HUD Information Systems:

Improved Management Practices Needed to Control Integration Cost and Schedule

AIMD-99-25: Published: Dec 18, 1998. Publicly Released: Dec 18, 1998.

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Pursuant to a congressional request, GAO identified: (1) the initial objectives, development, deployment and maintenance costs, and completion dates for the Department of Housing and Urban Development's (HUD) Financial Systems Integration (FSI) effort and how they have changed; (2) the factors that have contributed to FSI cost increases and schedule delays; (3) whether HUD is following industry best practices and has implemented provisions of the Clinger-Cohen Act of 1996 and the Paperwork Reduction Act of 1995 required to manage FSI projects as investments; and (4) whether HUD's Year 2000 program will impact its FSI activities.

GAO noted that: (1) while HUD's primary FSI objective of implementing an integrated financial management system has remained the same, the underlying strategy for achieving this objective and completion dates have changed significantly; (2) in 1991, HUD approved a plan to replace about 100 financial and mixed systems with nine standard integrated systems, estimating that it would cost about $103 million to develop and deploy the systems by September 1998; (3) in 1993, HUD abandoned its plan to develop nine new systems and significantly revised its FSI strategy; (4) HUD estimated that it would cost about $209 million to develop and deploy the new system by December 1998; (5) in 1997, HUD revised its FSI strategy again, extending the date for fully deploying the core financial management system to October 1999 and incorporating the development and deployment of additional new systems required to meet the department's latest management reforms and organizational changes; (6) the department did not adequately assess the costs or benefits of the 1997 FSI strategy; (7) as a result, HUD has no assurance that it has selected the most cost-beneficial solution to accomplish its FSI objectives; (8) until HUD finalizes its plans and cost and schedule estimates to complete the 1997 strategy, the expected FSI cost will remain uncertain; (9) nine systems included in the 1997 FSI strategy are in various stages of development and deployment; (10) revisions to the systems integration strategy and management and oversight problems associated with individual projects are factors that have contributed to FSI cost increases and schedule delays to date; (11) HUD has not yet fully implemented a complete, disciplined information technology investment management process, which includes selecting, controlling, and evaluating FSI projects and conforms with best practices and related requirements in the Clinger-Cohen Act and the Paperwork Reduction Act; (12) in addition, HUD has not implemented: (a) an adequate process to control information technology products once they have been selected for implementation; or (b) a process to evaluate information technology projects and determine whether they have achieved expected benefits; and (13) HUD's Year 2000 program, a top priority effort that must be completed on time, may further impact the FSI effort.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: HUD has implemented this recommendation. The Department has developed and institutionalized the select and in-process review processes, and has begun to conduct post-implementation reviews. Since fiscal year 2000, HUD has routinely assessed and scored proposed projects against department-wide project selection criteria and the Technology Investment Board Executive Committee used the process to select IT project investments. Also, HUD has been conducting quarterly in-process reviews of all information technology projects to determine whether the projects were achieving the approved objectives, milestones, and budget targets. HUD has ordered corrections to projects that fall short of the targets, reallocated project funding where appropriate, and stopped projects that were not making sufficient progress or properly managing their risks. In January 2002, HUD completed a pilot post-implementation review of a project. HUD is working to standardize the review criteria and has scheduled reviews for projects starting in October 2002. According to the Director of Information Technology Investment Management, HUD intends to accelerate the number of post-implementation reviews until they are being conducted routinely on all implemented projects. According to HUD's policy, the post-implementation reviews are intended to show whether IT initiatives have attained the desired results, and met the predicted strategic outcome measures, within the planned cost and schedule. The reviews also provide a forum for identifying and disseminating best practices and lessons learned.

    Recommendation: In order to strengthen FSI management and oversight and HUD's information technology investment management decisions, the Secretary of Housing and Urban Development should ensure that the department fully implements and institutionalizes a disciplined and documented process consistent with provisions of the Clinger-Cohen Act and the Paperwork Reduction Act, as well as GAO's and the Office of Management and Budget's guidance for selecting, controlling, and evaluating information technology investments. This process should, at a minimum, include steps to: (1) select information technology investments based on complete, accurate, reliable, and up-to-date project-level information, including estimated life-cycle costs, expected benefits, projected schedule, and risks; (2) conduct formal in-process reviews at key milestones in a project's life cycle-- including comparing actual and estimated project costs, benefits, schedule, and risk--and provide these results to decisionmakers, who will determine whether to continue, accelerate, modify, or terminate FSI projects; and (3) initiate post-implementation reviews within 12 months of deployment to compare completed project cost, schedule, and benefits with original estimates and provide the results of these reviews to decisionmakers so that improvements can be made to HUD's information technology investment and management processes.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: All mixed system projects (systems that are both information and financial management systems) were removed from the Financial Systems Integration (FSI) effort. Project plans are required for all system projects under HUD's new information technology investment management process. Therefore, projects formerly a part of the FSI effort are now required to have project plans.

    Recommendation: In order to strengthen FSI management and oversight and HUD's information technology investment management decisions, the Secretary of Housing and Urban Development should ensure that the department finalizes detailed project plans for individual FSI projects (mixed systems) that establish the milestones, tasks, task dependencies and critical paths, and staffing requirements to complete the 1997 FSI strategy.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Implemented

    Comments: The acting Chief Financial Officer told GAO that after the Financial Systems Integration effort was rescoped to only include HUD Central Accounting and Program System (HUDCAPS), a project plan was developed for HUDCAPS. The plan established milestones, tasks, task dependencies, and resource requirements to complete the project by November 30, 2000. HUDCAPS was completed by this deadline, and used to help prepare HUD's fiscal year 2000 financial statements.

    Recommendation: In order to strengthen FSI management and oversight and HUD's information technology investment management decisions, the Secretary of Housing and Urban Development should ensure that the department finalizes the detailed project plan for the core financial management system (HUD Central Accounting and Program System) to establish the milestones, tasks, task dependencies, a critical path, and staffing requirements demonstrate that it is cost-effective to meet the October 1999 scheduled implementation date called for in HUD's 2020 Management Reform Plan.

    Agency Affected: Department of Housing and Urban Development

  4. Status: Closed - Implemented

    Comments: HUD agreed that it should have complete and reliable estimates of its Financial Systems Integration (FSI) strategy and individual projects and contracted for an analysis of the 1997 FSI strategy. Arthur Anderson, LLP completed a benefit-cost analysis for the 1997 FSI strategy and identified options for completing the FSI project. HUD's acting Chief Financial Officer used this analysis to narrow the objective and scope of the FSI project to provide a core general ledger system by November 30, 2000. Other individual FSI projects, such as the Departmental Grants Management System and Enterprise Data Warehouse, were removed from the project and transferred to the Chief Information Officer for completion. These, and future software projects, must have benefit-cost analyses to be considered for funding under HUD's new information technology investment management process. After HUD completed its core general ledger, it determined that its financial management systems, developed largely under the FSI effort since 1991, did not meet all of its needs and plans to replace them. According to the acting Chief Financial Officer, HUD's financial management systems created burdensome manual reconciliation activities, increased the complexity and cost of systems maintenance, could cause diminished data control and integrity, and had inefficient system interfaces. From 1991 through 2000, HUD estimated that it spent $239 million to develop systems under FSI. This estimate does not include at least $132 million in software maintenance costs.

    Recommendation: In order to strengthen FSI management and oversight and HUD's information technology investment management decisions, the Secretary of Housing and Urban Development should ensure that the department prepares complete and reliable estimates of the life-cycle costs and benefits of the overall 1997 FSI strategy and individual FSI projects.

    Agency Affected: Department of Housing and Urban Development

  5. Status: Closed - Implemented

    Comments: HUD developed, and has been using, defined processes for estimating the costs of all IT projects as part of its new IT investment management program. HUD has adopted a project estimation guideline that provides a standard process for estimating and updating costs and making them available for the capital planning process. Use of the cost estimation guidelines has been mandated for all projects since fiscal year 2000. The department has taken action to make its cost models reflect actual costs for completed projects, develop audit trails that record and explain the cost model input values used, and develop a corporate database of historical cost and schedule estimates, revisions, actual costs, etc.

    Recommendation: In order to strengthen FSI management and oversight and HUD's information technology investment management decisions, the Secretary of Housing and Urban Development should ensure that the department develops and uses defined processes for estimating FSI costs. At a minimum, these processes should include the following Software Engineering Institute requisites: (1) a corporate memory (or historical database), which includes cost and schedule estimates, revisions, reasons for revisions, actuals, and relevant contextual information; (2) structured processes for estimating software size and the amount and complexity of existing software that can be reused; (3) cost models calibrated to reflect demonstrated accomplishments on similar past projects; (4) audit trails that record and explain the values used as cost model inputs; (5) processes for dealing with externally imposed cost or schedule constraints in order to ensure the integrity of the estimating process; and (6) data collection and feedback processes that foster capturing and correctly interpreting data from work performed.

    Agency Affected: Department of Housing and Urban Development

 

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