Prior Reviews on Agency Use of EVM to Acquire and Manage IT Systems Have Identified Weaknesses

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. Agencies’ EVM Policies Are Not Comprehensive

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. Criteria for implementing EVM on all IT major investments: Seven of  the eight agencies fully defined criteria for implementing EVM on major IT  investments. However, for all 13 programs, the project schedules contained  issues that undermined the quality of their performance baselines. Inconsistent Implementation Is Due in Part to Weaknesses in Policy and Lack of Enforcement

The inconsistent application of EVM across the investments exists in part  because of the weaknesses we previously identified in the eight agencies’  policies, as well as a lack of enforcement of the EVM policy components  already in place. Until key EVM practices are fully implemented, selected programs face an  increased risk that program managers cannot effectively optimize EVM as  a management tool to mitigate and reverse poor cost and schedule  performance trends. Earned Value Data Show Trends of Cost Overruns and Schedule Slippages on Most Programs

Earned value data trends of the 16 case study programs indicate that most  are currently experiencing cost overruns and schedule slippages, and,  based on our analysis, it is likely that when these programs are completed,  the total cost overrun will be about $3 billion. With timely and effective action taken by program and executive  management, it is possible to reverse negative performance trends so that  the projected cost overruns at completion may be reduced. Without comprehensive policies, it  will be difficult for the agencies to gain the full benefits of EVM. Until agencies expand and enforce their  EVM policies, it will be difficult for them to optimize the effectiveness of  this management tool, and they will face an increased risk that managers  are not getting the information they need to effectively manage the  programs. Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) assess whether key departments and agencies  have appropriately established earned value management (EVM) policies,  (2) determine whether these agencies are adequately using earned value  techniques to manage key system acquisitions, and (3) evaluate the earned  value data of these selected investments to determine their cost and  schedule performances. For this governmentwide review, we assessed eight agencies and 16  investments. We initially identified the 10 agencies with the highest  amount of spending for information technology (IT) development,  modernization, and enhancement work as reported in the Office of  Management and Budget’s (OMB) Fiscal Year 2009 Exhibit 53. The resulting  eight agencies also made up about 75 percent of the government’s planned  IT spending for fiscal year 2009. These best  practices are contained in the GAO cost guide. As a result, the total life- cycle cost of the JTRS-HMS program was reduced from an estimated $19.2  billion to $11.6 billion, a $7.6 billion decrease.
Why GAO Did This Study

In fiscal year 2009, the federal government planned to spend about $71 billion on information technology (IT) investments. To more effectively manage such investments, in 2005 the Office of Management and Budget (OMB) directed agencies to implement earned value management (EVM). EVM is a project management approach that, if implemented appropriately, provides objective reports of project status, produces early warning signs of impending schedule delays and cost overruns, and provides unbiased estimates of anticipated costs at completion. GAO was asked to assess selected agencies' EVM policies, determine whether they are adequately using earned value techniques to manage key system acquisitions, and eval- uate selected investments' earned value data to determine their cost and schedule performances. To do so, GAO compared agency policies with best practices, performed case studies, and reviewed documenta- tion from eight agencies and 16 major investments with the highest levels of IT development-related spending in fiscal year 2009.

What GAO Found

While all eight agencies have established policies requiring the use of EVM on major IT investments, these policies are not fully consistent with best practices. In particular, most lack training requirements for all relevant personnel responsible for investment oversight. Most policies also do not have adequately defined criteria for revising program cost and schedule baselines. Until agencies expand and enforce their EVM policies, it will be difficult for them to gain the full benefits of EVM. GAO's analysis of 16 investments shows that agencies are using EVM to manage their system acquisitions; however, the extent of implementation varies. Specifically, for 13 of the 16 investments, key practices necessary for sound EVM execution had not been implemented. For example, the project schedules for these investments contained issues--such as the improper sequencing of key activities--that undermine the quality of their performance baselines. This inconsistent application of EVM exists in part because of the weaknesses contained in agencies' policies, combined with a lack of enforcement of policies already in place. Until key EVM practices are fully implemented, these investments face an increased risk that managers cannot effectively optimize EVM as a management tool. Furthermore, earned value data trends of these investments indicate that most are currently experiencing shortfalls against cost and schedule targets. The total life-cycle costs of these programs have increased by about $2 billion. Based on GAO's analysis of current performance trends, 11 programs will likely incur cost overruns that will total about $1 billion at contract completion--in particular, 2 of these programs account for about 80 percent of this projection. As such, GAO estimates the total cost overrun to be about $3 billion at program completion (see figure). However, with timely and effective management action, it is possible to reverse negative trends so that the projected cost overruns may be reduced.