Information Technology Investment

Agencies Can Improve Performance, Reduce Costs, and Minimize Risks Gao ID: AIMD-96-64 September 30, 1996

The management of information technology projects has long been a significant problem for federal agencies. The government obligated more than $23.5 billion toward information technology products and services in fiscal year 1994--about five percent of the government's total discretionary spending. Yet the impact of this spending on agency operations and service delivery has been mixed at best. Federal computer systems often cost millions more than expected, take longer to complete than anticipated, and fail to significantly improve the speed and quality of federal programs--or reduce their cost. Some private and public sector organizations, however, have significantly improved performance by managing their information technology resources within an overall framework that aligns technology with business needs and priorities. This report compares the information technology investment management practices of leading organizations with those of five agencies--NASA, the National Oceanic and Atmospheric Administration, the Environmental Protection Agency, the Coast Guard, and the Internal Revenue Service.

GAO found that: (1) leading private- and public-sector organizations manage their IT projects as investments and rank projects based on maximizing returns and minimizing risks; (2) the five federal agencies reviewed have some elements of an IT investment process in place, but they lack a complete, institutionalized approach that would fulfill the requirements of ITMRA or the Paper Reduction Act; (3) the agencies reviewed need to manage their IT projects as an investment portfolio, viewing each project as a competing investment and make decisions based on the project's overall contribution to the agency's goals; (4) the agencies do not conduct postimplementation reviews (PIR) to determine actual costs, returns, and risks; (5) agency IT decisions are based on inconsistent or inaccurate data; (6) with the exception of the Coast Guard, none of the agencies reviewed have a set of explicit criteria for making IT decisions; and (7) OMB has taken a proactive role in developing IT investment policy to assist federal agencies in implementing ITMRA requirements.


Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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