technology Investments: A Practical Guide. The agency process is to (1) provide for the selection, management, and evaluation of IT investments, (2) be integrated with the processes for making budget, financial, and program management decisions, (3) include minimum criteria for selecting IT investments and specific quantitative and qualitative criteria for comparing and prioritizing projects, (4) provide for identifying potential IT investments that would result in shared benefits with other federal, state, or local governments, (5) provide for identifying quantifiable measurements for determining the net benefits and risks of IT investments, and (6) provide the means for senior agency managers to obtain timely development progress information, including a system of milestones for measuring progress, on an independently verifiable basis, in terms of cost, capability of the system to meet specified requirements, timeliness, and quality. The Information Technology Management Reform Act takes effect 180 days from the date of enactment (February 10, 1996).
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the: (1) information technology (IT) investment practices of several federal agencies and compared them to those used by leading private- and public-sector organizations; and (2) Office of Management and Budget (OMB) as it responds to the investment requirements of the Information Technology Management Reform Act (ITMRA).

What GAO Found

GAO found that: (1) leading private- and public-sector organizations manage their IT projects as investments and rank projects based on maximizing returns and minimizing risks; (2) the five federal agencies reviewed have some elements of an IT investment process in place, but they lack a complete, institutionalized approach that would fulfill the requirements of ITMRA or the Paper Reduction Act; (3) the agencies reviewed need to manage their IT projects as an investment portfolio, viewing each project as a competing investment and make decisions based on the project's overall contribution to the agency's goals; (4) the agencies do not conduct postimplementation reviews (PIR) to determine actual costs, returns, and risks; (5) agency IT decisions are based on inconsistent or inaccurate data; (6) with the exception of the Coast Guard, none of the agencies reviewed have a set of explicit criteria for making IT decisions; and (7) OMB has taken a proactive role in developing IT investment policy to assist federal agencies in implementing ITMRA requirements.