Text File

_______________________________________________________________________________ Title: Information Management and Technology Issues Subtitle:

Report No.: GAO/OCG-93-5TR Date: December 1992 _______________________________________________________________________________ Author: United States General Accounting Office Office of the Comptroller General

Addressee: Transition Series

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CONTENTS

Information Management and Technology Issues Lack of Essential Information Chronic Problems in Developing and Modernizing System Poor Management--A Root Cause - Failure to Think Strategically - Ineffective IRM Organization Problems With the Acquisition Management and Budget Process Solving the Problem--Managing Strategically - Establishing A Strategic Framework for Change - Strengthening IRM Leadership and Management - Experimenting With Change Related GAO Products Transition Series - Economics - Management - Program Areas

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Office of the Comptroller General Washington, DC 20548

December 1992

The Speaker of the House of Representatives The Majority Leader of the Senate

In response to your request, this transition series report discusses widespread weaknesses in federal information resources management that underlie many of the problems found in individual programs. Despite heavy investments in computer technology, executive agencies still lack essential information for managing their programs effectively and achieving measurable results. Moreover, many agencies are not using information technology strategically to simplify and streamline their organization, management, and business processes--as well as to improve service to the public. Our efforts have highlighted the need for better leadership and strategic planning in this area.

The GAO products upon which this report is based are listed at the end of the report.

We are also sending this report to the President-elect, the Republican leadership of the Congress, the appropriate congressional committees, and the designated heads of the appropriate agencies.

Signed: Charles A. Bowsher

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INFORMATION MANAGEMENT AND TECHNOLOGY ISSUES -------------------------------------------------------------------------------

The federal government spends over 20 billion annually on new technology--and tens of billions more running current systems. Yet agency after agency still lacks critical information needed to analyze programmatic issues, manage agency resources, control expenditures, and demonstrate measurable results. Moreover, the government is falling farther behind the private sector in using information technology to streamline its operations and improve service to the public.

As noted in our 1988 transition series report, these problems stem from management weaknesses. Top federal executives continue to overlook the strategic role of information technology in reengineering business practices. Moreover, information resource managers typically lack the authority and resources to help their agencies modernize and simplify work practices, define information needs, and ensure the most effective use of information resources. Aggravating this situation is the federal acquisition management and budget process. Its demand for certainty in the system development process leads project managers to downplay risks and problems--resulting in missed benefits and misspent money. Solving these problems will depend heavily on the ability of top executives to both develop a strategic framework for change and effectively marshal their agencies' information resources talent. In addition, both agencies and the Congress need the willingness to experiment with different approaches to the acquisition management and budget process.

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LACK OF ESSENTIAL INFORMATION -------------------------------------------------------------------------------

Information problems vex most federal programs. Program managers struggle to wrest the information they need from the mountain of data they collect--much of it still in paper form. Critical pieces of data are missing, unreliable, or not suited to the issues at hand. Even when available and automated, the data may be scattered among many separate information systems--making it harder for managers to analyze complex program problems, develop sound policies, or measure the effectiveness of agency actions. As a result, they may lack essential information needed to manage effectively. Some sobering examples follow:

-- _Health Care_: National health care expenditures reached $666 billion in 1990--absorbing more than 12 percent of the gross national product (GNP). Over 42 percent of this total is publicly funded. By the end of the decade, the expenditures are expected to exceed 16 percent of the GNP. Poor information systems are aggravating the current crisis in health care financing. Medicare, for example, mistakenly paid out over a billion dollars for services already covered by other insurers, in part because of inadequate data. Equally important, patient care is still heavily dependent on paper records that intrinsically limit the capacity to retrieve critical data needed to guide health care policymaking.

-- _Education_: The Department of Education, with an annual budget of over $29 billion, administers nearly 200 separate programs and provides federal funds to states and localities to educate disadvantaged children, help persons with disabilities, and finance the higher education of young Americans. But the Department lacks key management information with which to measure the effectiveness of its programs and redirect them as needed. For example, missing, incomplete, and unreliable data in the 13 billion Stafford Student Loan Program has led the government to provide millions of dollars in new loans to students who previously defaulted.

-- _Savings & Loan and Banking Crises_: The Resolution Trust Corporation (RTC), responsible for managing and selling over $400 billion in assets from 725 failed thrift institutions, has had trouble effectively executing sales strategies because it cannot adequately track the status of assets. About $100 billion in assets--many of which are hard to sell--remained to be sold at year's end. In addition, RTC could receive another $40 billion in assets from thrifts that may fail before September 30, 1993. Similar information problems face the Federal Deposit Insurance Corporation in dealing with assets from the rising number of bank failures.

Pulling together data from separate information systems can be particularly troublesome. As programmatic issues become more interrelated, managers increasingly need to integrate data from across an agency in order to analyze cross-cutting problems. The data, however, are commonly scattered among many independent, stand-alone information systems, developed at different times to meet the special needs of individual offices. These systems usually do not employ uniform data standards, processing standards, or communications standards--making the electronic exchange of data difficult or impossible.

At the Environmental Protection Agency (EPA), for example, various program offices manage different kinds of pollution--such as air, water, hazardous waste, toxic substances, and pesticides. Over the years, each office has developed separate information systems to meet its particular needs. EPA is currently struggling to integrate data from these separate systems to better understand and manage the interplay of various types of pollution. Its difficulties in doing this have weakened the agency's ability to enforce environmental regulations in a comprehensive manner or to pursue complex regional pollution issues.

The effectiveness of federal programs can also be stymied by agencies' inability to readily share information with other units of government and the private sector. This is particularly evident with child support and other welfare programs that are federally funded but locally administered. Each year, for example, about $4 billion in child support payments goes uncollected. A large part of the problem stems from difficulties that states and federal agencies have in exchanging data electronically on the location of absent parents. When absent parents cannot be found, the cost of child support is passed on to the taxpayers.

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CHRONIC PROBLEMS IN DEVELOPING AND MODERNIZING SYSTEMS -------------------------------------------------------------------------------

Developing and modernizing government information systems is a difficult and complex process. Again and again, projects have run into serious trouble, despite hard work by dedicated staff. They are developed late, fail to work as planned, and cost millions--even hundreds of millions--more than expected. The results, in missed benefits and misspent money, can be found throughout government.

During the past 25 years, for instance, the Internal Revenue Service (IRS) has twice tried and failed to modernize its antiquated tax-processing system. Unreliable and unresponsive, this system impedes IRS' ability to collect and account for about a trillion dollars in revenue, deal with a reported $111 billion in accounts receivable, and narrow the annual tax gap (the difference between taxes owed and taxes voluntarily paid), estimated at about 114 billion for 1992. Although IRS now has a vision for how it will operate in the future and has completed basic planning for its latest modernization effort, it has not made satisfactory progress in some areas critical to the project's success. For example, IRS has been slow in finalizing a business strategy for making the transition from its current, paper-intensive business processes to new, highly automated work processes--a necessary step before the benefits of automation can be fully realized.

Like IRS, the Social Security Administration (SSA) has been involved in a long-term effort to modernize its systems. For the most part, however, SSA has focused on automating its existing paper-driven, labor-intensive work practices in an incremental, piecemeal fashion. While resulting in some immediate benefits in improved service, this approach will not put SSA in a position to cope with the surge in beneficiaries looming on the horizon. To capture the critically needed benefits of modernization, SSA must direct its system modernization efforts toward fundamentally improving the way it does business. SSA is only now taking steps to complete a business plan for guiding its use of information technology in the future.

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POOR MANAGEMENT--A ROOT CAUSE -------------------------------------------------------------------------------

Although information problems can be complex and varied, they generally reflect basic weaknesses in leadership and organization. Top agency executives do not pay enough attention to the role of information technology in achieving fundamental improvements in agency operations. In addition, the agency unit responsible for information resources management (IRM) often lacks appropriate organizational stature to be an effective partner with top executives in identifying opportunities to use technology to reduce administrative costs, increase productivity, and enhance service to the public. As a result, agencies often initiate major technology projects without first determining where technology investments can produce the greatest operational benefits. Costly projects end up showing disappointing results. Moreover, many agencies have not even established measurements for determining the actual effects that the projects are having on supporting mission goals.

=============================================================================== FAILURE TO THINK STRATEGICALLY

Pressure for quick solutions to complex problems works against strategic planning--the heart of effective IRM. The political process pushes both the Congress and executive agencies to focus strongly on achieving near-term results at the expense of the long term. So does the fact that the average tenure of top government executives is less than 2 years. Faced with many competing demands and the desire to show progress, agency leaders do not focus enough attention on the long-term task of simplifying and streamlining agency operations through the use of technology.

Successful modernization is based on a strategic analysis of what the agency needs to accomplish, where it is now, and where it must be at future points in order to meet its goals. While most agencies have mission statements that define general goals, many agency leaders do not follow through on the next step: analyzing current business processes to learn where they are breaking down and how they should be restructured to achieve fundamental, long-term improvements in business practices and service to the public. Such analysis is exactly what many successful private sector organizations are doing.

Agencies cannot perform such analysis if they are not disciplined enough to use rigorous performance measures and quantitative data to evaluate current work processes. Instead of making the effort to do so, agency leaders too often give the green light to technology projects in the belief that more information resources will somehow engender solutions to management problems. Acquiring the latest technology can create the illusion of progress, but agencies may actually lock themselves more tightly into existing, inefficient ways of doing business.

Take, for example, the Veterans Benefits Administration's (VBA) modernization aimed at speeding up claims payments to veterans. VBA did not complete its analysis of claims-processing deficiencies before deciding on a technology approach. As it now turns out, VBA's initial modernization investment of $94 million will trim only 6 to 12 days from the average claims processing time of 151 days--hardly an acceptable return on investment. The problem: Technology was focused on what turned out to be a minor hitch in the claims process as a whole.

Such misjudgment is not uncommon. When an agency does not first analyze its business processes and determine where improvements should be focused, it short-circuits technology's potential to dramatically increase productivity and reduce costs. This kind of "modernization" often does little more than speed up existing work processes. Not surprisingly, dramatic benefits in cost savings, productivity, and service rarely materialize. Some improvements are gained at the margins--but often at a high cost.

=============================================================================== INEFFECTIVE IRM ORGANIZATION

A strong IRM organization is an indispensable partner in helping agency leaders work through a top-down analysis of business processes and determine where strategic information technology investments need to be made. The importance of this partnership is recognized in the Paperwork Reduction Act, which requires federal departments and agencies to designate a senior official for information resources management. This official is to report to the agency head and, in essence, is charged with ensuring that the agency carries out its information activities in an efficient, effective, economical manner.

Many agencies, however, have organized themselves for failure in IRM. Too often, the senior-level IRM official is a titular figure, without experience in information management, who is burdened with major responsibilities in other areas. His or her IRM responsibilities become delegated to mid-level IRM managers, who are immersed in the agency's day-to-day systems operation and procurement issues. Typically, these managers do not play a major role in the agency's high-level strategic planning. They lack adequate organizational visibility, authority, and competent staff resources to ensure that program offices are using technology to best advantage in meeting both their own needs and the agency's corporate information needs.

This IRM organizational problem has come about largely because top agency leaders have not recognized the increasingly important role of technology in their organizations. Historically, data processing began as a back-room function, supporting activities such as personnel and payroll. Today it is still common to find an agency's IRM function placed under a general administrative services office, even though computers have moved out of the back room and onto the desks of program staff.

Poor IRM organization leads to the failure of top management and IRM staff to work together in developing an effective strategic technology plan. This plan is the linchpin that aligns an organization's business needs with its information resources. It is the map for getting the agency from where it is now to where it wants to be--and for defining the technology investments that should be made to support streamlined work processes. Frequently, what an agency touts as a strategic technology plan is merely a listing of ongoing acquisitions.

Failure to align program needs with technology investments results in lost opportunities for improvement and wasted dollars. For example, the National Institutes of Health (NIH) did not effectively manage key aspects of a major system contract, potentially worth over $800 million. The acquisition was not factored into NIH's strategic planning, nor were the computing requirements of the scientific community identified. The result was a contract that did not effectively support NIH's basic purpose: biomedical research. Another example is the Farmers Home Administration's (FmHA) effort to modernize the automated systems used to make and collect loans--its third attempt since the mid-1970s. FmHA failed to link its $520 million technology initiative to a long-range business plan that clearly articulated how the agency would operate in the future. Indeed, the technology plan did not even reflect important changes being made in FmHA's organizational structure and loan-management operations. These problems cast serious doubt on FmHA's ability to use technology to better support its loan programs.

Without strong corporate IRM leadership and planning, program staff may develop systems that meet their own requirements, but conflict with the broader information needs of the organization. The result is a hodge-podge of incompatible standards and systems. For example, the Navy's $600 million program to upgrade nontactical computers on ships lacks effective central IRM management. Instead, 12 different Navy commands have authority over development, funding, and procurement of the major computer systems that comprise the program. The resulting redundant development efforts require excessive financial resources and increase the amount of training and maintenance needed to support the different systems.

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PROBLEMS WITH THE ACQUISITION MANAGEMENT AND BUDGET PROCESS -------------------------------------------------------------------------------

Even well-planned efforts to modernize the use of information technology can be derailed by the federal acquisition management and budget process. The objectives of the process are reasonable: to deliver individual systems that perform as intended, on time, and cost-effectively. The process aims to achieve economy through standardizing and sharing systems across agencies. Rewards are supposed to go to project managers who can do this. Yet the process repeatedly fails to meet these objectives because it does not take into account the realities of systems development.

A fundamental dichotomy is at work in large-scale systems development projects: the acquisition management process demands certainty and is risk-averse, yet systems development is inherently uncertain and risk-intensive. The process calls for systems developers to formulate precise long-term plans and budgets. It unrealistically assumes that detailed systems requirements can be well understood at the outset, that software development will be predictable, and that long-term budgeting can be done with a high degree of accuracy. Unfortunately, none of these expectations recognizes the enormous difficulties involved in developing large systems.

The acquisition management process often works well for purchasing readily definable goods and services, but it does not support effective risk identification and risk management--the essence of major systems development. Large-scale systems are extremely complex and take many years to design, develop, test, and install. For example, software development, which is the heart of most system development projects, remains a poorly managed discipline. It is still very difficult to accurately predict software costs, development time, and performance at the beginning of a systems project. Such uncertainties make it nearly impossible to satisfy in any meaningful way the process's expectations for precise milestones and budget estimates.

To make matters worse, the acquisition management and budget process creates behavioral incentives that actually undermine good systems development practices and hinder the achievement of governmentwide objectives. For example, the process provides powerful incentives for project managers to set unrealistically optimistic cost and schedule estimates and to ignore risks and problems. Project budgets are generally set by the agency, the Office of Management and Budget, and the Congress on a year-by-year basis. This process often involves scrutiny of the progress being made by the project. Because changes in plans and cost estimates are seen as indicators of poor management, project managers try to maintain a pretense of problem-free development and avoid providing honest assessments of project risks. By not mentioning problems for as long as possible, managers can often ensure continued project funding--at least in the near term.

Since agencies frequently change project managers, it becomes easy to defer problems to others. This is particularly true with Defense projects, where the rotation of personnel into and out of project manager positions is routine. With such managerial turnover comes a clouding of responsibility and accountability for the project's success, all too often resulting in higher costs and delays in the delivery of systems.

Because there are few incentives and many risks in developing systems that bridge the needs of several offices or support other agencies, it is not surprising that technology projects generally reflect the parochial interests of individual offices. The result is the continued spawning of systems that are narrowly focused and cannot support the larger needs of the agency or the government.

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SOLVING THE PROBLEM--MANAGING STRATEGICALLY -------------------------------------------------------------------------------

Managing information resources strategically involves visionary leadership and a framework for managing change that focuses on the strategic uses of technology for achieving the agency's mission. Few other management initiatives offer higher leverage over the cost-effective use of taxpayer dollars. This effort needs to be supported by a sound IRM organization.

=============================================================================== ESTABLISHING A STRATEGIC FRAMEWORK FOR CHANGE

Agency leaders can start by adopting a management philosophy that emphasizes continuous improvement of business practices. This philosophy is essential if agencies are to carry out their missions effectively during a prolonged period of budgetary constraints.

Implementing such a philosophy requires a strategic framework that can guide the agency over many years, even amid turnover in agency leadership. This framework must necessarily be based on mission goals, analysis of business practices, and long-range information technology planning. The operative concept should be simplifying and streamlining business processes. Developing a strategic framework should always precede the development and acquisition of automated systems. Without it, technology modernization invariably breaks down into a series of half-measures that are redirected or replaced every few years.

The Congress often focuses on the costs of systems procurements. While costs are important, the underlying management issue is becoming more critical: How well do planned information technology projects support fundamental, long-term improvement in agency programs, operations, and service to the public? By highlighting this issue as part of its oversight activities, the Congress can encourage agency leaders to develop and follow a strategic framework for successful modernization that can be sustained over many years. The need to continuously improve federal operations is, after all, a shared concern that transcends shifts in personnel or politics.

=============================================================================== STRENGTHENING IRM LEADERSHIP AND MANAGEMENT

Sound IRM management is essential for realizing potential productivity and effectiveness gains achievable with today's technology. Agency leaders need to make their IRM organization a strong partner in determining how information technology should be applied to best meet the strategic needs of the agency. Doing this involves three elements: IRM leadership, organization, and resources.

The agency needs a senior-level IRM executive who is familiar with the uses of information technology in simplifying and streamlining business practices and who can devote full attention to this issue. This senior executive needs to be highly placed in the organization so that he or she can work closely with the agency head and senior program managers in analyzing work processes and formulating a strategic plan for information technology needs. Some agencies have formalized this relationship by establishing the position of chief information officer, reporting directly to the head of the organization.

Similarly, the IRM function itself needs organizational placement that appropriately reflects the critical role of information technology in all aspects of agency operations. This means moving the IRM unit out from under general administrative services and making it a unit of its own, reporting to top management. It should be headed by the agency's senior-level IRM executive.

Neither the senior-level IRM executive nor the IRM organization can be effective without adequate staff resources imbued with disciplined approaches for both managing the current technology base and carrying out strategic planning for new technology. Providing these resources is difficult for agencies in lean budget times. But this is a good place to make an investment since the effective use of information technology can leverage major benefits in operational efficiency and service to the public.

=============================================================================== EXPERIMENTING WITH CHANGE

How can the federal acquisition management and budget process be better tailored to accommodate the uncertainty and complexity inherent in modern, large-scale systems development? The stakes are high, considering the billions of dollars involved in these procurements, the desire to promote competition, and the need to oversee and control expenditures.

Resolving this issue will require the cooperative dedication of the Congress, the executive branch, and the technology industry. No one has answers that satisfy everyone's concerns. It is therefore important that all parties involved have the willingness and flexibility to experiment with different approaches. For example, multiyear budgeting might be tried on some projects to encourage managers to identify and correct problems early in the acquisition. Such experimentation is particularly appropriate given the rapid pace of innovation in information technology. It may lead to broad-based agreement on better acquisition management models that could help agencies build the information technology base they need to dramatically improve their operations and better serve the American people.

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RELATED GAO PRODUCTS -------------------------------------------------------------------------------

_Veterans Benefits: Acquisition of Information Resources for Modernization Is Premature_ (GAO/IMTEC-93-6, Nov. 4, 1992).

_ADP Procurement: Prompt Navy Action Can Reduce Risks to SNAP III Implementation_ (GAO/IMTEC-92-69, Sept. 29, 1992).

_Defense ADP: Corporate Information Management Must Overcome Major Problems_ (GAO/IMTEC-92-77, Sept. 14, 1992).

_Perceived Barriers to Effective Information Resources Management: Results of GAO Panel Discussions_ (GAO/IMTEC-92-67, Sept. 1992).

_Tax Systems Modernization: Update on Critical Issues Facing IRS_ (GAO/T-IMTEC-92-18, May 13, 1992).

_Department of Education: Management Commitment Needed to Improve Information Resources Management_ (GAO/IMTEC-92-17, Apr. 20, 1992).

_Environmental Enforcement: EPA Needs a Better Strategy to Manage Its Cross-Media Information_ (GAO/IMTEC-92-14, Apr. 2, 1992).

_Resolution Trust Corporation: Corporate Strategy Needed to Improve Information Management_ (GAO/IMTEC-92-38, Mar. 5, 1992).

_Information Resources: Summary of Federal Agencies' Information Resources Management Problems_ (GAO/IMTEC-92-13FS, Feb. 13, 1992).

_Major NIH Computer System: Poor Management Resulted in Unmet Scientists' Needs and Wasted Millions_ (GAO/IMTEC-92-5, Nov. 4, 1991).

_ADP Modernization: Half-Billion Dollar FmHA Effort Lacks Adequate Planning and Oversight_ (GAO/IMTEC-92-9, Oct. 29, 1991).

_Interstate Child Support Enforcement: Computer Network Contract Not Ready to Be Awarded_ (GAO/IMTEC-92-8, Oct. 23, 1991).

_SSA Computers: Long-Range Vision Needed to Guide Future Systems Modernization Efforts_ (GAO/IMTEC-91-44, Sept. 24, 1991).

_FAA Information Resources: Agency Needs to Correct Widespread Deficiencies_ (GAO/IMTEC-91-43, June 18, 1991).

_Medical ADP Systems: Automated Medical Records Hold Promise to Improve Patient Care_ (GAO/IMTEC-91-5, Jan. 22, 1991).

_Meeting the Government's Technology Challenge: Results of a GAO Symposium_ (GAO/IMTEC-90-23, Feb. 1990).

_Information Technology Issues_ (GAO/OCG-89-6TR, Nov. 1988).

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TRANSITION SERIES -------------------------------------------------------------------------------

=============================================================================== ECONOMICS

_Budget Issues_ (GAO/OCG-93-1TR).

_Investment_ (GAO/OCG-93-2TR).

=============================================================================== MANAGEMENT

_Government Management Issues_ (GAO/OCG-93-3TR).

_Financial Management Issues_ (GAO/OCG-93-4TR).

_Information Management and Technology Issues_ (GAO/OCG-93-5TR).

_Program Evaluation Issues_ (GAO/OCG-93-6TR).

_The Public Service_ (GAO/OCG-93-7TR).

=============================================================================== PROGRAM AREAS

_Health Care Reform_ (GAO/OCG-93-8TR).

_National Security Issues_ (GAO/OCG-93-9TR).

_Financial Services Industry Issues_ (GAO/OCG-93-10TR).

_International Trade Issues_ (GAO/OCG-93-11TR).

_Commerce Issues_ (GAO/OCG-93-12TR).

_Energy Issues_ (GAO/OCG-93-13TR).

_Transportation Issues_ (GAO/OCG-93-14TR).

_Food and Agriculture Issues_ (GAO/OCG-93-15TR).

_Environmental Protection Issues_ (GAO/OCG-93-16TR).

_Natural Resources Management Issues_ (GAO/OCG-93-17TR).

_Education Issues_ (GAO/OCG-93-18TR).

_Labor Issues_ (GAO/OCG-93-19TR).

_Health and Human Services Issues_ (GAO/OCG-93-20TR).

_Veterans Affairs Issues_ (GAO/OCG-93-21TR).

_Housing and Community Development Issues_ (GAO/OCG-93-22TR).

_Justice Issues_ (GAO/OCG-93-23TR).

_Internal Revenue Service Issues_ (GAO/OCG-93-24TR).

_Foreign Economic Assistance Issues_ (GAO/OCG-93-25TR).

_Foreign Affairs Issues_ (GAO/OCG-93-26TR).

_NASA Issues_ (GAO/OCG-93-27TR).

_General Services Issues_ (GAO/OCG-93-28TR).