	Background

The President’s fiscal year 2014 budget request included plans for the  federal government to spend over $82 billion on IT. Further, in addition to including amounts to be spent on IT development  and O&M, the budget also further specifies how the total $76 billion  budgeted for IT is to be spent on agency IT investments by the following  three categories:  those solely under development ($6 billion),  those involving activities and systems that are in both development  and O&M—known as mixed life cycle ($40 billion), and  those existing operational systems—commonly referred to by OMB as  steady state investments—that are solely in O&M ($30 billion). To address these areas, the  guidance specifies the following 17 key factors that are to be addressed:   This guidance calls for the policy to assessment of current costs against life-cycle costs; a structured schedule assessment (i.e., measuring the performance of the investment against its established schedule); a structured assessment of performance goals (i.e., measuring the  performance of the investment against established goals);  identification of whether the investment supports customer processes  as designed and is delivering goods and services it was designed to  deliver; a measure of the effect the investment has on the performing a measure of how well the investment contributes to achieving the  organization’s business needs and strategic goals; a comparison of current performance with a pre-established cost areas for innovation in the areas of customer satisfaction, strategic  and business results, and financial performance;  indication if the agency revisited alternative methods for achieving the  same mission needs and strategic goals;  consideration of issues, such as greater utilization of technology or  consolidation of investments to better meet organizational goals; an ongoing review of the status of the risks identified in the  investment’s planning and acquisition phases;  identification of whether there is a need to redesign, modify, or  terminate the investment; an analysis on the need for improved methodology (i.e., better ways  for the investment to meet cost and performance goals);  lessons learned;  cost or schedule variances;  recommendations to redesign or modify an asset in advance of  potential problems; and overlap with other investments. Consequently, we recommended, among other things, that the agencies  conduct annual OAs and in doing, ensure they are performed for all  investments and that all factors are fully assessed. In total,  the investments accounted for about $7.9 billion in O&M spending for  fiscal year 2012, which was approximately 14 percent of all such  spending for federal IT O&M. Most of the Largest O&M IT Investments Did Not Undergo Operational Analyses

Although required to do so, seven of the eight agencies did not conduct  OAs on their largest O&M investments. In doing so, the  department addressed most of the required OMB factors. With regard to why DHS’s analyses did not address all OMB factors,  officials from the DHS Office of the Chief Information Officer (who are  responsible for overseeing the performance of OAs departmentwide)  attributed this to the department still being in the process of updating their  Management Directive 102-01 and its related guidance, which will provide  additional instructions for completing OAs. Majority of Agencies’ Investments Were Mixed Life Cycle and Use of O&M Funds for Development Activities Was Limited

For the eight selected agencies, the majority of their 401 major IT  investments—totaling $29 billion— were in the mixed life-cycle phase in  both spending and number of investments. However, our experience at federal agencies has shown that agencies  have not yet fully established effective governance and program  management capabilities essential to managing IT investments. Until these agencies address  these shortcomings and ensure all their large O&M investments are fully  assessed, there is increased risk that these agencies will not know  whether these multibillion dollar investments fully meet intended  objectives, including whether there are more efficient ways to deliver their  intended purpose. Agency Comments and Our Evaluation

In commenting on a draft of this report, four agencies—DHS, NASA, SSA,  and VA—agreed with our recommendations; two agencies—DOD and  DOE—partially agreed; and two agencies—HHS and Treasury—had no  comments. Appendix I: Objectives, Scope, Methodology

Our objectives were to (1) identify the federal IT O&M investments with  the largest budgets, including their responsible agencies and how each  investment supports its agency’s mission; (2) determine the extent to  which these investments have undergone OAs; and (3) assess whether  the responsible agency’s major IT investments are in development, mixed  life cycle, or steady state, and the extent to which funding for investments  in O&M have been used to finance investments in development. To identify those federal IT O&M investments with the largest budgets, we  used data reported to the Office of Management and Budget (OMB) as  part of the budget process, and focused on the 10 largest reported  budgets in O&M and the responsible eight agencies (the Departments of  Defense, Energy, Homeland Security, Health and Human Services, the  Treasury, and Veteran Affairs; and the National Aeronautics and Space  Administration and Social Security Administration) that operate these  investments.
Why GAO Did This Study

Of the over $82 billion that federal agencies plan to spend on IT in fiscal year 2014, at least $59 billion is to be spent on O&M, which consists of legacy systems (i.e., steady state) and systems that are in both development and O&M (known as mixed life cycle). OMB calls for agencies to perform annual OAs, which are a key method for examining the performance of O&M investments.
GAO was asked to review IT O&M investments and agency use of OAs. The objectives of this report were to among other things (1) identify the federal IT O&M investments with the largest budgets, including their responsible agencies and how each investment supports its agencys mission; (2) determine the extent to which these investments have undergone OAs; and (3) assess whether the responsible agencys major IT investments are in development, mixed life cycle, or steady state. To do so, GAO focused on the 10 IT investments with the largest budgets in O&M and their responsible eight agencies, and assessed whether OAs were conducted on the investments. In addition, GAO evaluated what agencies spent on mixed, development, and O&M investments and whether agencies were using O&M funds for development activities.

What GAO Found

The 10 federal information technology (IT) operations and maintenance (O&M) investments with the largest budgets in fiscal year 2012and the eight agencies that operate themare identified by GAO in the table below. They support agencies by providing, for example, global telecommunications infrastructure and information transport services for the Department of Defense.
Of the 10 investments, only the Department of Homeland Security (DHS) investment underwent an operational analysis (OA)a key performance evaluation and oversight mechanism required by the Office of Management and Budget (OMB) to ensure O&M investments continue to meet agency needs. DHSs OA addressed most factors that OMB calls for; it did not address three factors (e.g., comparing current cost and schedule against original estimates). DHS officials attributed these factors not being addressed to the department still being in the process of implementing its new OA policy. The remaining agencies did not assess their investments, which accounted for $7.4 billion in reported O&M spending. Agency officials cited several reasons for not doing so, including relying on budget submission and related management reviews that measure performance; however, OMB has noted that these are not a substitute for OAs. Until the agencies ensure their operational investments are assessed, there is a risk that they will not know whether these multibillion dollar investments fully meet intended objectives.
For the eight agencies in this review, the majority of their 401 major IT investments were mixed life cycle (i.e., having activities and systems that are in both development and O&M) with regard to total spending and number of investments. Specifically, 193 (48 percent) of the investments were mixed investments, accounting for about $18 billion (61 percent) of planned spending. As such, successful oversight of such investments should involve a combination of conducting OAs to address operational portions of an investment and establishing IT governance and program management disciplines to manage those portions under development. GAOs experience at the agencies and this report have identified agency inconsistencies in conducting OAs and establishing the capabilities that are key to effectively managing IT investments; accordingly, GAO has made prior recommendations to strengthen agency efforts in these areas.

What GAO Recommends

GAO is recommending that the seven agencies that did not perform OAs on their large IT O&M investments do so, and that DHS ensure that its OA is complete and addresses all OMB factors. Of the seven agencies, three agreed with GAOs recommendations; two partially agreed; and two had no comments. DHS agreed with the GAO recommendation to it.