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Title: Information Management and Technology Issues
Subtitle:
Report No.: GAO/OCG-93-5TR Date: December 1992
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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
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.
INFORMATION MANAGEMENT AND TECHNOLOGY ISSUES
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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.
LACK OF ESSENTIAL INFORMATION
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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.
CHRONIC PROBLEMS IN DEVELOPING AND MODERNIZING SYSTEMS
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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.
POOR MANAGEMENT--A ROOT CAUSE
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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.
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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.
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.
PROBLEMS WITH THE ACQUISITION MANAGEMENT AND BUDGET PROCESS
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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.
SOLVING THE PROBLEM--MANAGING STRATEGICALLY
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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.
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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.
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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.
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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.
