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Manage Information Technology Acquisitions, but Needs to Clarify Policy 
and Strengthen Oversight' which was released on July 18, 2008.

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Report to Congressional Requesters: 

United States Government Accountability Office: 
GAO: 

July 2008: 

Air Traffic Control: 

FAA Uses Earned Value Techniques to Help Manage Information Technology 
Acquisitions, but Needs to Clarify Policy and Strengthen Oversight: 

GAO-08-756: 

GAO Highlights: 

Highlights of GAO-08-756, a report to congressional requesters. 

Why GAO Did This Study: 

In fiscal year 2008, the Federal Aviation Administration (FAA) plans to 
spend over $2 billion on information technology (IT) investments—many 
of which support FAA’s air traffic control modernization. To more 
effectively manage such investments, in 2005 the Office of Management 
and Budget required agencies to use 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 a program’s total costs. 

Among other objectives, GAO was asked to assess FAA’s policies for 
implementing EVM on its IT investments, evaluate whether the agency is 
adequately using these techniques to manage key IT acquisitions, and 
assess the agency’s efforts to oversee EVM compliance. To do so, GAO 
compared agency policies with best practices, performed four case 
studies, and interviewed key FAA officials. 

What GAO Found: 

FAA has established a policy requiring the use of EVM on its major IT 
acquisition programs, but key components of this policy are not fully 
consistent with best practices of leading organizations. Specifically, 
FAA fully met four and partially met three components of an effective 
EVM policy (see table). For example, FAA requires its program managers 
to obtain EVM training, but it does not enforce completion of this 
training or require other relevant personnel to obtain this training. 
Until FAA expands and enforces its policy, it will be difficult for the 
agency to gain the full benefits of EVM. 

FAA is using EVM to manage IT acquisition programs, but not all 
programs are ensuring that their earned value data are reliable. Case 
studies of four programs demonstrated that all are using or planning to 
use EVM systems. However, of the three programs currently collecting 
EVM data, only one program is adequately ensuring that its earned value 
data are reliable. Another program is limited in its ability to ensure 
data reliability because it was initiated before earned value was 
required. The third program did not adequately validate contractor 
performance data. For example, GAO found anomalies in which the 
contractor reported spending funds without accomplishing work and 
others in which the contractor reported accomplishing work while 
crediting funds to the government. Until programs undertake a rigorous 
validation of their EVM data, FAA faces an increased risk that managers 
may not be getting the information they need to effectively manage the 
programs. 

FAA has taken important steps to oversee program compliance with EVM 
policies, but its oversight process lacks sufficient rigor. Through its 
recurring assessments, FAA has reported that most programs have 
improved their earned value capabilities over time, and that 74 percent 
of the programs were fully compliant with national standards. However, 
FAA’s assessments are not thorough enough to identify anomalies in 
contractor data, and its progress reports do not distinguish between 
systems that collect comprehensive data and those that do not. As a 
result, FAA executives do not always receive an accurate view of the 
quality of a program’s EVM data when making investment decisions on 
that program. 

Table: Seven Key Components of an Effective EVM Policy: 

Policy component: 
Assessment of FAA policy: 

Policy component: Establish clear criteria for which programs are to 
use EVM; Assessment of FAA policy: Fully met. 

Policy component: Require programs to comply with national standards; 
Assessment of FAA policy: Fully met. 

Policy component: Require programs to use a standard structure for 
defining the work products that enables managers to track cost and 
schedule by defined deliverables (e.g., hardware or software 
component); Assessment of FAA policy: Partially met. 

Policy component: Require programs to conduct detailed reviews of 
expected costs, schedules, and deliverables (called an integrated 
baseline review); Assessment of FAA policy: Fully met. 

Policy component: Require and enforce EVM training; Assessment of FAA 
policy: Partially met. 

Policy component: Define when programs may revise cost and schedule 
baselines (called rebaselining) Partially met. 

Policy component: Require system surveillance—routine validation checks 
to ensure that major acquisitions continue to comply with agency 
policies and standards; Assessment of FAA policy: Fully met. 

Sources: GAO Cost Guide, Exposure Draft (GAO-07-1134SP) and analysis of 
FAA data. 

[End of table] 

What GAO Recommends: 

GAO is making recommendations to the Secretary of Transportation to 
improve FAA’s acquisition policies governing EVM, contractor data 
reliability on a key system, and the process for overseeing major 
systems. The Department of Transportation generally agreed with the 
recommendations and provided technical comments, which GAO incorporated 
as appropriate. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-756]. For more 
information, contact David A. Powner, (202) 512-9286, pownerd@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

FAA Has Established an EVM Policy for Major IT Investments, but Key 
Components Are Not Fully Consistent with Best Practices: 

Key FAA Systems Are Using EVM, but Are Not Consistently Implementing 
Key Practices: 

FAA Has Taken Steps to Oversee EVM Compliance, but Its Oversight 
Process Lacks Sufficient Rigor: 

FAA Has Incorporated Important EVM Performance Data into Its IT 
Investment Management Process: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Overview of Industry Guidelines That Support Sound EVM: 

Appendix III: Case Studies of FAA's Implementation of EVM: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Key Components of an Effective EVM Policy: 

Table 2: Assessment of FAA's EVM Policies, as of April 2008: 

Table 3: Eleven Key EVM Practices for System Acquisition Programs: 

Table 4: Management Functions Addressed by ANSI Guidance on Earned 
Value Management Systems: 

Table 5: Funding Data for ASR-11: 

Table 6: Assessment of ASR-11's EVM Practices, as of April 2008: 

Table 7: Funding Data for ERAM: 

Table 8: Assessment of ERAM's EVM Practices, as of April 2008: 

Table 9: SBS Funding Data: 

Table 10: Assessment of SBS's EVM Practices, as of April 2008: 

Table 11: Financial Funding Data for SWIM: 

Table 12: Assessment of SWIM's EVM Practices, as of April 2008: 

Figures: 

Figure 1: Assessment of EVM Practices for Key FAA Systems, as of April 
2008: 

Figure 2: Cumulative Cost and Schedule Variances for the ASR-11 Program 
in Calendar Year 2007: 

Figure 3: Cumulative Cost and Schedule Variances of the ERAM Prime 
Contract in Calendar Year 2007: 

Figure 4: Cumulative Cost and Schedule Variances for the SBS Program: 

Abbreviations: 

ANSI: American National Standards Institute: 

ASR-11: Airport Surveillance Radar: 

ATC: air traffic control: 

EIA: Electronic Industries Alliance: 

ERAM: En Route Automation Modernization: 

FAA: Federal Aviation Administration: 

EVM: earned value management: 

IT: information technology: 

OMB: Office of Management and Budget: 

NextGen: Next Generation Air Transportation System: 

SBS: Surveillance and Broadcast Service: 

SWIM: System Wide Information Management: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

July 18, 2008: 

Congressional Requesters: 

In fiscal year 2008, the Federal Aviation Administration (FAA) plans to 
spend approximately $2 billion on information technology (IT) 
investments, many of which involve systems and technologies to 
modernize the air traffic control (ATC) system or to transition to a 
Next Generation Air Transportation System (NextGen). Over the past 13 
years, we have identified FAA's ATC modernization as a high-risk 
initiative due to the cost, size, and complexity of this program as 
well as the cost overruns, schedule delays, and performance shortfalls 
that have plagued the system acquisitions that make up this effort. 
[Footnote 1] To more effectively manage such investments, in 2005 the 
Office of Management and Budget (OMB) required agencies to implement 
earned value management (EVM).[Footnote 2] 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. 

This report responds to your request that we review FAA's use of EVM. 
Specifically, our objectives were to (1) assess FAA's policies for 
implementing EVM on its IT investments, (2) evaluate whether the agency 
is adequately using these techniques to manage key IT acquisitions, (3) 
assess the agency's efforts to oversee compliance with its EVM 
policies, and (4) evaluate whether the agency is using earned value 
data as part of its investment management process. 

To address our objectives, we reviewed agency documentation, including 
FAA-wide policies and plans governing the use of EVM on IT 
acquisitions, selected programs' documented EVM practices and 
performance reports, internal EVM assessment criteria and reports, and 
executive management briefings. We conducted case studies of four 
programs that we selected for their large development and life-cycle 
costs, representation of FAA's major modernization initiatives, and 
different stages of life-cycle maturity. We compared the agency's 
policies and practices with federal standards and best practices of 
leading organizations to determine the effectiveness of FAA's use of 
earned value data in managing its IT investments. We also interviewed 
relevant agency officials, including key personnel on programs selected 
for case study and the official responsible for implementing EVM, and 
we observed working group meetings on EVM. This report builds on a body 
of work we have performed on FAA's ATC modernization efforts.[Footnote 
3] 

We conducted this performance audit from November 2007 to July 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. Further details on our 
objectives, scope, and methodology are provided in appendix I. 

Results in Brief: 

FAA has established a policy requiring the use of EVM on its major IT 
acquisition programs, but key components of this policy are not fully 
consistent with the best practices of leading organizations. We 
recently reported that leading organizations establish EVM policies 
with seven key components.[Footnote 4] These organizations: 

* establish clear criteria for which programs are to use EVM; 

* require programs to comply with a national standard[Footnote 5] on 
EVM systems; 

* require programs to use a product-oriented structure[Footnote 6] for 
defining work products; 

* require programs to conduct detailed reviews of expected costs, 
schedules, and deliverables (called an integrated baseline review); 

* require and enforce EVM training; 

* define when programs may revise cost and schedule baselines (called 
rebaselining); and: 

* require system surveillance--routine validation checks to ensure that 
major acquisitions are continuing to comply with agency policies and 
standards. 

FAA has fully addressed four of these components. Specifically, FAA has 
established a policy that requires the use of EVM on all major IT 
acquisition programs, compliance with the national standard, completion 
of rigorous integrated baseline reviews, and routine validation checks. 
However, the agency has only partially addressed the remaining three 
components. Specifically, FAA requires that acquisition programs use a 
common structure for defining work products, but does not require a 
product-oriented work structure. Furthermore, FAA requires that its 
program managers obtain EVM training, but does not require that other 
relevant personnel obtain this training or that the completion of this 
training be monitored and enforced. In addition, FAA requires that 
programs obtain approval to revise their cost and schedule baselines, 
but does not require programs to identify and mitigate the root cause 
of any cost or schedule overruns. Until FAA provides more clarification 
on its policy, it will be difficult for the agency to optimize the 
effectiveness of EVM as a management tool. 

FAA is using EVM to manage IT acquisition programs, but not all 
programs are ensuring that their earned value data are reliable. Case 
studies of four programs demonstrated that all are using or planning to 
use EVM; three programs are currently collecting earned value data and 
using these data to make program management decisions; and the fourth 
program is not yet far enough along in its development to collect data. 
However, of the three programs collecting data, only one is adequately 
ensuring that its earned value data are reliable. Another program is 
limited in its ability to ensure data reliability because it was 
initiated before the use of EVM was required by FAA. The third program-
-called the En Route Automation Modernization--did not adequately 
validate contractor performance data. For example, we found anomalies 
in which the contractor reported spending funds without accomplishing 
work and others in which the contractor reported accomplishing work 
while crediting funds to the government. Program officials were unable 
to explain these anomalies. Until programs undertake a rigorous 
validation of their EVM data, FAA faces an increased risk that managers 
may not be receiving the information they need to effectively manage 
the programs. 

FAA has taken important steps to oversee program compliance with EVM 
policies, but its oversight process lacks sufficient rigor. In 2005, 
FAA established an EVM oversight office that is responsible for 
assessing the major systems using defined evaluation criteria and 
providing executives with a summary of its results. Through its 
recurring assessments, FAA has reported that most programs have 
improved their earned value capabilities over time, and that 74 percent 
of its 23 major programs were fully compliant with the national EVM 
standard as of February 2008. However, the oversight office's 
assessments are not thorough enough to identify anomalies in contractor 
data, and its agencywide progress reports do not distinguish between 
systems that collect comprehensive data and those that do not. As a 
result, FAA executives do not always receive an accurate view of the 
quality of a program's EVM data when making investment decisions on 
that program. 

FAA has incorporated EVM performance data into multiple levels of its 
senior executive investment reviews to provide better insight into 
system acquisition programs. The level of detail of EVM data reporting 
varies depending on the level of executive review. For example, senior 
FAA executives responsible for investment decisions review earned value 
cost and schedule efficiency data, while program executives responsible 
for a portfolio of systems review data on cumulative cost and schedule 
variance trends over an extended period of time, estimated costs at 
program completion, and management reserves. FAA also has work under 
way to improve the information provided to its executive decision 
makers. 

We are making recommendations to the Secretary of Transportation to 
direct the Acting FAA Administrator to modify IT acquisition policies 
governing EVM to better define requirements for describing work 
products, training requirements, and rebaselining criteria. We are also 
recommending that program officials responsible for the En Route 
Automation Modernization system investigate anomalies in contractor 
data to ensure the reliability of these data. Furthermore, we are 
recommending that FAA's oversight office strengthen its oversight 
process to include an assessment of contractor data and clarify its 
reporting to distinguish between systems that collect comprehensive 
data and those that do not, in order to provide insight on the quality 
of its EVM data to decision makers. The Department of Transportation's 
Director of Audit Relations provided comments on a draft of this report 
via e-mail. In those comments, he said that the department generally 
agreed with the draft's findings and recommendations. The department 
also provided technical comments, which we incorporated as appropriate. 

Background: 

The mission of FAA, an agency within the Department of Transportation, 
is to promote the safe, orderly, and expeditious flow of air traffic in 
the U.S. airspace system, commonly referred to as the National Airspace 
System. To maintain its ability to effectively carry out this mission, 
address an aging infrastructure, and meet an increasing demand for air 
transportation, in 1981, FAA embarked on a multibillion-dollar effort 
to modernize its aging ATC system. Under this modernization program, 
FAA has acquired and deployed new technologies and systems--and 
continues to do so today. Looking to the future, FAA is now beginning 
to fund components of NextGen, a transformation to a new system that is 
expected to use satellite-based technologies and state-of-the-art 
procedures to handle increasing air traffic volume through 2025, while 
further improving safety and security. 

FAA Relies on IT to Carry out Its Mission: 

FAA relies extensively on IT to carry out its mission--both in terms of 
its operational air traffic responsibilities and its administrative 
activities. The agency depends on the adequacy and reliability of the 
nation's ATC system, which includes a vast network of radars, 
navigation and communications equipment, and information processing 
systems located at air traffic facilities across the country.[Footnote 
7] Through its ATC system, FAA provides services such as controlling 
takeoffs and landings, and managing the flow of traffic between 
airports. For example, the Integrated Terminal Weather System 
integrates local weather data to allow the maximum use of airport 
runways. The Wide Area Augmentation System is used to provide 
vertically guided system approaches via Global Positioning System 
satellites and its own satellites to aircraft at thousands of airports 
and airstrips where there is currently no vertically guided landing 
capability, thereby improving safety and reducing pilot workload. FAA 
also relies on IT to carry out its mission-support and administrative 
operations. For example, FAA uses IT to support accident and incident 
investigations, security inspections, and personnel and payroll 
functions. 

With an IT budget of $2.1 billion for fiscal year 2008, FAA accounts 
for about 83 percent of the Department of Transportation's IT budget. 
For fiscal years 2007 through 2011, FAA plans to acquire more than $14 
billion in new systems to continue operating the nation's current ATC 
system, while simultaneously transitioning to NextGen. This transition 
involves acquiring numerous systems to support precision satellite 
navigation; digital, networked communications; integrated weather 
information; layered, adaptive security; and more. A cost-effective and 
timely transition to NextGen depends in large part on FAA's ability to 
keep these acquisitions within budget and on schedule. Historically, 
however, FAA has had chronic difficulties in meeting budget, schedule, 
and performance targets for acquisitions aimed at modernizing the 
National Airspace System.[Footnote 8] For example, in June 2005, we 
reported that 13 of 16 selected major ATC system acquisitions 
experienced cost, schedule, or performance shortfalls when assessed 
against their original milestones. These 13 system acquisitions 
experienced cost increases ranging from $1.1 million to about $1.5 
billion; schedule extensions ranging from 1 to 13 years; and 
performance shortfalls, including safety problems. 

GAO Designated FAA's ATC Modernization as High Risk; FAA Has Taken 
Steps to Address Weaknesses: 

In 1995, we designated FAA's modernization of its ATC system as a high- 
risk initiative because of the size, cost, and complexity of the 
program as well as difficulties in meeting cost, schedule, and 
performance goals on the individual projects that make up the 
modernization.[Footnote 9] Since then, in our High-Risk Series updates, 
we have reported on FAA's efforts to address the underlying weaknesses 
that put it on the high-risk list.[Footnote 10] These include FAA's 
efforts to: 

* institutionalize key processes for acquiring and developing software 
systems; 

* develop and enforce its enterprise architecture; 

* improve its cost accounting and estimating practices; 

* improve its ability to effectively manage IT investments, and: 

* develop an organizational culture that supports sound acquisitions. 

To the agency's credit, FAA has taken a number of steps over the years 
to better manage its ATC modernization program. Because of FAA's 
contention that its modernization efforts were hindered by federal 
acquisition regulations, in November 1995 Congress enacted legislation 
that exempted the agency from most federal acquisition laws and 
regulations.[Footnote 11] The legislation directed FAA to develop and 
implement a new acquisition management system that would address the 
unique needs of the agency. In April 1996, FAA implemented an 
acquisition management system that provided acquisition policy and 
guidance for selecting and controlling FAA's investments through all 
phases of the acquisition life cycle. This guidance was intended to 
reduce the time and cost needed for fielding new products and services 
by introducing (1) a new investment management system that spans the 
entire life cycle of an acquisition, (2) a new procurement system that 
provides flexibility in selecting and managing contractors, and (3) 
organizational and human capital reforms that support the new 
investment and procurement systems. 

More recently, in February 2004, FAA created the performance-based Air 
Traffic Organization to control and improve FAA's investments and 
operations and to better provide safe, secure, and cost-effective air 
traffic services now and into the future. This change combined the 
groups responsible for developing and acquiring systems with those that 
operate them into a single organization. The Air Traffic Organization 
is led by FAA's Chief Operating Officer. 

EVM Provides Insight on Program Cost and Schedule: 

Pulling together essential cost, schedule, and technical information in 
a meaningful, coherent fashion is a challenge for most programs. 
Without meaningful and coherent cost and schedule information, program 
managers can have a distorted view of a program's status and risks. To 
address this issue, in the 1960s, the Department of Defense developed 
the EVM technique, which goes beyond simply comparing budgeted costs 
with actual costs. This technique measures the value of work 
accomplished in a given period and compares it with the planned value 
of work scheduled for that period and with the actual cost of work 
accomplished. 

Differences in these values are measured in both cost and schedule 
variances. Cost variances compare the earned value of the completed 
work with the actual cost of the work performed. For example, if a 
contractor completed $5 million worth of work and the work actually 
cost $6.7 million, there would be a -$1.7 million cost variance. 
Schedule variances are also measured in dollars, but they compare the 
earned value of the work completed with the value of work that was 
expected to be completed. For example, if a contractor completed $5 
million worth of work at the end of the month but was budgeted to 
complete $10 million worth of work, there would be a -$5 million 
schedule variance. Positive variances indicate that activities are 
costing less or are completed ahead of schedule. Negative variances 
indicate activities are costing more or are falling behind schedule. 
These cost and schedule variances can then be used in estimating the 
cost and time needed to complete the program. 

Without knowing the planned cost of completed work and work in progress 
(i.e., the earned value), it is difficult to determine a program's true 
status. Earned value provides information that is necessary for 
understanding the health of a program; it provides an objective view of 
program status. As a result, EVM can alert program managers to 
potential problems sooner than expenditures alone can, thereby reducing 
the chance and magnitude of cost overruns and schedule delays. 
Moreover, EVM directly supports the institutionalization of key 
processes for acquiring and developing systems and the ability to 
effectively manage investments--areas that are often found to be 
inadequate on the basis of our assessments of major IT investments. 

Because of the importance of ensuring quality earned value data, in May 
1998, the American National Standards Institute (ANSI) and the 
Electronic Industries Alliance (EIA) jointly established a national 
standard for EVM systems.[Footnote 12] This standard, commonly called 
the ANSI standard, consists of 32 guidelines to instruct programs on 
how to establish a sound EVM system, ensure that the data coming from 
the system are reliable, and use the earned value data to manage the 
program. See appendix II for an overview of this standard. 

Federal Guidance Calls for Using EVM to Improve IT Management: 

In August 2005, OMB issued guidance outlining steps that agencies must 
take for all major and high-risk development projects to better ensure 
improved execution and performance and to promote more effective 
oversight through the implementation of EVM.[Footnote 13] Specifically, 
this guidance directs agencies to (1) develop comprehensive policies to 
ensure that agencies are using EVM to plan and manage development 
activities for major IT investments; (2) include a provision and clause 
in major acquisition contracts or agency in-house project charters 
directing the use of an EVM system compliant with the ANSI standard; 
(3) provide documentation demonstrating that the contractor's or 
agency's in-house EVM system complies with the national standard; (4) 
conduct periodic surveillance reviews; and (5) conduct integrated 
baseline reviews[Footnote 14] on individual programs to finalize the 
cost, schedule, and performance goals. 

Building on OMB's requirements, in July 2007, we issued a draft guide 
on best practices for estimating and managing program costs.[Footnote 
15] This guide highlights the policies and practices adopted by leading 
organizations to implement an effective EVM program. Specifically, in 
the guide, we identify the need for organizational policies that 
establish clear criteria for which programs are required to use EVM, 
compliance with the ANSI standard, a standard product-oriented 
structure for defining work products, integrated baseline reviews, 
specialized training, criteria and conditions for rebaselining 
programs, and an ongoing surveillance function. In addition, we 
identify key practices that individual programs can use to ensure that 
they establish a sound EVM system, that the earned value data are 
reliable, and that the data are used to support decision making. OMB 
refers to this guide as a key reference manual for agencies in its 2006 
Capital Programming Guide.[Footnote 16] 

Two FAA Executives Are Responsible for EVM Implementation: 

Two FAA executives--the Acquisition Executive and the Chief Information 
Officer--are jointly responsible for implementing EVM and ensuring its 
consistent application across the agency's IT acquisitions. The 
Acquisition Executive's responsibilities include developing EVM policy 
and guidance, certifying contractors' conformance with the ANSI 
standard, advising and assisting programs with integrated baseline 
reviews, approving programs' plans for continued surveillance of 
contractors' EVM systems, and managing the EVM training program and 
curriculum. The Acquisition Executive established the position of EVM 
Focal Point to lead these efforts. 

The Chief Information Officer's responsibilities include assisting in 
the development of EVM policy and guidance, certifying programwide 
conformance with the ANSI standard, performing ongoing programwide EVM 
system surveillance, and managing the preparation of information 
reported on programs' annual business cases--which includes verifying 
the accuracy of the program baseline, schedule and cost performance, 
and corrective action plans. The Chief Information Officer established 
a Value Management Office to perform these functions. 

FAA Has Established an EVM Policy for Major IT Investments, but Key 
Components Are Not Fully Consistent with Best Practices: 

In 2005, FAA established a policy requiring the use of EVM on its major 
IT investments; however, key components of this policy are not fully 
consistent with best practices. We recently reported[Footnote 17] that 
leading organizations establish EVM policies that: 

* establish clear criteria for which programs are to use EVM; 

* require programs to comply with the ANSI standard; 

* require programs to use a product-oriented structure for defining 
work products; 

* require programs to conduct detailed reviews of expected costs, 
schedules, and deliverables (called an integrated baseline review); 

* require and enforce EVM training; 

* define when programs may revise cost and schedule baselines (called 
rebaselining); and: 

* require system surveillance--routine validation checks to ensure that 
major acquisitions are continuing to comply with agency policies and 
standards. 

Table 1 describes the key components of an effective EVM policy. 

Table 1: Key Components of an Effective EVM Policy: 

Component: Clear criteria for implementing EVM on all major IT 
investments; 
Description: OMB requires agencies to implement EVM on all major IT 
investments and ensure that the corresponding contracts include 
provisions for using EVM systems. However, each agency is responsible 
for establishing its own definition of a "major" IT investment. As a 
result, agencies should clearly define the conditions under which a new 
or ongoing acquisition program is required to implement EVM. 

Component: Compliance with the ANSI standard; 
Description: OMB requires agencies to use EVM systems that are 
compliant with a national standard developed by ANSI and EIA (ANSI/EIA-
748-B). This standard consists of 32 guidelines that an organization 
can use to establish a sound EVM system, ensure that the data resulting 
from the EVM system are reliable, and use earned value data for 
decision-making purposes (see app. II). 

Component: Standard structure for defining the work products; 
Description: The work breakdown structure defines the work necessary to 
accomplish a program's objectives. It is the first criterion stated in 
the ANSI standard and the basis for planning the program baseline and 
assigning responsibility for the work. It is a best practice to 
establish a product-oriented work breakdown structure because it allows 
a program to track cost and schedule by defined deliverables, such as a 
hardware or software component. This allows a program manager to more 
precisely identify which components are causing cost or schedule 
overruns and to more effectively mitigate the root cause of the 
overruns. Standardizing the work breakdown structure is also considered 
a best practice because it enables an organization to collect and share 
data among programs. 

Component: Integrated baseline review; 
Description: An integrated baseline review is an evaluation of the 
performance measurement baseline--the foundation for an EVM system--to 
determine whether all program requirements have been addressed, risks 
have been identified, mitigation plans are in place, and available and 
planned resources are sufficient to complete the work. The main goal of 
an integrated baseline review is to identify potential program risks, 
including risks associated with costs, management processes, resources, 
schedules, and technical issues. 

Component: Training requirements; 
Description: EVM training should be provided and enforced for all 
personnel with investment oversight and program management 
responsibilities. Executive personnel with oversight responsibilities 
need to understand EVM terms and analysis products to make sound 
investment decisions. Program managers and staff need to be able to 
interpret and validate earned value data to effectively manage 
deliverables, costs, and schedules. 

Component: Rebaselining criteria; 
Description: At times, management may conclude that the remaining 
budget and schedule targets for completing a program (including the 
contract) are significantly insufficient, and that the current baseline 
is no longer valid for realistic performance measurement. Management 
may decide that a revised baseline for the program is needed to restore 
its control of the remaining work effort. An agency's rebaselining 
criteria should define acceptable reasons for rebaselining and require 
programs to (1) explain why the current plan is no longer feasible and 
what measures will be implemented to prevent recurrence and (2) develop 
a realistic cost and schedule estimate for remaining work that has been 
validated and spread over time to the new plan. 

Component: System surveillance; 
Description: Surveillance is the process of reviewing a program's 
(including contractor's) EVM system as it is applied to one or more 
programs. The purpose of surveillance is to focus on how well a program 
is using its EVM system to manage cost, schedule, and technical 
performance. The following two goals are associated with EVM system 
surveillance: (1) ensure that the program is following corporate 
processes and procedures and (2) confirm that the program's processes 
and procedures continue to satisfy ANSI guidelines. 

Source: GAO, Cost Assessment Guide: Best Practices for Estimating and 
Managing Program Costs, Exposure Draft, GAO-07-1134SP (Washington, 
D.C.: July 2007). 

[End of table] 

FAA began developing EVM-related policies for its IT acquisition 
programs in 2005. The agency currently has a policy in place that fully 
addresses four of the seven areas and partially addresses the remaining 
three areas (see table 2). 

Table 2: Assessment of FAA's EVM Policies, as of April 2008: 

Policy component: Clear criteria for implementing EVM on all major IT 
investments; 
Assessment of FAA policy: Fully met. 

Policy component: Compliance with the ANSI standard; 
Assessment of FAA policy: Fully met. 

Policy component: Standard structure for defining the work products; 
Assessment of FAA policy: Partially met. 

Policy component: Integrated baseline review; 
Assessment of FAA policy: Fully met. 

Policy component: Training requirements; 
Assessment of FAA policy: Partially met. 

Policy component: Rebaselining criteria; 
Assessment of FAA policy: Partially met. 

Policy component: System surveillance; 
Assessment of FAA policy: Fully met. 

Source: GAO analysis of FAA data. 

[End of table] 

Specifically, FAA has policies and guidance in its Acquisition 
Management System[Footnote 18] that fully address EVM implementation on 
all major IT investments, compliance with the ANSI standard, integrated 
baseline reviews, and system surveillance. These policies are discussed 
below. 

* Criteria for implementing EVM on all IT major investments: FAA 
requires all of its major development, modernization, and enhancement 
programs to use EVM. Specifically, these are all programs with a 
requirement to provide a business case to OMB.[Footnote 19] In 
addition, FAA requires that all contracts and subcontracts that are 
expected to exceed a cost of $10 million for development, 
modernization, and enhancement work must be managed using an EVM 
system. Projects lasting less than 1 year are not required to use EVM. 

* Compliance with the ANSI standard: FAA requires that all work 
activities performed on major programs by government personnel, major 
contractors, and support contractors be managed using an EVM system 
that complies with industry standards. FAA's EVM Focal Point is 
responsible for certifying that contractors with contracts over $10 
million conform with the standard. FAA's Value Management Office is 
responsible for certifying that each program conforms with the 
standard. 

* Integrated baseline reviews: FAA requires each program manager to 
conduct a comprehensive review of a program baseline for major programs 
and contracts within 90 to 180 days of contract award or program 
baseline establishment. Furthermore, an updated integrated baseline 
review must be performed after a program exercises significant contract 
options or executes modifications. The agency's guidance calls for the 
involvement of program management teams, prime contractor management, 
and independent subject matter experts who validate the program 
baselines and performance measurement processes. 

* System surveillance: FAA requires ongoing surveillance of all 
programs and contracts that are required to use EVM systems to ensure 
their continued compliance with industry standards. The Value 
Management Office is responsible for providing surveillance at the 
program level through annual assessments of each major program. 
Individual program managers and contracting officers are responsible 
for conducting surveillance on their contractors' EVM in accordance 
with a surveillance plan approved by the EVM Focal Point. 

However, FAA's policy and guidance are not consistent with best 
practices in three areas: defining a product-oriented structure for 
defining work products, requiring EVM training, and establishing 
rebaselining criteria. These areas are discussed below. 

* Standard structure for defining work products: FAA requires its 
programs to establish a standard work breakdown structure. However, FAA 
calls for a function-oriented structure, rather than a product-oriented 
one. This means that work is delineated based on functional activities, 
such as design engineering, requirements analysis, and quality control. 
In contrast, a product-oriented work breakdown structure reflects cost, 
schedule, and technical performance on specific deliverables. Without 
the level of detail provided by a product-oriented approach, program 
managers may not have the information they need to make decisions on 
specific program components. For example, cost overruns associated with 
a specific radar component could be quickly identified and addressed 
using a product-oriented structure. If a function-oriented structure 
were used, these costs could be spread out over design, engineering, 
and quality control. 

FAA program managers can choose to use a product-oriented work 
breakdown structure to manage their programs and contracts, but then 
they need to transfer their data to FAA's required function-oriented 
work breakdown structure when reporting to management. EVM experts 
agree that such mapping efforts are time-consuming and subject to 
error. Furthermore, programs do not always map items in the same way, 
and, as a result, costs may not be captured consistently across 
programs. 

FAA officials stated that they use the functional format because it is 
aligned with the agency's cost accounting system. While this presents a 
challenge, it is not insurmountable. For example, in the near-term, the 
agency could develop a standard mapping function to translate product- 
oriented program data into the function-oriented cost accounting 
system. While this approach would not resolve the time-consuming nature 
of mapping (since programs would still be expected to complete this 
activity), it does at least allow costs to be captured consistently 
across programs. As a longer-term solution, we have repeatedly urged 
government agencies to adopt cost accounting systems that provide 
meaningful links among budget, accounting, and performance. Such 
systems are consistent with product-oriented work breakdown structures. 
[Footnote 20] 

Until FAA establishes a standard product-oriented work breakdown 
structure, program officials who use the function-oriented approach to 
manage their contracts may not be obtaining the information they need. 
Furthermore, program officials who choose to manage using a product- 
oriented structure will continue to spend valuable time and effort 
mapping their product-oriented structures to the FAA standard, and the 
agency will continue to risk that data are captured inaccurately or 
inconsistently during this mapping exercise. 

* EVM training requirements: FAA has developed EVM training and 
requires program managers to complete a minimum of 24 hours of EVM and 
cost estimating training. However, the agency does not specify EVM 
training requirements for program team members or senior executives 
with program oversight responsibilities. In addition, the agency does 
not enforce EVM training to ensure that all relevant staff have 
completed the required training. Instead, individual program offices 
are responsible for ensuring that their teams obtain sufficient EVM 
training. Some programs ensure that all key program staff have 
completed the appropriate level of training they need to understand 
their roles and responsibilities, while other programs do not. Until 
FAA establishes EVM training requirements for all relevant personnel 
(including executives with oversight responsibilities and program staff 
responsible for contract management) and verifies the completion of 
this training, it cannot effectively ensure that its program staff have 
the appropriate skills to validate and interpret EVM data, and that its 
executives fully understand the data they are given in order to ask the 
right questions and make informed decisions. 

* Rebaselining criteria: FAA requires that programs seeking a new cost 
and schedule baseline gain approval from a board of executives, called 
the Joint Resources Council, which is responsible for investment 
decisions. However, the agency does not define acceptable reasons for 
rebaselining or require programs to identify and address the reasons 
for the need to rebaseline. Until FAA addresses these elements, it will 
face an increased risk that its executive managers will make decisions 
about programs with incomplete information, and that these programs 
will continue to overrun costs and schedules because their underlying 
problems have not been identified or addressed. 

Key FAA Systems Are Using EVM, but Are Not Consistently Implementing 
Key Practices: 

FAA is using EVM to manage system acquisition programs, but the extent 
of implementation varies among programs. Case studies of four programs 
demonstrated that all are using or planning to use EVM. However, the 
four programs are not consistently performing EVM on the full scope of 
the program (as opposed to the scope of the contract) and ensuring that 
the earned value data are reliable. Until these areas are fully 
addressed, FAA faces an increased risk that program managers are not 
adequately using earned value to manage their programs. 

Our work on best practices in EVM identified 11 key practices that are 
implemented on acquisition programs of leading organizations. These 
practices can be organized into three management areas: establishing a 
sound EVM system, ensuring reliable data, and using earned value data 
to manage. Table 3 lists these 11 key practices. 

Table 3: Eleven Key EVM Practices for System Acquisition Programs: 

Program management area: Establish a comprehensive EVM system; 
EVM practice: Define the scope of effort using a work breakdown 
structure.
EVM practice: Identify who in the organization will perform the work.
EVM practice: Schedule the work.
EVM practice: Estimate the labor and material required to perform the 
work and authorize the budgets, including management reserve.
EVM practice: Determine objective measure of earned value.
EVM practice: Ensure that the data resulting from the EVM system are 
reliable: Develop the performance measurement baseline. 

Program management area: Ensure that the data resulting from the EVM 
system are reliable; 
EVM practice: Execute the work plan and record all costs.
EVM practice: Analyze EVM performance data and record variances from 
the performance measurement baseline plan.
EVM practice: Ensure that the program management team is using earned 
value data for decision-making purposes: Forecast estimates at 
completion. 

Program management area: Ensure that the program management team is 
using earned value data for decision-making purposes; 
EVM practice: Take management action to mitigate risks.
EVM practice: Update the performance measurement baseline as changes 
occur. 

Source: GAO, Cost Assessment Guide: Best Practices for Estimating and 
Managing Program Costs, Exposure Draft, GAO-07-1134SP (Washington, 
D.C.: July 2007). 

[End of table] 

We performed case studies of four FAA system acquisitions: the Airport 
Surveillance Radar (ASR-11), En Route Automation Modernization (ERAM), 
Surveillance and Broadcast Services (SBS), and System Wide Information 
Management (SWIM). All of the four key FAA system programs demonstrated 
at least a partial level of EVM implementation. Figure 1 summarizes our 
results on these selected programs. Following the figure, we provide a 
summary of each key area of program management responsibility in EVM. 
In addition, more details on the four case studies are provided in 
appendix III. 

Figure 1: Assessment of EVM Practices for Key FAA Systems, as of April 
2008: 

[See PDF for image] 

This figure is a table depicting the following data: 

Assessment of EVM Practices for Key FAA Systems, as of April 2008: 

Program management area: Establish a comprehensive EVM system; 
FAA system program, ASR-11: Partially implemented/with justification: 
The program partially addressed the EVM practices in this program 
management area; however, external factors prevented the program from 
fully implementing these practices; 
FAA system program, ERAM: Partially implemented/with justification: The 
program partially addressed the EVM practices in this program 
management area; however, external factors prevented the program from 
fully implementing these practices; 
FAA system program, SBS: Fully implemented: The program fully 
implemented all EVM practices in this program management area; 
FAA system program, SWIM: Work in progress: The program is early in its 
life cycle and is working to address the EVM practices in this program 
management area. 

Program management area: Ensure that the data resulting from the EVM 
system are reliable; 
FAA system program, ASR-11: Partially implemented/with justification: 
The program partially addressed the EVM practices in this program 
management area; however, external factors prevented the program from 
fully implementing these practices; 
FAA system program, ERAM: Partially implemented: The program partially 
implemented the EVM practices in this program management area; 
FAA system program, SBS: Fully implemented: The program fully 
implemented all EVM practices in this program management area; 
FAA system program, SWIM: Not applicable: The program is not yet at a 
stage of development that would implement the EVM practices in this 
program management area. 

Program management area: Ensure that the program management team is 
using earned value data for decision-making purposes; 
FAA system program, ASR-11: Fully implemented: The program fully 
implemented all EVM practices in this program management area; 
FAA system program, ERAM: Fully implemented: The program fully 
implemented all EVM practices in this program management area; 
FAA system program, SBS: Fully implemented: The program fully 
implemented all EVM practices in this program management area; 
FAA system program, SWIM: Not applicable: The program is not yet at a 
stage of development that would implement the EVM practices in this 
program management area. 

Source: GAO analysis of FAA data. 

[End of figure] 

Programs Did Not Consistently Establish Comprehensive EVM Systems, but 
Had Justification for These Shortfalls: 

The four programs did not consistently establish comprehensive EVM 
systems, but were able to justify these shortfalls. Of the four 
programs, only SBS demonstrated that it had fully implemented the six 
practices in this area. For example, the program established an 
integrated performance baseline that captures the full scope of work on 
the program and links directly to the integrated master schedule. 

Two programs--ASR-11 and ERAM--demonstrated that they partially 
implemented each of the six key practices in this area. Both had a 
reasonable justification for their partial EVM implementation: the 
systems were initiated before FAA required projects to obtain EVM data 
and have implemented work-arounds to allow them to meet FAA's current 
earned value reporting requirements. Specifically, the ASR-11 team does 
not receive any EVM data, so the team established a performance 
measurement baseline to estimate the work remaining on both the 
contractor and government portions of the program.[Footnote 21] 
Alternatively, ERAM has implemented EVM to govern the contract 
deliverables, but not the government's portion of the program. Instead, 
the program estimates government costs. 

The fourth program, SWIM, has initiated EVM practices, but these 
efforts are still under way because the system is in an early stage in 
its acquisition life cycle. At the time of our review, SWIM had fully 
met two of the six key practices. For example, SWIM has a work 
breakdown structure and has identified who will perform the work. In 
addition, the program is currently developing its integrated master 
schedule and plans to complete all key EVM process steps prior to 
beginning development work (which is expected to begin in fiscal year 
2009). SWIM is not currently collecting EVM data. 

Programs Did Not Consistently Ensure That EVM Data Were Reliable: 

The three programs that currently collect or estimate monthly EVM data 
(ASR-11, ERAM, and SBS) did not consistently ensure that their EVM data 
were reliable. Of the three programs, one fully implemented the 
practices for ensuring the reliability of the prime contractor and 
government performance data, one partially implemented the practices 
but had justification for its shortfalls, and one partially implemented 
the practices. 

SBS demonstrated that it fully implemented the three practices. The 
program requires its technical managers to validate the earned value 
data they are responsible for collecting on a monthly basis. It also 
established mechanisms to alert the team if the contractor's 
deliverables may not meet system requirements. In addition, program EVM 
analysts are expected to analyze and report cost and schedule 
performance trends and cost estimates to complete the remaining work to 
the program manager and an internal management review board. 

ASR-11 partially implemented each of the three practices for ensuring 
that earned value data are reliable, but had a justification for this 
shortfall. As we have previously noted, ASR-11 measures government and 
contractor effort; however, it is constrained in its oversight 
capabilities since the prime contractor is not required to report 
earned value information or cost data to FAA. As a result, the program 
is unable to collect or validate actual costs expended on the 
contractor's scope of work. Instead, ASR-11 relies on schedule status 
to determine when planned work on a contract deliverable has been 
authorized to begin--such as work to dismantle a legacy facility site-
-and completed. The program depends on the receipt of Air Force 
invoices to determine the actual costs for that planned effort, and 
relies on its FAA teams that are on-site to get qualitative assessments 
of the cost and schedule drivers impacting performance. Despite the 
external constraints, ASR-11 has a skilled team in place to assess the 
EVM data, perform the appropriate analyses of performance trends, and 
make projections of estimated costs at program completion. 

ERAM also partially implemented each of the three practices for 
ensuring that earned value data are reliable. The ERAM program team 
analyzes the prime contractor's monthly EVM data and variance reports 
and then uses that information to make projections of estimated costs 
at program completion. However, we identified several anomalies in the 
contractor's reports over an 11-month period that suggest the 
contractor may not be reliably reporting its work activities. For 
example: 

* There were multiple cases in which the contractor reported that no 
work was planned or accomplished, yet funds were spent; in other cases, 
the contractor reported that work was planned and accomplished, but 
funds were credited to the government. There were also cases in which 
the contractor reported that work was planned and dollars spent, but a 
negative amount of work was performed (i.e., work that was previously 
reported as completed was now reported as not completed). The 
contractor did not provide an explanation for these issues in its 
reports to the ERAM program office. 

* In September 2007, the contractor planned to complete $102 million 
worth of work--a significant spike in planned work, given that the 
average amount of work planned and accomplished in a single month is 
about $25 million. Furthermore, the contractor reported that it 
accomplished $100 million worth of that work and spent only $31 million 
to complete it. The contractor did not provide a justification for this 
steep spike in work planned and accomplished, or for the sizable gap 
between the work accomplished and the cost of this work. The ERAM 
program office was also unable to explain why this occurred. 

These reporting anomalies raise questions about the reliability of the 
contractor data and the quality of the program's efforts to verify and 
validate these data. Program officials were unable to explain these 
anomalies. Until ERAM improves its ability to assess contract data and 
resolve anomalies, it risks using inaccurate data to manage the 
contractor, potentially resulting in cost overruns, schedule delays, 
and performance shortfalls. 

Program Management Teams Consistently Used Earned Value Data to Make 
Decisions: 

All three programs that currently collect monthly EVM data were able to 
demonstrate that they use these data to manage their programs. The SBS 
program manager conducts rigorous reviews with its internal performance 
management review board to discuss the program's earned value 
performance against planned cost and schedule targets and take 
appropriate actions to reverse negative trends. The ASR-11 program 
manager is using the current cost and schedule variances being accrued 
on site construction work to make projections on the overall cost to 
complete this work and to create risk mitigation plans to address the 
cost and schedule drivers. The ERAM program manager uses the earned 
value data to identify areas of concern and make recommendations to the 
contractor on items that should be watched, mitigated, and tracked to 
closure. Currently, the program manager is monitoring the contractor's 
use of management reserve as well as fluctuating cost variances 
associated with the design and engineering supporting ERAM's initial 
capability. 

FAA Has Taken Steps to Oversee EVM Compliance, but Its Oversight 
Process Lacks Sufficient Rigor: 

FAA has taken important steps to oversee compliance with EVM policies 
by establishing an oversight office, assessing major systems using 
defined evaluation criteria, and demonstrating improved capabilities on 
most programs. However, the oversight office's assessments are not 
thorough enough to identify anomalies in contractor data, and its 
agencywide progress reports can be misleading, in that the agency's 
evaluation process does not distinguish between systems that collect 
comprehensive data and those that do not. As a result, FAA executives 
do not always receive an accurate view of the quality of a program's 
EVM data when making investment decisions on that program. 

FAA Established an Oversight Program to Ensure Compliance with EVM 
Requirements: 

According to best practices in program oversight, an organization 
should assign responsibility for providing oversight, establish and 
implement a plan for conducting oversight that is sufficiently detailed 
to identify problems, and report on its progress over time. FAA 
established an oversight program to ensure EVM compliance assessments 
on its major programs. 

In August 2005, FAA established the Value Management Office, an 
organization responsible for assessing the EVM compliance of all major 
IT acquisition programs. This office developed an EVM system assessment 
plan to evaluate each major system program. This plan defines the 
evidence needed to obtain a weak, moderate, or strong score for each of 
the 32 guidelines in the ANSI standard. The group assesses each major 
program's earned value capabilities on an annual basis. In addition, 
this office provides its senior executives and OMB with a summary of 
the EVM compliance status of all major programs. FAA reports that its 
IT systems have made major improvements in their earned value 
capabilities over the last few years. For example, in August 2005, FAA 
reported that 6 of its 19 major IT acquisition programs (or 32 percent) 
had fully complied with the standard. As of February 2008, FAA reported 
that 17 of its 23 major IT programs (or 74 percent) had achieved full 
compliance with the ANSI standard. 

FAA's Oversight Process Lacks Sufficient Rigor: 

While FAA's oversight has accomplished much since it was established, 
the process used to assess and report on programs lacks the rigor 
needed to be a reliable gauge of agency progress. Best practices call 
for program EVM oversight to include an assessment of both government 
and contractor performance data to identify issues that may undermine 
the validity of these data. In addition, to be transparent and 
reliable, reports on the status of programs' EVM implementation should 
clearly identify situations in which programs are unable to fully 
comply with FAA policies. 

In assessing programs' EVM compliance, FAA's oversight office obtains 
and reviews earned value data for the program as a whole. It does not 
analyze the contractor's performance data. For example, FAA's oversight 
office did not review ERAM's contractor data and, therefore, did not 
identify anomalies in which funds were spent on no work and other work 
was performed for no funds. As a result, it rated the program highly on 
factors associated with data reliability. 

In addition, in reporting agencywide progress in implementing EVM, the 
agency's oversight process does not distinguish between programs that 
collect earned value data only on the contract level, and those that 
collect integrated data on the program as a whole. For example, both 
ERAM and ASR-11 use approximations to reflect their earned value data. 
As we have previously noted, ASR-11 uses approximations for the entire 
program because another agency administers the contract. ERAM uses 
approximations only for the government portions of the program. 
Nonetheless, FAA gave both of these programs their highest ratings. 
This is misleading in that it portrays the performance data on these 
programs as having the same level of precision as programs that have an 
integrated approach to EVM. Since these programs were initiated before 
the EVM requirement, it is likely that other older acquisition programs 
have also implemented work-arounds. Of the 23 major programs assessed 
by FAA, 16 were initiated before the EVM policy was established. Until 
these issues are resolved, FAA will be unable to effectively ensure 
that EVM implementation is consistent across the agency, and that FAA 
executives obtain an inaccurate view of the quality of an individual 
program's EVM data when making investment decisions. 

FAA Has Incorporated Important EVM Performance Data into Its IT 
Investment Management Process: 

To obtain better insight into the progress made on its system 
acquisition programs, FAA incorporated EVM performance data into its 
process for reviewing IT investments. Our work in IT investment 
management highlights the importance of executive decision makers 
having sufficient insight into program status so that they can identify 
and mitigate risks, and ensure that programs are on track against 
established cost and schedule expectations. The performance data from 
program EVM systems are critical for helping managers achieve 
sufficient insight on program status. 

FAA executives are reviewing EVM data as part of their investment 
review process. The level of detail in EVM data reporting is dependent 
on the level of executive review. For example, executives responsible 
for a portfolio of projects conduct project reviews on a quarterly 
basis. They obtain project data that include cumulative cost and 
schedule variance reporting over an extended period. For example, ASR- 
11 has reported cumulative trends over an 11-month period. Other key 
reported performance metrics include estimated costs at program 
completion, cost and schedule efficiency indexes (which describe the 
dollar value of work being accomplished for every dollar spent), and 
management reserve. At a more senior level, FAA's Joint Resource 
Council receives project data on a monthly basis, is briefed on 
projects that are breaching cost and schedule variances by more than 10 
percent on a quarterly basis, and obtains detailed briefings on 
projects twice a year. At this time, these briefings contain a program 
dashboard matrix, which shows the earned value cost and schedule 
efficiency indexes taken over a 6-month period. FAA's Value Management 
Office also has a joint initiative under way with the Joint Resource 
Council to refine the dashboard matrix in order to determine the most 
appropriate data, as well as level of detail, that will enable decision 
makers to prevent, detect, and respond to issues in a timely manner. 

Conclusions: 

FAA has taken a number of important steps to improve the management of 
its IT investments through the implementation of EVM. The agency has 
established policies that require the use of EVM; system acquisition 
programs are using earned value data to manage their programs; an 
oversight office monitors system acquisition programs' compliance with 
policy and standards; and earned value performance data are being used 
by multiple levels of management as they review and manage IT 
investment. 

However, the agency does not fully ensure the accuracy and usefulness 
of earned value data as a management tool. Specifically, FAA policies 
lack sufficient guidance on the type of work structure needed to most 
effectively use EVM data, training requirements do not extend to all 
relevant personnel and call for this training to be monitored and 
enforced, and programs are not required to identify or mitigate the 
root cause of any cost and schedule overruns when they request a 
revised cost and schedule baseline. In addition, FAA programs are not 
consistently ensuring that the data coming from contractors are 
reliable. Of the three programs we reviewed that currently collect 
earned value data, one program, ERAM, had no explanation for anomalies 
in its contractor data wherein funds were spent but no work was done; 
in another situation, work was accomplished but funds were credited to 
the government. This is of concern because both program managers and 
agency executives could be making programmatic and investment decisions 
on the basis of inaccurate and misleading data. Furthermore, FAA's 
Value Management Office--an internal EVM oversight group--does not 
evaluate the validity of contractor data or distinguish between 
programs that have comprehensive earned value systems and ones that 
have implemented work-arounds. As a result, FAA executives are, in 
selected cases, receiving an inaccurate view of the quality of a 
program's EVM data, which could impede sound investment decisions. 
Until these issues are resolved, it will be difficult for FAA to 
effectively implement EVM or optimize its investment in this critical 
management tool. 

Recommendations for Executive Action: 

To improve FAA's ability to effectively implement EVM on its IT 
acquisition programs, we recommend that the Secretary of Transportation 
direct the Acting FAA Administrator to take the following seven 
actions: 

Modify acquisition policies governing EVM to: 

* require the use of a product-oriented standard work breakdown 
structure, 

* enforce existing EVM training requirements and expand these 
requirements to include senior executives responsible for investment 
oversight and program staff responsible for program oversight, and: 

* define acceptable reasons for rebaselining and require programs 
seeking to rebaseline to (1) perform a root cause analysis to determine 
why significant cost and schedule variances occurred and (2) establish 
mitigation plans to address the root cause. 

Direct the ERAM program office to work with FAA's Value Management 
Office to: 

* determine the root causes for the anomalies found in the contractor's 
EVM reports and: 

* develop a corrective action plan to resolve these problems. 

Direct the Value Management Office to improve its oversight processes 
by: 

* including an evaluation of contractors' performance data as part of 
its program assessment criteria, when FAA has the authority to do so, 
and: 

* distinguishing between programs that collect earned value data on 
fully integrated programs and those that do not in its agencywide 
progress reports to provide transparency to decision makers. 

Agency Comments: 

The Department of Transportation's Director of Audit Relations provided 
comments on a draft of this report via e-mail. In those comments, he 
said that the department generally agreed with the findings and 
recommendations contained in the draft. The department also provided 
technical comments, which we have incorporated in this report as 
appropriate. 

We will be sending copies of this report to interested congressional 
committees, the Secretary of Transportation, the Acting FAA 
Administrator, and other interested parties. We will also make copies 
available to others upon request. In addition, the report will be 
available at no charge on our Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staffs have any questions on the matters discussed in 
this report, please contact me at (202) 512-9286 or by e-mail at 
pownerd@gao.gov. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. GAO staff who made major contributions to this report are 
listed in appendix IV. 

Signed by: 

David A. Powner: 
Director, Information Technology Management Issues: 

List of Requesters: 

The Honorable Bart Gordon: 
Chairman: 
The Honorable Ralph Hall: 
Ranking Member: 
Committee on Science and Technology: 
House of Representatives: 

The Honorable Jerry Costello: 
Chairman: 
The Honorable Thomas Petri: 
Ranking Member: 
Subcommittee on Aviation: 
Committee on Transportation and Infrastructure: 
House of Representatives: 

The Honorable John D. Rockefeller IV: 
Chairman: 
The Honorable Kay Bailey Hutchison: 
Ranking Member: 
Subcommittee on Aviation Operations, Safety, and Security: 
Committee on Commerce, Science, and Transportation: 
United States Senate: 

The Honorable John Mica: 
House of Representatives: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

Our objectives were to (1) assess the Federal Aviation Administration's 
(FAA) policies for implementing earned value management (EVM) on its 
information technology (IT) investments, (2) evaluate whether the 
agency is adequately using EVM techniques to manage key system 
acquisitions, (3) assess the agency's efforts to oversee compliance 
with its EVM policies, and (4) evaluate whether the agency is using EVM 
data as part of its IT investment management. 

To assess whether FAA has policies in place to effectively implement 
EVM, we analyzed FAA's policies and guidance that support EVM 
implementation agencywide as well as on system acquisition programs. 
Specifically, we compared these policies and guidance documents with 
both the Office of Management and Budget's (OMB) requirements and key 
best practices recognized within the federal government and industry 
for the implementation of EVM. These best practices are contained in an 
exposure draft version of our cost guide.[Footnote 22] We also 
interviewed key agency officials and observed FAA EVM working group 
meetings to obtain information on the agency's ongoing and future EVM 
plans. 

To determine whether key FAA system programs are adequately using EVM 
techniques, we performed case studies on 4 of FAA's 23 system 
acquisition programs currently required to use EVM: the Airport 
Surveillance Radar (ASR-11), En Route Automation Modernization (ERAM), 
Surveillance and Broadcast Services (SBS), and System Wide Information 
Management (SWIM). In consultation with FAA officials, we selected 
programs with high development and life-cycle costs, which represented 
FAA's two major modernization initiatives--the Air Traffic Control 
Modernization and the Next Generation Air Transportation System 
(NextGen)--and reflected different stages of life-cycle maturity. These 
studies were not intended to be generalizable, but instead to 
illustrate the status of a variety of programs. To determine the extent 
of each program's implementation of sound EVM, we compared program 
documentation with the fundamental EVM practices implemented on 
acquisition programs of leading organizations, as identified in our 
cost guide.[Footnote 23] We determined whether the program implemented, 
partially implemented, or did not implement each of the 11 practices. 
We further analyzed the EVM data obtained from the programs to assess 
the program performance against planned cost and schedule targets. 
Finally, we interviewed program officials to obtain clarification on 
how EVM practices are implemented and how the data are validated and 
used for decision-making purposes. Regarding the reliability of cost 
data, we did not test the adequacy of agency or contractor cost- 
accounting systems. Our evaluation of these cost data was based on what 
we were told by the agency and the information they could provide. 

To determine whether FAA is effectively overseeing compliance with its 
EVM policies, we reviewed the quality and completeness of the agency's 
surveillance efforts on its system acquisition programs. Specifically, 
we reviewed the agency's EVM assessment reports for programs, FAA- 
developed EVM assessment criteria, and other relevant documents. We 
further compared the results of FAA's EVM assessment for each of the 
selected case study programs with the results of our case evaluation to 
ascertain the extent to which the results were in agreement. We also 
interviewed key agency officials and observed FAA EVM working group 
meetings to obtain information on the agency's ongoing surveillance 
efforts and issues regarding these efforts. 

To evaluate whether FAA is using EVM data as part of its IT investment 
management process, we analyzed senior executive management briefings, 
OMB business cases (exhibit 300), and other key management reports on 
program status. Specifically, we analyzed briefings and status reports 
to determine the types of EVM metrics used in describing program status 
for senior-level decision-making purposes. We also compared this 
analysis with the key best practices recognized within the federal 
government and industry for the implementation of EVM, as well as for 
the execution of sound IT investment management. We also interviewed 
key agency officials to obtain information on the extent of executive- 
level EVM awareness and clarification on how EVM is used in FAA's 
capital planning process. 

We conducted this performance audit from November 2007 to July 2008 at 
FAA offices in Washington, D.C., in accordance with generally accepted 
government auditing standards. Those standards require that we plan and 
perform the audit to obtain sufficient, appropriate evidence to provide 
a reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Overview of Industry Guidelines That Support Sound EVM: 

Organizations must be able to evaluate the quality of an EVM system to 
determine the extent to which the cost, schedule, and technical 
performance data can be relied on for program management purposes. In 
recognition of this, the American National Standards Institute (ANSI) 
and the Electronic Industries Alliance (EIA) jointly established a 
national standard for EVM systems--ANSI/EIA-748-B (commonly referred to 
as the ANSI standard). This standard consists of 32 guidelines 
addressing organizational structure; planning, scheduling, and 
budgeting; accounting considerations; analysis and management reports; 
and revisions and data maintenance. These guidelines comprise three 
fundamental management functions for effectively using EVM: 
establishing a sound EVM system, ensuring that the EVM data are 
reliable, and using earned value data for decision-making purposes. 
Table 4 lists the management functions and the ANSI guidelines. 

Table 4: Management Functions Addressed by ANSI Guidance on Earned 
Value Management Systems: 

Management function: Establish a comprehensive EVM system; 
ANSI guideline: 
(1); Define the authorized work elements for the program. A work 
breakdown structure, tailored for effective internal management 
control, is commonly used in this process.
(2); Management function: Identify the program organizational 
structure, including the major subcontractors responsible for 
accomplishing the authorized work, and define the organizational 
elements in which work will be planned and controlled.
(3); Management function: Provide for the integration of the planning, 
scheduling, budgeting, work authorization, and cost accumulation 
processes with each other and, as appropriate, with the program work 
breakdown structure and the program organizational structure.
(4); Management function: Identify the organization or function 
responsible for controlling overhead (indirect costs). 
(5); Management function: Provide for integration of the program work 
breakdown structure and the program organizational structure in a 
manner that permits cost and schedule performance measurement by 
elements of either or both structures as needed.
(6); Management function: Schedule the authorized work in a manner that 
describes the sequence of work and identifies significant task 
interdependencies required to meet the requirements of the program.
(7); Management function: Identify physical products, milestones, 
technical performance goals, or other indicators that will be used to 
measure progress.
(8); Management function: Establish and maintain a time-phased budget 
baseline, at the control account level, against which program 
performance can be measured. Initial budgets established for 
performance measurement will be based on either internal management 
goals or the external customer negotiated target cost, including 
estimates for authorized but undefinitized work. Budget for far-term 
efforts may be held in higher level accounts until an appropriate time 
for allocation at the control account level. If an over-target baseline 
is used for performance measurement reporting, prior notification must 
be provided to the customer.
(9); Management function: Establish budgets for authorized work with 
identification of significant cost elements (e.g., labor and material) 
as needed for internal management and for control of subcontractors.
(10); Management function: To the extent that it is practicable to 
identify the authorized work in discrete work packages, establish 
budgets for this work in terms of dollars, hours, or other measurable 
units. Where the entire control account is not subdivided into work 
packages, identify the far-term effort in larger planning packages for 
budget and scheduling purposes.
(11); Management function: Provide that the sum of all work package 
budgets plus planning package budgets within a control account equals 
the control account budget.
(12); Management function: Identify and control "level-of-effort" 
activities by time-phased budgets established for this purpose. Only 
efforts that are unmeasurable or for which measurement is impractical 
may be classified as level-of-effort activities.
(13); Management function: Establish overhead budgets for each 
significant organizational component of the company for expenses that 
will become indirect costs. Reflect in the program budgets, at the 
appropriate level, the amounts in overhead pools that are planned to be 
allocated to the program as indirect costs.
(14); Management function: Identify management reserves and 
undistributed budget.
(15); Management function: Provide that the program target cost goal is 
reconciled with the sum of all internal program budgets and management 
reserves. 

Management function: Ensure that the data resulting from the EVM system 
are reliable; 
ANSI guideline: 
(16); Record direct costs in a manner consistent with the budgets in a 
formal system controlled by the general books of account.
(17); Management function: When a work breakdown structure is used, 
summarize direct costs from control accounts into the work breakdown 
structure without allocation of a single control account to two or more 
work breakdown structure elements.
(18); Management function: Summarize direct costs from the control 
accounts into the contractor's organizational elements without 
allocation of a single control account to two or more organizational 
elements.
(19); Management function: Record all indirect costs that will be 
allocated to the program consistent with the overhead budgets.
(20); Management function: Identify unit costs, equivalent unit costs, 
or lot costs when needed.
(21); Management function: For the EVM system, the material accounting 
system will provide for (1) accurate cost accumulation and assignment 
of costs to control accounts in a manner consistent with the budgets 
using recognized, acceptable, costing techniques; (2) cost recorded for 
accomplishing work performed in the same period that earned value is 
measured and at the point most suitable for the category of material 
involved, but no earlier than the actual receipt of material; and (3) 
full accountability of all material purchased for the program, 
including the residual inventory.
(22); Management function: At least on a monthly basis, generate the 
following information at the control account and other levels as 
necessary for management control using actual cost data from, or 
reconcilable with, the accounting system: (1) Comparison of the amount 
of planned budget and the amount of budget earned for work 
accomplished. This comparison provides the schedule variance. (2) 
Comparison of the amount of the budget earned and the actual (applied 
where appropriate) direct costs for the same work. This comparison 
provides the cost variance.
(23); Management function: Identify, at least monthly, the significant 
differences between both planned and actual schedule performance and 
planned and actual cost performance, and provide the reasons for the 
variances in the detail needed by program management.
(24); Management function: Identify budgeted and applied (or actual) 
indirect costs at the level and frequency needed by management for 
effective control, along with the reasons for any significant 
variances. 
(25); Management function: Summarize the data elements and associated 
variances through the program organization and work breakdown structure 
to support management needs and any customer reporting specified in the 
contract. 

Management function: Ensure that the program management team is using 
earned value data for decision-making purposes; 
ANSI guideline: 
26); Implement managerial actions taken as a result of the earned value 
information.
(27); Management function: Develop revised estimates of cost at 
completion on the basis of performance to date, commitment values for 
material, and estimates of future conditions. Compare this information 
with the performance measurement baseline to identify variances at 
completion that are important to company management and any applicable 
customer reporting requirements, including statements of funding 
requirements.
(28); Management function: Incorporate authorized changes in a timely 
manner, recording the effects of such changes in budgets and schedules. 
In the directed effort before negotiation of a change, base such 
revisions on the amount estimated and budgeted to the program 
organizations.
(29); Management function: Reconcile current budgets to prior budgets 
in terms of changes to the authorized work and internal replanning in 
the detail needed by management for effective control.
(30); Management function: Control retroactive changes to records 
pertaining to work performed that would change previously reported 
amounts for actual costs, earned value, or budgets. Adjustments should 
be made only for correction of errors, routine accounting adjustments, 
the effects of customer-or management-directed changes, or improvements 
to the baseline integrity and accuracy of performance measurement data.
(31); Management function: Prevent revisions to the program budget, 
except for authorized changes.
(32); Management function(32): Document changes to the performance 
measurement baseline. 

Source: ©2007, Information Technology Association of America. Excerpts 
from "Earned Value Management Systems" (ANSI/EIA-748-B). All Rights 
Reserved. Reprinted by permission. 

[End of table] 

[End of section] 

Appendix III: Case Studies of FAA's Implementation of EVM: 

We conducted case studies of four major system acquisition programs: 
ASR-11, ERAM, SBS, and SWIM. For each of these programs, the following 
sections provide a brief description of the system; an assessment of 
the system's implementation of the 11 key EVM practices; and, where 
applicable, an analysis of the system's recent earned value data and 
trends. These data and trends are often described in terms of cost and 
schedule variances. Cost variances compare the earned value of the 
completed work with the actual cost of the work performed. Schedule 
variances are also measured in dollars, but they compare the earned 
value of the work completed with the value of work that was expected to 
be completed. Positive variances are good--they indicate that 
activities are costing less than expected or are completed ahead of 
schedule. Negative variances are bad--they indicate activities are 
costing more than expected or are falling behind schedule. 

Airport Surveillance Radar: 

ASR-11 is a joint program sponsored by both FAA and the U.S. Air Force 
to replace outdated primary radar systems at selected airports with an 
integrated digital primary and secondary radar system. This investment 
is also to replace the deteriorating infrastructure supporting current 
radar systems with new radar facilities, including advanced grounding 
and lightning protection systems, digital or fiber-optic 
telecommunications, emergency backup power supplies, and enhanced 
physical security. The contract was awarded in 1996 and is managed by 
the Air Force. The total program cost is currently estimated at $1.15 
billion, with $437.2 million remaining to be spent (see table 5). ASR- 
11 is currently being deployed across the country. As of April 2008, 44 
of the total of 66 systems were operational. FAA plans to complete 
deployment of these systems by March 2010. 

Table 5: Funding Data for ASR-11 (Dollars in millions): 

Cost type: Life cycle; 
Fiscal year 2007: $55.2; 
Fiscal year 2008: $34.6; 
To complete: $437.2; 
Total: $1,148.3. 

Cost type: Development; 
Fiscal year 2007: $43.6; 
Fiscal year 2008: $19.6; 
To complete: $19.6; 
Total: $696.5. 

Source: OMB FY2008 Exhibit 300. 

[End of table] 

ASR-11 fully met 2 of the 11 key practices and partially met 9 others 
(with justification for not being able to fully meet these). For 
example, ASR-11 fully met the practices involving using earned value 
information to mitigate risks and updating baselines as changes occur. 
ASR-11 partially met the other practices because, while the program 
implemented many key components of an effective EVM system, ASR-11 is 
limited in what it can measure and validate. There are two reasons for 
these limitations: (1) the contract was awarded in the mid-1990s, 
before FAA implemented its EVM requirements, and (2) FAA does not have 
the authority to obtain data on actual costs expended by the contractor 
or Air Force because Air Force is the contracting agency. To work 
around these constraints, FAA's ASR-11 program management team 
developed a system that allows them to approximate EVM reporting and 
tracking at the program level on the basis of estimated (not actual) 
costs. Specifically, ASR-11 established a program-level work breakdown 
structure, developed a work schedule, and identified who will perform 
the work. ASR-11 has also implemented EVM using estimated data and 
analyzes its estimated EVM results against its performance measurement 
baseline. While valuable, this approximation does not fully meet the 
key practices needed to establish a sound EVM system and ensure data 
reliability. However, FAA is limited in what it can measure and how it 
can validate the work accomplished and the dollars spent. Table 6 shows 
the detailed assessment results for ASR-11. 

Table 6: Assessment of ASR-11's EVM Practices, as of April 2008: 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Define the scope of effort using a work breakdown 
structure; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Identify who in the organization will perform the work; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Schedule the work; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Estimate the labor and material required to perform the 
work and authorize the budgets, including management reserve; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Determine objective measure of earned value; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Develop the performance measurement baseline; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Ensure that the data 
resulting from the EVM system are reliable; 
Key practice: Execute the work plan and record all costs; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Ensure that the data 
resulting from the EVM system are reliable; 
Key practice: Analyze EVM performance data and record variances from 
the performance measurement baseline plan; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Ensure that the data 
resulting from the EVM system are reliable; 
Key practice: Forecast estimates at complete; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Ensure that the program 
management team is using earned value data for decision-making 
purposes; 
Key practice: Take management action to mitigate risks; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Ensure that the program 
management team is using earned value data for decision-making 
purposes; 
Key practice: Update the performance measurement baseline as changes 
occur; 
GAO assessment: Fully implemented. 

Source: GAO analysis of FAA data. 

[End of table] 

Earned Value Data Show Cost Overruns and Schedule Delays: 

ASR-11 experienced negative cost variances between January 2007 and 
December 2007 (see fig. 2). In this period, the program exceeded cost 
targets by $19.2 million--which is 3.3 percent of the program budget 
for that time. Similarly, the ASR-11 program was unable to complete 
$20.6 million (3.4 percent) of the work planned in this period. The 
main factors contributing to the cost and schedule variances were high 
construction costs, due mainly to the effects of Hurricane Katrina, and 
an unusually long real estate acquisition for the Green Bay, Wisconsin, 
ASR-11 site. Program officials are currently working on a request to 
rebaseline the program due to the current high variances. 

Based on the program performance trends, we estimate that the program 
will overrun its budget by between $7.6 million and $53.3 million. Our 
projection of the most likely cost overrun will be about $9.8 million. 
In comparison, the ASR-11 program office estimates about a $6.2 million 
overrun at program completion. 

Figure 2: Cumulative Cost and Schedule Variances for the ASR-11 Program 
in Calendar Year 2007 (Dollars in millions): 

[See PDF for image] 

This figure is a multiple line graph depicting the following data: 

Date: January, 2007; 
Cumulative cost variance: $1.0; 
Cumulative schedule variance: -$1.1. 

Date: February, 2007; 
Cumulative cost variance: $1.0; 
Cumulative schedule variance: -$1.4. 

Date: March, 2007; 
Cumulative cost variance: $0; 
Cumulative schedule variance: $1.1. 

Date: April, 2007; 
Cumulative cost variance: $0; 
Cumulative schedule variance: $5.6. 

Date: May, 2007; 
Cumulative cost variance: $2.0; 
Cumulative schedule variance: $4.3. 

Date: June, 2007; 
Cumulative cost variance: -$1.4; 
Cumulative schedule variance: $4.4. 

Date: July, 2007; 
Cumulative cost variance: -$1.4; 
Cumulative schedule variance: $4.8. 

Date: August, 2007; -$1.4; 
Cumulative cost variance: $5.6. 
Cumulative schedule variance: 

Date: September, 2007; -$1.4; 
Cumulative cost variance: $5.2. 
Cumulative schedule variance: 

Date: October, 2007; 
Cumulative cost variance: -$2.9; 
Cumulative schedule variance: -$14.3. 

Date: November, 2007; 
Cumulative cost variance: -$12.1; 
Cumulative schedule variance: -$18.6. 

Date: December, 2007; 
Cumulative cost variance: -$19.2; 
Cumulative schedule variance: -$20.6. 

As of December 2007, ASR-11 incurred a cost overrun of $19.2 million. 
In addition, it was unable to complete $20.6 million worth of planned 
work. 

Source: GAO analysis of FAA data. 

[End of figure] 

En Route Automation Modernization: 

ERAM is to replace existing software and hardware in the air traffic 
control automation computer system and its backup system, the Direct 
Access Radar Channel, and other associated interfaces, communications, 
and support infrastructure at en route centers across the country. It 
is a critical effort because it is expected to upgrade hardware and 
software for facilities that control high altitude air traffic. The 
contract was awarded in 2002. The ERAM prime contract requires EVM to 
be accomplished by the contractor in accordance with the ANSI standard. 
The total program cost is estimated at $2.93 billion, with $1.2 billion 
still to be spent (see table 7). ERAM consists of two major components. 
One component has been fully deployed and is currently in operation at 
facilities across the country. The other component is scheduled for 
deployment through fiscal year 2009. 

Table 7: Funding Data for ERAM (Dollars in millions): 

Cost type: Life cycle; 
Fiscal year 2007: $375.0; 
Fiscal year 2008: $377.4; 
To complete: $1,283.8; 
Total: $2,930.4. 

Cost type: Development; 
Fiscal year 2007: $375.0; 
Fiscal year 2008: $368.0; 
To complete: $517.4; 
Total: $2,153.2. 

Source: OMB FY2008 Exhibit 300. 

[End of table] 

ERAM fully met 2 of the 11 key practices for implementing EVM and 
partially met 9 others (with justification for 6 of these). ERAM fully 
met the practices involving using EVM data to mitigate risks and 
updating performance baselines as changes occur. ERAM partially met 6 
other practices, with justification, because of limitations in the 
earned value data for the government portions of the program. 
Specifically, ERAM manages its contractor using an EVM system that 
includes a work breakdown structure, master schedule, and performance 
baseline. However, ERAM did not implement a comprehensive EVM system 
that integrates government and contractor data because this was not a 
requirement when the program was initiated in 2002. Program officials 
reported that they implemented a work-around to approximate the 
government portion of the program. The ERAM program partially 
implemented the 3 remaining practices associated with data reliability. 
Anomalies in the prime contractor's EVM reports affect the program's 
ability to execute the work plan, analyze variances, and estimate the 
cost of the program at completion. Table 8 shows the detailed 
assessment results for ERAM. 

Table 8: Assessment of ERAM's EVM Practices, as of April 2008: 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Define the scope of effort using a work breakdown 
structure; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Identify who in the organization will perform the work; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Schedule the work; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Estimate the labor and material required to perform the 
work and authorize the budgets, including management reserve; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Determine objective measure of earned value; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Develop the performance measurement baseline; 
GAO assessment: Partially implemented--with justification. 

Program management area of responsibility: Ensure that the data 
resulting from the EVM system are reliable; 
Key practice: Execute the work plan and record all costs; 
GAO assessment: Partially implemented. 

Program management area of responsibility: Ensure that the data 
resulting from the EVM system are reliable; 
Key practice: Analyze EVM performance data and record variances from 
the performance measurement baseline plan; 
GAO assessment: Partially implemented. 

Program management area of responsibility: Ensure that the data 
resulting from the EVM system are reliable; 
Key practice: Forecast estimates at complete; 
GAO assessment: Partially implemented. 

Program management area of responsibility: Ensure that the program 
management team is using earned value data for decision-making 
purposes; 
Key practice: Take management action to mitigate risks; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Ensure that the program 
management team is using earned value data for decision-making 
purposes; 
Key practice: Update the performance measurement baseline as changes 
occur; 
GAO assessment: Fully implemented. 

Source: GAO analysis of FAA data. 

[End of table] 

Earned Value Data Show ERAM Is Ahead of Schedule and Under Budget, but 
Data May Not Be Reliable: 

Using contractor-provided data, our analysis indicates that the ERAM 
program experienced positive cost and schedule performance in 2007 (see 
fig. 3). Specifically, from January 2007 to December 2007, the 
contractor was able to outperform its planned targets by finishing 
under budget by $11.3 million (1 percent of the work for this period) 
and by completing $25.5 million, or 3 percent, worth of work beyond 
what was planned. Factors that contributed to the positive cost and 
schedule variances include less labor needed than planned, savings in 
materials purchased, and higher productivity and efficiency. For 
example, the program contractor reported a positive schedule variance 
in 2007 due to technology refresh activities at the William J. Hughes 
Technical Center[Footnote 24] being accomplished earlier than planned. 

However, as we have previously noted, our analysis of ERAM's contractor 
performance reports uncovered a number of anomalies that raise 
questions regarding the reliability of these data. Furthermore, the 
contractor did not provide justification for these anomalies, and the 
program office was unable to explain the occurrences. 

Figure 3: Cumulative Cost and Schedule Variances of the ERAM Prime 
Contract in Calendar Year 2007 (Dollars in millions): 

[See PDF for image] 

This figure is a multiple line graph depicting the following data: 

Date: January, 2007; 
Cumulative cost variance: $2.8; 
Cumulative schedule variance: $13.7. 

Date: February, 2007; 
Cumulative cost variance: $4.3; 
Cumulative schedule variance: $14.6. 

Date: March, 2007; 
Cumulative cost variance: $7.1; 
Cumulative schedule variance: $15.5. 

Date: April, 2007; 
Cumulative cost variance: $8.2; 
Cumulative schedule variance: $6.0. 

Date: May, 2007; 
Cumulative cost variance: $10.8; 
Cumulative schedule variance: $4.1. 

Date: June, 2007; 
Cumulative cost variance: $7.6; 
Cumulative schedule variance: $8.5. 

Date: July, 2007; 
Cumulative cost variance: $10.2; 
Cumulative schedule variance: $8.7. 

Date: August, 2007; 
Cumulative cost variance: $17.1; 
Cumulative schedule variance: $13.9. 

Date: September, 2007; 
Cumulative cost variance: $14.1; 
Cumulative schedule variance: $10.9. 

Date: October, 2007; 
Cumulative cost variance: $13.5; 
Cumulative schedule variance: $8.7. 

Date: November, 2007; 
Cumulative cost variance: $9.1; 
Cumulative schedule variance: $10.3. 

Date: December, 2007; 
Cumulative cost variance: $11.3; 
Cumulative schedule variance: $25.6. 

In December 2007, the ERAM contractor reported that it outperformed its 
planned cost and schedule goals. Specifically, it reported coming in 
under budget by $11.3 million and completing $25.5 million worth of 
work beyond what was planned for that period. 

Source: GAO analysis of FAA data. 

Note: As we indicated in the previous text, we question the reliability 
of these data on the basis of the anomalies found in the contractor 
reports. 

[End of figure] 

Surveillance and Broadcast Services: 

SBS is to provide new surveillance solutions that employ technology 
using avionics and ground stations for improved accuracy and update 
rates and provide shared situational awareness (including visual 
updates of traffic, weather, and flight notices) between pilots and air 
traffic control. These technologies are considered critical to 
achieving the FAA strategic goals of decreasing the rate of accidents 
and incursions, improving the efficiency of air traffic, and reducing 
congestion. The program is currently estimated at $4.31 billion, with a 
total of $4.11 billion planned to be spent for the remaining work until 
completion (see table 9). 

Table 9: SBS Funding Data (Dollars in millions): 

Cost type: Life cycle; 
Fiscal year 2007: $91.6; 
Fiscal year 2008: $101.9; 
To complete: $4,109.6; 
Total: $4,313.0. 

Cost type: Development; 
Fiscal year 2007: $90.0; 
Fiscal year 2008: $100.0; 
To complete: $3,771.1; 
Total: $3,961.1. 

Source: OMB FY2008 Exhibit 300. 

[End of table] 

The program reported that the achievement of cost, schedule, and 
performance goals was expected to be tracked and monitored through FAA 
best practices and established EVM processes defined by FAA. Monthly 
program reviews, detailed schedule updates, and EVM reporting are 
expected to be applied in accordance with the FAA EVM policy. Future 
contracts are expected to include all EVM requirements since 
established by FAA and to be consistent with the industry standards and 
OMB A-11 guidance. 

SBS implemented all 11 of the key practices necessary to ensure that 
the program was planned in accordance with industry standards, that the 
resulting EVM data were appropriately verified and validated for 
reliability, and that the SBS management team was using these data for 
decision-making purposes. Table 10 shows the detailed assessment 
results for SBS. 

Table 10: Assessment of SBS's EVM Practices, as of April 2008: 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Define the scope of effort using a work breakdown 
structure; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Identify who in the organization will perform the work; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Schedule the work; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Estimate the labor and material required to perform the 
work and authorize the budgets, including management reserve; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Determine objective measure of earned value; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Develop the performance measurement baseline; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Ensure that the data 
resulting from the EVM system are reliable; 
Key practice: Execute the work plan and record all costs; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Ensure that the data 
resulting from the EVM system are reliable; 
Key practice: Analyze EVM performance data and record variances from 
the performance measurement baseline plan; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Ensure that the data 
resulting from the EVM system are reliable; 
Key practice: Forecast estimates at complete; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Ensure that the program 
management team is using earned value data for decision-making 
purposes; 
Key practice: Take management action to mitigate risks; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Ensure that the program 
management team is using earned value data for decision-making 
purposes; 
Key practice: Update the performance measurement baseline as changes 
occur; 
GAO assessment: Fully implemented. 

Source: GAO analysis of FAA data. 

[End of table] 

Earned Value Data Show SBS Performance Is under Cost Targets, but over 
Schedule Targets: 

From December 2007 to February 2008, SBS cost performance has been 
mixed against its planned cost and schedule targets (see fig. 4). The 
program was able to outperform its cost targets by $3.0 million. 
However, the SBS program was unable to complete $4.5 million, or 6 
percent of the value of planned work. The program indicated that the 
positive program cost variances were associated with key activities 
(including the preliminary design review) taking less effort than 
expected to complete. The negative schedule variances were primarily 
due to scheduling errors and system-level testing issues. In 
particular, the system-level testing was delayed due to a lack of 
readiness of the test environment, test documentation, and equipment. 

Figure 4: Cumulative Cost and Schedule Variances for the SBS Program 
(Dollars in millions): 

[See PDF for image] 

This figure is a multiple line graph depicting the following data: 

Date: December, 2007; 
Cumulative cost variance: $1.8; 
Cumulative schedule variance: -$0.6. 

Date: January, 2008; 
Cumulative cost variance: $1.0; 
Cumulative schedule variance: -$5.4. 

Date: February, 2008; 
Cumulative cost variance: $3.1; 
Cumulative schedule variance: -4.5. 

As of February 2008, SBS outperformed its planned cost target and 
finished under budget by $3 million. However, during this time, it was 
unable to complete $4.5 million worth of planned work. 

Source: GAO analysis of FAA data. 

[End of figure] 

System Wide Information Management: 

As the key information management and data sharing system for NextGen, 
SWIM is expected to provide policies and standards to support data 
management, along with the core services needed to publish data to the 
network, retrieve the data, secure the data's integrity, and control 
access and use of the data. SWIM is also expected to reduce the number 
and types of interfaces and systems, reduce unnecessary redundancy of 
information, better facilitate information-sharing, improve 
predictability and operational decision making, and reduce cost of 
service. The FAA's Joint Resource Council established a baseline for 
the first 2 years of the first segment of this program on June 20, 
2007. The estimated life-cycle cost for the total SWIM program is 
$546.1 million, with $501.3 million still to be spent (see table 11). 

Table 11: Financial Funding Data for SWIM (Dollars in millions): 

Cost type: Life cycle; 
Fiscal year 2007: $24.0; 
Fiscal year 2008: $20.8; 
To complete: $501.3; 
Total: $546.12. 

Cost type: Development; 
Fiscal year 2007: $0.0; 
Fiscal year 2008: $0.0; 
To complete: $234.5; 
Total: $234.5. 

Source: OMB FY2008 Exhibit 300. 

[End of table] 

SWIM is in the planning phase of its life cycle, which entails setting 
up the program's EVM system of internal controls and the resulting 
performance measurement baseline. EVM data will not be available until 
development work begins in fiscal year 2009. 

Our assessment of SWIM's EVM process maturity indicated that the 
program is on track in its implementation of EVM. Specifically, it has 
fully met two of the six key process steps for ensuring that the 
program is planned in accordance with industry standards. SWIM also has 
work under way to address the other four steps. We did not assess SWIM 
in the five key process steps related to EVM data reliability and use 
in program decision making because the program has not begun 
development work at this time. Table 12 shows the detailed assessment 
results for SWIM. 

Table 12: Assessment of SWIM's EVM Practices, as of April 2008: 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Define the scope of effort using a work breakdown 
structure; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Identify who in the organization will perform the work; 
GAO assessment: Fully implemented. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Schedule the work; 
GAO assessment: Work in progress. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Estimate the labor and material required to perform the 
work and authorize the budgets, including management reserve; 
GAO assessment: Work in progress. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Determine objective measure of earned value; 
GAO assessment: Work in progress. 

Program management area of responsibility: Establish a comprehensive 
EVM system; 
Key practice: Develop the performance measurement baseline; 
GAO assessment: Work in progress. 

Program management area of responsibility: Ensure that the data 
resulting from the EVM system are reliable; 
Key practice: Execute the work plan and record all costs; 
GAO assessment: N/A. 

Program management area of responsibility: Ensure that the data 
resulting from the EVM system are reliable; 
Key practice: Analyze EVM performance data and record variances from 
the performance measurement baseline plan; 
GAO assessment: N/A. 

Program management area of responsibility: Ensure that the data 
resulting from the EVM system are reliable; 
Key practice: Forecast estimates at complete; 
GAO assessment: Take management action to mitigate risks: N/A. 

Program management area of responsibility: Ensure that the program 
management team is using earned value data for decision-making 
purposes; 
Key practice: Take management action to mitigate risks; 
GAO assessment: N/A. 

Program management area of responsibility: Ensure that the program 
management team is using earned value data for decision-making 
purposes; 
Key practice: Update the performance measurement baseline as changes 
occur; 
GAO assessment: N/A. 

Source: GAO analysis of FAA data. 

[End of table] 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

David A. Powner, (202) 512-9286 or pownerd@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Colleen Phillips (Assistant 
Director), Kate Agatone, Carol Cha, Neil Doherty, Nancy Glover, and 
Teresa Smith made key contributions to this report. 

[End of section] 

Footnotes: 

[1] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-07-310] (Washington, D.C.: 
January 2007); High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-207] (Washington, D.C.: 
January 2005); High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-119] (Washington, D.C.: 
January 2003); High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-01-263] (Washington, D.C.: 
January 2001); High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO/HR-99-1] (Washington, D.C.: 
January 1999); High-Risk Areas: Update on Progress and Remaining 
Challenges, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-HR-97-
22] (Washington, D.C.: Feb. 13, 1997); and High-Risk Series: An 
Overview, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HR-95-1] 
(Washington, D.C.: February 1995). 

[2] OMB Memorandum, M-05-23 (Aug. 4, 2005). 

[3] GAO, Air Traffic Control: FAA Reports Progress in System 
Acquisitions, but Changes in Performance Measurement Could Improve 
Usefulness of Information, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-08-42] (Washington, D.C.: Dec. 18, 2007); National 
Airspace System: FAA Has Made Progress but Continues to Face Challenges 
in Acquiring Major Air Traffic Control Systems, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-331] (Washington, D.C.: June 
10, 2005); and Air Traffic Control: FAA's Acquisition Management Has 
Improved, but Policies and Oversight Need Strengthening to Help Ensure 
Results, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-23] 
(Washington, D.C.: Nov. 12, 2004). 

[4] GAO, Cost Assessment Guide: Best Practices for Estimating and 
Managing Program Costs, Exposure Draft, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-07-1134SP] (Washington, D.C.: 
July 2007). 

[5] American National Standards Institute/Electronic Industries 
Alliance Standard, Earned Value Management Systems, ANSI/EIA-748-B, 
approved July 2007. 

[6] A product-oriented work breakdown structure allows a program to 
track cost and schedule by defined deliverables, such as a hardware or 
software component. This allows a program manager to more precisely 
identify which components are causing cost or schedule overruns and to 
more effectively mitigate the root cause of the overruns. 

[7] FAA uses airport towers, terminal radar approach control 
facilities, and air route traffic control centers (also called en route 
centers) located throughout the country to control air traffic. In 
addition, FAA's ATC System Command Center manages the flow of traffic 
across the country. 

[8] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-331] and 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-23]. 

[9] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HR-95-1]. 

[10] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-310], 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-207], [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-03-119], [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-01-263], [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO/HR-99-1], and [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO/T-HR-97-22]. 

[11] 49 U.S.C. § 40110. 

[12] ANSI/EIA Standard, Earned Value Management Systems, ANSI/EIA-748- 
A-1998. This document was updated in July 2007 and is referred to as 
ANSI/EIA-748-B. 

[13] OMB Memorandum, M-05-23 (Aug. 4, 2005). 

[14] An integrated baseline review is an evaluation of a program's 
baseline plan to determine whether all program requirements have been 
addressed, risks have been identified, mitigation plans are in place, 
and available and planned resources are sufficient to complete the 
work. 

[15] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-1134SP]. 

[16] OMB, Capital Programming Guide, Supplement to Circular A-11, Part 
7, version 2.0 (June 2006), 9 and 91-94 (app. 9). 

[17] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-1134SP]. 

[18] The Acquisition Management System defines all acquisition 
management and procurement policy and guidance within FAA. 

[19] OMB requires agencies to submit justification packages for major 
IT investments on an annual basis. This justification package is called 
the exhibit 300. 

[20] GAO, Financial Management: Improvements Under Way but Serious 
Financial Systems Problems Persist, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-06-970] (Washington, D.C.: Sept. 26, 2006); Financial 
Management Systems: Additional Efforts Needed to Address Key Causes of 
Modernization Failures, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-06-184] (Washington, D.C.: Mar. 15, 2006); Managerial 
Cost Accounting Practices: Departments of Education, Transportation, 
and the Treasury, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-
301R] (Washington, D.C.: Dec. 19, 2005); and Financial Management: 
Achieving FFMIA Compliance Continues to Challenge Agencies, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-05-881] (Washington, D.C.: Sept. 
20, 2005). 

[21] ASR-11 is a joint program sponsored by both FAA and the U.S. Air 
Force. FAA does not have the authority to obtain data on actual costs 
expended by the contractor or the Air Force because the Air Force is 
the sole acquisition authority on this contract. 

[22] GAO, Cost Assessment Guide: Best Practices for Estimating and 
Managing Program Costs, Exposure Draft, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-07-1134SP] (Washington, D.C.: 
July 2007). 

[23] [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-1134SP]. 

[24] This is the center where metrics are being developed to test the 
accuracy of ERAM. 

[End of section] 

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