Federal Capital
Three Entities' Implementation of Capital Planning Principles Is Mixed Gao ID: GAO-07-274 February 23, 2007In fiscal year 2005, the federal government spent nearly $117 billion on capital investments intended to yield long-term benefits for its operations. Effective capital planning ensures that the sizable investments made by federal agencies result in the most efficient return to taxpayers. Accordingly, GAO evaluated (1) how well selected entities followed the planning phase principles of GAO's Executive Guide and the Office of Management and Budget's (OMB) Capital Programming Guide, (2) OMB's actions to encourage all agencies to conform with capital planning principles, and (3) what capital planning information is received by or would be useful to congressional decision makers. Based on missions, asset types, and capital spending, we selected three entities to review within the Departments of Energy (DOE) and Homeland Security (DHS).
The selected entities--the Offices of Science (SC) and Environmental Management (EM) within DOE and U.S. Customs and Border Protection (CBP) within DHS--had mixed success with implementing the planning phase principles and practices described in OMB's and our guides. We found that in their capital planning processes, the selected entities' guidance generally requires linkage between proposed investments and strategic goals and they assess needs and identify performance gaps in a variety of ways. We also found that the selected entities' evaluations of alternatives are not always apparent in their capital planning documentation. Each entity has established a framework to review and approve proposed investments and uses criteria to rank and select projects, but problems exist with CBP's framework and CBP has only established criteria to rank and select its real property investments. In addition, although each entity produces some long-term planning documents, none has developed a comprehensive capital plan that defines all of its long-term investment decisions. OMB worked with agencies to update its Capital Programming Guide, which was released in June 2006. OMB staff also told us that OMB requires agencies to comply with the principles and practices in its guide. However, OMB does not routinely request all the information recommended by its guide. For example, although OMB's guide encourages agencies to develop long-term capital plans, OMB staff told us they do not request copies of these plans, so it is not clear whether all agencies develop them. Instead, OMB staff said they are able to determine if an agency has a capital planning process based on other required documents. Although these documents contain some elements of a long-term capital plan, they do not include all expected aspects. Congressional staff with whom we met believed additional capital planning information would be useful. Specifically, those responsible for resource allocation for and oversight of SC, EM, and CBP told us they would like to receive the type of information that would be found in a long-term capital plan. Congressional staff said that this information would help Congress make better-informed appropriations and oversight decisions.
RecommendationsOur 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.
Director: Team: Phone:GAO-07-274, Federal Capital: Three Entities' Implementation of Capital Planning Principles Is Mixed
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Report to the Subcommittee on Federal Financial Management, Government
Information, Federal Services, and International Security, Committee on
Homeland Security and Governmental Affairs, U.S. Senate:
United States Government Accountability Office:
GAO:
February 2007:
Federal Capital:
Three Entities' Implementation of Capital Planning Principles Is Mixed:
GAO-07-274:
GAO Highlights:
Highlights of GAO-07-274, a report to the Subcommittee on Federal
Financial Management, Government Information, Federal Services, and
International Security, Committee on Homeland Security and Governmental
Affairs, U.S. Senate
Why GAO Did This Study:
In fiscal year 2005, the federal government spent nearly $117 billion
on capital investments intended to yield long-term benefits for its
operations. Effective capital planning ensures that the sizable
investments made by federal agencies result in the most efficient
return to taxpayers. Accordingly, GAO evaluated (1) how well selected
entities followed the planning phase principles of GAO‘s Executive
Guide and the Office of Management and Budget‘s (OMB) Capital
Programming Guide, (2) OMB‘s actions to encourage all agencies to
conform with capital planning principles, and (3) what capital planning
information is received by or would be useful to congressional decision
makers. Based on missions, asset types, and capital spending, we
selected three entities to review within the Departments of Energy
(DOE) and Homeland Security (DHS).
What GAO Found:
The selected entities”the Offices of Science (SC) and Environmental
Management (EM) within DOE and U.S. Customs and Border Protection (CBP)
within DHS”had mixed success with implementing the planning phase
principles and practices described in OMB‘s and our guides. We found
that in their capital planning processes, the selected entities‘
guidance generally requires linkage between proposed investments and
strategic goals and they assess needs and identify performance gaps in
a variety of ways. We also found that the selected entities‘
evaluations of alternatives are not always apparent in their capital
planning documentation. Each entity has established a framework to
review and approve proposed investments and uses criteria to rank and
select projects, but problems exist with CBP‘s framework and CBP has
only established criteria to rank and select its real property
investments. In addition, although each entity produces some long-term
planning documents, none has developed a comprehensive capital plan
that defines all of its long-term investment decisions.
Table: Selected Entities' Conformance with Capital Planning Principles:
Planning Principle: Strategic linkage; DOE/SC: Practices conform;
DOE/EM: Practices conform;
DHS/CBP: Practices partially conform.
Planning Principle: Needs assessment and gap identification; DOE/SC:
Practices conform;
DOE/EM: Practices conform;
DHS/CBP: Practices partially conform.
Planning Principle: Alternatives evaluation; DOE/SC: Practices
partially conform;
DOE/EM: Practices partially conform;
DHS/CBP: Practices partially conform.
Planning Principle: Review and approval framework with established
criteria for selecting capital investments; DOE/SC: Practices conform;
DOE/EM: Practices conform;
DHS/CBP: practices partially conform.
Planning Principle: Long-term capital investment plan; DOE/SC:
Practices do not conform;
DOE/EM: Practices do not conform;
DHS/CBP: Practices do not conform.
Source: GAO analysis of agency data.
[End of table]
OMB worked with agencies to update its Capital Programming Guide, which
was released in June 2006. OMB staff also told us that OMB requires
agencies to comply with the principles and practices in its guide.
However, OMB does not routinely request all the information recommended
by its guide. For example, although OMB‘s guide encourages agencies to
develop long-term capital plans, OMB staff told us they do not request
copies of these plans, so it is not clear whether all agencies develop
them. Instead, OMB staff said they are able to determine if an agency
has a capital planning process based on other required documents.
Although these documents contain some elements of a long-term capital
plan, they do not include all expected aspects.
Congressional staff with whom we met believed additional capital
planning information would be useful. Specifically, those responsible
for resource allocation for and oversight of SC, EM, and CBP told us
they would like to receive the type of information that would be found
in a long-term capital plan. Congressional staff said that this
information would help Congress make better-informed appropriations and
oversight decisions.
What GAO Recommends:
We recommend DOE and DHS improve conformance with capital planning
principles at SC and EM, and CBP, respectively. We also make
recommendations to the Director of OMB and suggest Congress make
capital planning information more available to decision makers. DOE and
DHS agreed with our recommendations; OMB agreed with as-needed
submissions of capital plans but not with requiring them. We believe
requiring these plans is important to ensure consistent conformance
with the principles.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-274].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Susan J. Irving at (202)
512-9142 or irvings@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Objectives, Scope, and Methodology:
Capital Planning Principles Are Evident but Implementation Is Mixed:
OMB Has Taken Actions to Encourage Agencies to Conform with Capital
Planning Principles, but It Does Not Request Long-term Capital Plans:
Congress Receives Some Capital Planning Information from Agencies but
Additional Information Would Enhance Decision Making:
Conclusions:
Matter for Congressional Consideration:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Department of Energy:
Background:
Types of Assets:
Capital Funding:
Capital Planning Process:
Appendix III: U.S. Customs and Border Protection:
Background:
Types of Assets:
Capital Funding:
Capital Planning Process:
Appendix IV: Comments from the Department of Energy:
GAO Comments:
Appendix V: Comments from the Department of Homeland Security:
GAO Comments:
Appendix VI: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Capital Planning Principles:
Table 2: DOE Review and Approval Authority Thresholds for Investments
Costing $5 Million or More:
Table 3: DHS Investment Levels for Non-IT Projects:
Table 4: Criteria for Scoring Capital Investment Projects at CBP
Facilities:
Table 5: DOE Review and Approval Authority Thresholds for Investments
Costing $5 Million or More:
Table 6: DHS Investment Levels for Non-IT Projects:
Table 7: Criteria for Scoring Capital Investment Projects at CBP
Facilities:
Figures:
Figure 1: Selected Entities' Conformance with Capital Planning
Principles:
Figure 2: Summary of SC and EM Project Categories:
Figure 3: SC Capital Asset Investments, Fiscal Year 2005:
Figure 4: EM Capital Asset Investments, Fiscal Year 2005:
Figure 5: SC's and EM's Conformance with Capital Planning Principles:
Figure 6: CBP Capital Asset Investments, Fiscal Year 2005:
Figure 7: CBP's Conformance with Capital Planning Principles:
Abbreviations:
AIP: accelerator improvement projects:
ARB: Architecture Review Board:
BES: Basic Energy Sciences:
CAMP: Capital Asset Management Process:
CBP: U.S. Customs and Border Protection:
DOE: Department of Energy:
DHS: Department of Homeland Security:
EM: Office of Environmental Management:
ESAAB: Energy Systems Acquisitions Advisory Board:
FIMS: Facilities Information Management System:
GPP: general plant projects:
IFI: Integrated Facilities and Infrastructure Crosscut Budget:
IRB: Investment Review Board:
IT: information technology:
MIE: major items of equipment:
OIG: Office of Inspector General:
OMB: Office of Management and Budget:
SAP: Systems, Applications and Products:
SC: Office of Science:
TYSP: 10-year site plan:
United States Government Accountability Office:
Washington, DC 20548:
February 23, 2007:
The Honorable Thomas R. Carper:
Chairman:
The Honorable Tom Coburn:
Ranking Member:
Subcommittee on Federal Financial Management, Government Information,
Federal Services, and International Security:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
In fiscal year 2005 alone, the federal government spent nearly $117
billion on capital assets intended to yield long-term benefits for its
own operations--a 17 percent increase from the $100 billion spent in
2002. Both because large sums of taxpayer funds are spent on capital
assets and because their performance affects how well agencies are able
to achieve their missions, goals, and objectives, effective planning
for capital investments is a very important task. The Congress, the
Office of Management and Budget (OMB), and we have all identified the
need for effective capital planning. In addition, budgetary pressures
and demands to improve performance in all areas increase the need for
agencies to make sound capital acquisition choices.
This report responds to your request that we evaluate federal entities'
conformance with capital planning principles embodied in our Executive
Guide[Footnote 1] and in OMB's Capital Programming Guide--supplemental
guidance contained in its annual Circular No. A-11. As requested, we
evaluated (1) how well selected entities followed the planning phase
principles in OMB's and our guides, (2) what actions OMB has taken to
encourage all agencies' conformance with capital planning principles,
and (3) what capital planning information is currently received by or
would be useful to congressional decision makers. As you requested, we
focused on noninformation technology (non-IT) capital investments at
selected entities. Based on the diversity in their missions, the
different types of assets they acquired, and their relatively high
volume of capital spending, we looked at the Office of Science (SC) and
the Office of Environmental Management (EM) within the Department of
Energy (DOE), and U.S. Customs and Border Protection (CBP) within the
Department of Homeland Security (DHS). In fiscal year 2005, SC, EM, and
CBP budget authority for capital investments was $563 million, $1,027
million, and $851 million, respectively.
We conducted our work from February 2006 through December 2006 in
accordance with generally accepted government auditing standards.
Detailed information on our scope and methodology appears in appendix
I.
Results in Brief:
EM, SC, and CBP have experienced mixed success with implementing the
planning phase principles and practices described in OMB's Capital
Programming Guide and our Executive Guide. DOE has a well-established
capital planning process in place for higher-cost investments--largely
based on OMB's Capital Programming Guide, according to DOE officials--
that both SC and EM follow; as such, SC's and EM's capital planning
processes better conform with capital planning principles. Conversely,
CBP's capital planning process is relatively new and untested for
capital investments other than IT; it did not fully conform with any of
the capital planning principles at the time of our review. We found
that in their capital planning processes, all three selected entities'
guidance generally requires linkage between proposed investments and
strategic goals and objectives and they use a variety of methods to
assess needs and identify performance gaps between current and needed
capabilities. A lack of non-IT examples meant we were unable to verify
implementation of these practices in CBP's process; however, we were
able to verify these practices for a CBP project reviewed in DHS's
capital planning process. We also found that the selected entities'
evaluations of alternatives are not always apparent in their capital
planning documentation. Although each entity has established a
framework to review and approve proposed investments and uses criteria
to rank and select projects, problems exist with CBP's framework, such
as it does not review non-IT capital projects below $50 million, and it
has established criteria to rank and select only its real property
investments. None of the selected entities has developed a
comprehensive, long-term capital plan. Each entity has some long-term
planning documents, but none has an entitywide capital plan that
defines all of its long-term investment decisions.
OMB has taken steps to encourage agencies' conformance with capital
planning principles, but it does not request long-term capital plans
from agencies. Beginning in November 2005, OMB collaborated with
agencies to update its Capital Programming Guide. The updated guide was
released in June 2006 as a part of OMB's annual Circular No. A-11. In
addition, OMB staff told us that OMB requires agencies to comply with
the principles and practices in its guide. However, OMB does not
routinely request all the information recommended by its guide. For
example, although agencies are encouraged to develop long-term capital
plans as a part of the Capital Programming Guide, OMB staff told us
they do not request copies of these plans, so it is not clear whether
all agencies produce them. Instead, OMB staff stated that they are able
to determine if an agency has a capital planning process based on other
required documents. Although these other documents contain some
elements of a long-term capital plan, they do not include all expected
aspects. As the principal output of an agency's capital planning
process, a long-term capital plan should be the central document an
agency uses to guide its capital decision making. We have previously
recommended, and we continue to believe, that OMB should require
agencies to develop and submit long-term capital plans to OMB and
congressional decision makers.
EM, SC, and CBP provide some capital planning information to Congress.
However, congressional staff with whom we met stated that they would
like to receive additional information. Specifically, those responsible
for resource allocation for and oversight of the selected entities told
us they would like to receive the type of information that would be
found in a long-term capital plan. Congressional staff said that this
information would help Congress make better-informed appropriations and
oversight decisions.
We make recommendations in this report to the Secretaries of Energy and
Homeland Security to improve conformance with capital planning
principles at SC and EM, and CBP, respectively. DOE and DHS agreed with
these recommendations.
In addition, we make recommendations to the Director of OMB and offer a
matter for Congress to consider to enhance the availability of long-
term capital planning information to decision makers. OMB agreed that
there are benefits to it reviewing an agency's long-term capital plan
on an as-needed basis. However, it did not agree that all federal
agencies should be required to submit a long-term capital plan to OMB
and stated that these plans should be developed by agencies and shared
with OMB on a case-by-case basis depending on the specific issue being
addressed. We continue to believe that requiring agencies to develop
and submit long-term capital plans to OMB will better ensure that
agencies have long-term capital planning processes that conform with
established capital planning principles.
Written comments from DOE and DHS are included and addressed in
appendixes IV and V, respectively. OMB provided comments orally and via
e-mail. In addition, each of the case study entities, their respective
departments, and OMB provided technical comments. We have incorporated
changes as a result of these comments, as appropriate.
Background:
Federal government spending on capital investments can be divided into
two categories: that which provides long-term benefits to the nation as
a whole--increasing the nation's overall capital stock for economic
growth--and that which improves the efficiency of internal federal
agency operations--capital investment for the government as an
operating entity. This report focuses on the latter. OMB and we have
defined these assets, which are acquired for the government's own use,
as land, structures, equipment, and intellectual property (including
software) that have an estimated useful life of 2 years of
more.[Footnote 2] Some examples are office buildings, waste storage
facilities, motor vehicles, aircraft, marine vessels, construction
equipment, pieces of scientific research equipment, and scanning and
detection equipment.
Effective capital programming requires long-range planning and a
disciplined decision-making process as the basis for managing a
portfolio of assets to achieve performance goals and objectives with
minimal risk, lowest life-cycle costs, and greatest benefits to the
agency's business. Capital programming consists of four phases: (1)
planning, (2) budgeting, (3) acquiring, and (4) managing assets. We
have previously reported that the planning phase is the crux of the
capital decision-making process.[Footnote 3] The results from this
phase are used throughout the remaining phases of the process and
failure to follow key practices during this phase may have
repercussions on agency operations if poor capital investment decisions
are made. For the planning phase, both OMB and our guidance stress the
importance of linking capital asset investments to an organization's
overall mission and long-term strategic goals. The guidance also
emphasizes evaluating a full range of alternatives to bridge any
identified performance gap, informed by agency asset inventories that
contain condition information. Further, the guidance calls for a
comprehensive decision-making framework to review, rank, and select
from among competing project proposals. Such a framework should include
appropriate levels of management review and selections should be based
on the use of established criteria. The ultimate product of the
planning phase is a comprehensive capital plan, which defines the long-
term capital decisions that resulted from the agency's capital planning
process. Both OMB and our guidance highlight the importance of this
plan. Table 1 further elaborates on the five key capital planning
principles contained in the guidance.
Table 1: Capital Planning Principles:
Planning principle: Strategic linkage;
Description: Capital planning is an integral part of an agency's
strategic planning process. It provides a long-range plan for the
capital asset portfolio in order to meet the goals and objectives in
the agency's strategic and annual performance plans. Agency strategic
and annual performance plans should identify capital assets and define
how they will help the agency achieve its goals and objectives. Leading
organizations also view strategic planning as the vehicle that guides
decision making for all spending.
Planning principle: Needs assessment and gap identification;
Description: A comprehensive needs assessment identifies the resources
needed to fulfill both immediate requirements and anticipated future
needs based on the results-oriented goals and objectives that flow from
the organization's mission. A comprehensive assessment of needs
considers the capability of existing resources and makes use of an
accurate and up-to-date inventory of capital assets and facilities as
well as current information on asset condition. Using this information,
an organization can properly determine any performance gap between
current and needed capabilities.
Planning principle: Alternatives evaluation;
Description: Agencies should determine how best to bridge performance
gaps by identifying and evaluating alternative approaches, including
nonphysical capital options such as human capital. Before choosing to
purchase or construct a capital asset or facility, leading
organizations carefully consider a wide range of alternatives such as
contracting out, privatizing the activity, leasing, and whether
existing assets can be used.
Planning principle: Review and approval framework with established
criteria for selecting capital investments;
Description: Agencies should establish a formal process for senior
management review and approval of proposed capital assets. The cost of
a proposed asset, the level of risk involved in acquiring the asset,
and its importance to achieving the agency mission should be considered
when defining criteria for executive review. Leading organizations have
processes that determine the level of review and analysis based on the
size, complexity, and cost of a proposed investment or its
organizationwide impact. As a part of this framework, proposed capital
investments should be compared to one another to create a portfolio of
major assets ranked in priority order.
Planning principle: Long-term capital investment plan;
Description: The long-term capital plan should be the final and
principal product resulting from the agency's capital planning process.
The capital plan, covering 5 years or more, should be the result of an
executive review process that has determined the proper mix of existing
assets and new investments needed to fulfill the agency's mission,
goals, and objectives, and should reflect decision makers' priorities
for the future. Leading organizations update long-term capital plans
either annually or biennially. Agencies are encouraged to include
certain elements in their capital plans, including a statement of the
agency mission, strategic goals, and objectives; a description of the
agency's planning process; baseline assessments and identification of
performance gaps; and a risk management plan.
Source: GAO analysis based on OMB's Capital Programming Guide (Version
2.0) and GAO-04-138.
[End of table]
Originally released in July 1997, and recently updated in June 2006,
OMB's Capital Programming Guide provides federal agencies a basic
reference for establishing an effective process for making investment
decisions. In December 1998, we issued an Executive Guide on leading
practices for capital decision making. In addition, in January 2004, we
reported on the implementation of capital planning concepts in four
federal agencies: the Department of Veterans Affairs, the Bureau of
Prisons within the Department of Justice, the National Park Service
within the Department of the Interior, and the National Oceanic and
Atmospheric Administration within the Department of Commerce.[Footnote
4] We found that these agencies' capital planning processes generally
linked investments to their strategic goals and objectives, and they
all considered a range of alternatives to bridge any identified
performance gap. Most had established frameworks to review and select
from competing project proposals, but had limited success with using
agencywide asset inventory systems and data on asset condition to
identify performance gaps. None of the agencies we examined then had
prepared comprehensive, agencywide, long-term capital plans. Since our
report, most have taken actions to improve their capital planning
processes by addressing some or all of these issues.
As in our past report, this report reviews capital planning processes
at selected entities. This report looks at SC, EM, and CBP, which were
selected based on the diversity in their missions, the different types
of assets they acquired, and their relatively high volume of capital
spending.
According to its 5-Year Budget Plan for Fiscal Years 2007-2011, SC's
mission is to "deliver the discoveries and scientific tools that
transform our understanding of energy and matter and advance the
national, economic, and energy security of the U.S." It had a fiscal
year 2006 budget of over $3.5 billion and manages 10 national
laboratories as well as additional research projects at other locations
across the country. In fiscal year 2005, budget authority for SC's
capital investments accounted for $563 million, or 15 percent of the
total DOE Science appropriations. Its capital spending is influenced by
facility revitalization needs and the demand of the scientific
community for new or improved research tools and facilities. SC invests
in research-oriented assets such as research facilities, new
instrumentation and components for existing facilities, and other
pieces of scientific research equipment, as well as general-purpose
construction, maintenance, and repair projects.
EM's mission is to complete the safe cleanup of the environmental
legacy from 5 decades of nuclear weapons development and government-
sponsored nuclear energy research. It had a fiscal year 2006 budget of
over $6.5 billion and manages over 80 environmental cleanup projects at
25 sites across the country. In fiscal year 2005, budget authority for
capital investments accounted for $1,027 million, or 14 percent of EM's
total appropriations. EM capital spending is influenced by facility
maintenance needs and the legislative and regulatory requirements that
drive its cleanup operations as well as the current state of
technology. EM acquires waste treatment facilities, waste storage
facilities, vehicles, pumping equipment, and construction equipment.
Like SC, EM also invests in general-purpose construction, maintenance,
and repair projects.
CBP's mission is to prevent terrorists and terrorist weapons from
entering the United States while at the same time facilitating the flow
of legitimate trade and travel. CBP is organized into 20 different
offices and has a large field presence. In fiscal year 2005, budget
authority for capital investments accounted for $851 million, or 13
percent of the agency's total appropriations.[Footnote 5] CBP acquires
and uses many different types of capital assets to accomplish its
mission. Its current facilities and tactical infrastructure portfolio
consists of CBP-owned and -leased facilities and real estate, temporary
structures, and other tactical infrastructure, such as fences, lights,
and barriers. CBP owns and maintains a motor vehicle fleet, a variety
of aircraft, and different types of marine vessels. The agency also
acquires different types of scanning and detection equipment, such as
large-scale X-ray and gamma-imaging systems, and nuclear and
radiological detection equipment.
Objectives, Scope, and Methodology:
The objectives of this study were to evaluate (1) how well selected
entities followed the planning phase principles in OMB's and our
guides, (2) what actions OMB has taken to encourage all agencies'
conformance with capital planning principles, and (3) what capital
planning information is currently received by or would be useful to
congressional decision makers. Based on the diversity in their
missions, the types of assets they acquired, and their relatively high
volume of capital spending, we focused on non-IT capital investments at
selected entities: the Office of Science (SC) and the Office of
Environmental Management (EM) within the Department of Energy (DOE),
and U.S. Customs and Border Protection (CBP) within the Department of
Homeland Security (DHS).
To accomplish our first objective, we obtained and reviewed various
forms of agency documentation, including asset management, budget, and
program documents; strategic plans; performance plans and other annual
plans; and capital project proposals. We also conducted extensive
interviews with agency officials at various levels of management,
including planning, policy, budget, and facilities staff as well as
program, project, and property management staff.
To accomplish our second objective, we met with OMB staff to discuss
what actions OMB had taken to encourage agencies' conformance with
capital planning principles. We also obtained and reviewed various OMB
guidance, including its Circular No. A-11 and its updated Capital
Programming Guide.
To accomplish our third objective, we met with staff members of several
committees responsible for resource allocation for or oversight of the
selected entities in order to better understand what capital planning
data are used or would be most useful in their decision
making.[Footnote 6]
Capital Planning Principles Are Evident but Implementation Is Mixed:
The selected entities have experienced mixed success with implementing
the planning phase principles and practices described in OMB's Capital
Programming Guide and our Executive Guide. DOE has a well-established
capital planning process in place for higher-cost investments--largely
based on OMB's Capital Programming Guide, according to DOE officials--
that both SC and EM follow; as such, SC's and EM's capital planning
processes better conform with capital planning principles. Conversely,
CBP's process is relatively new and untested for capital investments
other than IT; it did not fully conform with any of the capital
planning principles at the time of our review. We found that in their
capital planning processes, the selected entities' guidance generally
requires linkage between proposed investments and strategic goals and
objectives and they use a variety of methods to assess needs and
identify performance gaps between current and needed capabilities. A
lack of non-IT examples meant we were unable to verify implementation
of these practices in CBP's process; however, we were able to verify
these practices for a CBP project reviewed in DHS's capital planning
process. CBP officials told us that this project served as an example
of how a project proceeds through DHS's capital planning process. We
also found that the selected entities' evaluations of alternatives are
not always apparent in their capital planning documentation. Although
each entity has established a framework to review and approve proposed
investments and uses criteria to rank and select projects, problems
exist with CBP's framework, such as it does not review non-IT capital
projects below $50 million, and it only has established criteria to
rank and select its real property investments. In addition, none of the
selected entities has developed a comprehensive, long-term capital
plan. Each entity has some long-term planning documents, but none has a
comprehensive capital plan that defines all of its long-term investment
decisions. Figure 1 provides a snapshot of the degrees of conformance
with the planning phase guidance at the examined entities. Further
information on each entity and its capital planning process is
contained in appendix II for SC and EM, and appendix III for CBP.
Figure 1: Selected Entities' Conformance with Capital Planning
Principles:
Planning Principle: Strategic linkage; DOE/SC: Practices conform;
DOE/EM: Practices conform;
DHS/CBP: Practices partially conform.
Planning Principle: Needs assessment and gap identification; DOE/SC:
Practices conform;
DOE/EM: Practices conform;
DHS/CBP: Practices partially conform.
Planning Principle: Alternatives evaluation; DOE/SC: Practices
partially conform;
DOE/EM: Practices partially conform;
DHS/CBP: Practices partially conform.
Planning Principle: Review and approval framework with established
criteria for selecting capital investments; DOE/SC: Practices conform;
DOE/EM: Practices conform;
DHS/CBP: practices partially conform.
Planning Principle: Long-term capital investment plan; DOE/SC:
Practices do not conform;
DOE/EM: Practices do not conform;
DHS/CBP: Practices do not conform.
Source: GAO analysis of agency data.
[End of figure]
All Three Entities' Guidance Requires Strategic Linkage:
Both OMB and our guidance emphasize the importance of linking capital
asset investments, funding, and management to an organization's overall
mission and long-term strategic goals. OMB's guide describes capital
planning as an integral part of an agency's strategic planning process
within the framework established by the Government Performance and
Results Act.[Footnote 7] The guide states that by linking planning and
budgeting to procurement and the management of capital assets the
resulting all-encompassing roadmap encourages agencies to develop a
capital plan. This provides for the long-range planning of the capital
asset portfolio in order to meet the goals and objectives in the
strategic and annual performance plans. Both the strategic and annual
performance plans should identify capital assets and define how they
will help the agency achieve its goals and objectives. Our guide
describes how leading organizations also view strategic planning as the
vehicle that guides decision making for all spending. These
organizations use their strategic planning processes to assess the
needs of clients and constituents and the political and economic
environment in which they are operating and to link the expected
outcomes of projects, including capital projects, to the organization's
overall strategic goals and objectives.
EM, SC, and CBP have guidance that calls for linking planned capital
acquisitions to agency strategic plans. As required by DOE's capital
planning process for investments equal to or over $5 million--which is
largely based on OMB's Capital Programming Guide, according to DOE
officials--both SC and EM produce mission need statements to tie these
higher cost investments to DOE's strategic goals. For example, an SC
mission need statement for the National Synchrotron Light Source-II
discusses how the proposed research facility is linked to one of SC's
program goals, which in turn is linked to DOE's strategic goal to
provide world-class scientific research capacity in a number of fields.
For projects entering CBP's capital planning process, the related
guidance directs project managers to prepare a need analysis document
that outlines how the proposed investment links to both CBP and DHS
strategic goals. However, we were unable to verify implementation of
this practice for non-IT capital projects because none had yet
completed CBP's capital planning process at the time of our review.
CBP's major non-IT projects--those with an acquisition cost of $50
million or more--are also reviewed and approved in DHS's capital
planning process. DHS guidance calls for a link between the capital
investment and DHS's mission and strategic goals in mission need
statements. In a mission need statement for Border Patrol's aircraft
recapitalization, the narrative explicitly ties aviation assets to the
awareness, prevention, and protection goals in DHS's strategic plan.
CBP officials told us that Border Patrol's aircraft recapitalization
served as an example of how a project proceeds through DHS's capital
planning process. This project was not reviewed in CBP's current
capital planning process because the project began in 2003, before the
process was implemented.
The Selected Entities Generally Conduct Needs Assessment and Gap
Identification:
Conducting a comprehensive assessment of resources needed or an
analysis of program requirements is an important first step in an
organization's capital decision-making process. A comprehensive needs
assessment identifies the resources needed to fulfill both immediate
requirements and anticipated future needs based on the results-oriented
goals and objectives that flow from the organization's mission. The
needs assessment is results oriented in that it determines what is
needed to obtain specific outcomes rather than what is needed to
maintain or expand existing capital stock. A comprehensive assessment
of needs considers the capability of existing resources and makes use
of an accurate and up-to-date inventory of capital assets and
facilities as well as current information on asset condition. Using
this information, an organization can properly determine any
performance gap between current and needed capabilities.
The selected entities assess their needs and identify gaps in a variety
of ways. For example, the nature of its programs leads SC to rely on
discussion among its research programs, laboratories, advisory
committees, and the scientific community to identify gaps in the
capabilities of its research-oriented assets. However, for EM, needs
assessment is driven by legal or regulatory requirements that target
gaps between current and desired environmental safety conditions at
cleanup sites and the current state of technology. For example, the
need for its Sodium-Bearing Waste Treatment Project is driven by the
Idaho Settlement Agreement between DOE, the Department of the Navy, and
the state of Idaho, which lays out goals for treatment and disposal of
1 million gallons of sodium-bearing waste at the Idaho National
Engineering and Environmental Laboratory. At CBP, capital planning
guidance requires the identification of the need for a project, a
description of the difference in the current versus required
capabilities, and an explanation of why existing resources are unable
to provide the required capability. As noted, we were unable to verify
implementation of this practice due to a lack of non-IT examples.
However, DHS also requires this information, which is illustrated by
the previously cited Border Patrol example. In its mission need
statement for aircraft recapitalization, Border Patrol references its
five mission objectives and describes how aviation assets provide
necessary support in carrying out those objectives.[Footnote 8] Also in
the statement, Border Patrol identifies several gaps in its current and
future capabilities such as existing aircraft have become
unserviceable, increasingly expensive to maintain, or have or soon will
reach the end of their useful lives.
CBP has also established a separate process to determine needed
improvements for its real property investments. CBP is implementing an
investment planning process for Border Patrol and Field Operations
facilities that involves conducting long-range strategic resource
assessments to assess existing facilities, predict future needs, and
analyze space capacity. For example, a strategic resource assessment of
the Tucson Field Operations Office found that the main building at the
Nogales West land port of entry lacks sufficient space for CBP
operations and is not currently configured to achieve unification of
legacy services.
CBP, EM, and SC all use inventories to track information on current
assets, but data in several of these inventories are inaccurate or
incomplete. CBP maintains an agencywide asset inventory that includes
asset condition and other information. EM and SC report into a DOE-wide
real property inventory. Although there is not yet a departmentwide
personal property inventory, EM and SC maintain site-level personal
property inventories that include condition information, as required by
DOE.[Footnote 9] However, some data in CBP's and EM's asset inventories
are inaccurate or incomplete. For example, CBP officials told us that
legacy Border Patrol marine assets have not yet been transferred from
Border Patrol cost centers to Air and Marine cost centers in the
agency's asset inventory. In addition, in a report to the House of
Representatives and Senate Committees on Appropriations on its Master
Construction Planning Process, CBP cited a number of concerns with
existing facility data, including that the data were not complete,
contained conflicting information, or had not been updated since
initial collection. EM officials at one site told us that they had not
recorded all of their assets in DOE's real property inventory.
Officials at both CBP and EM told us they are working to address these
issues.
The Selected Entities' Evaluation of Alternatives Is Not Always
Apparent:
When a performance gap between needed and current capabilities has been
identified, it is important that organizations carefully consider how
best to bridge the gap by identifying and evaluating alternative
approaches, including noncapital options. OMB's guide states that once
detailed requirements are defined, agency management should answer the
"Three Critical Questions" before planning to acquire capital assets.
The Three Critical Questions are: (1) does the investment in a major
capital asset support core/priority mission functions that need to be
performed by the federal government, (2) does the investment need to be
undertaken by the requesting agency because no alternative private
sector or governmental source can better support the function, and (3)
does the investment support work processes that have been simplified or
otherwise redesigned to reduce costs, improve effectiveness, and make
maximum use of commercial, off-the-shelf technology? If the answer to
all three questions is yes, according to the OMB guide, management
should still consider options other than acquiring new assets to bridge
the performance gap, such as meeting the objectives through regulation
or user fees, using human capital instead of physical capital assets,
or consider modifying existing assets. It also encourages the use of
benefit-cost or cost-effectiveness analyses to determine if acquiring a
new asset is the best way to reduce an identified performance gap. Our
guide describes how leading organizations consider a wide range of
alternatives to bridge a performance gap, including noncapital
alternatives, before choosing to purchase or construct a capital asset
or facility. These options include contracting out, privatizing the
activity, nonownership options such as leasing, or engaging in joint
venture projects with other organizations to minimize the amount
invested and reduce the organization's risk. If it is determined that a
capital asset is needed to bridge a performance gap, leading
organizations first consider the use of existing assets before choosing
to purchase or construct new assets.
The selected entities' capital planning documents do not always capture
an evaluation of alternatives. Of the 12 SC and EM mission need
statements we reviewed, nine included an alternatives evaluation, but
even when this was included, noncapital options were not always
considered. We also reviewed related acquisition plans and strategies-
-additional required documents that are expected to fully discuss
alternatives--for five of these investments. Although all considered
capital alternatives, only one each of the two SC and three EM
acquisition plans and strategies we reviewed discussed noncapital
options. SC and EM officials told us that alternatives are sometimes
evaluated outside of the formal DOE project management process. For
example, an SC official told us that senior management decides which
assets SC will acquire versus fulfilling its need through noncapital
options. This includes providing funding to outside entities, such as a
university, for research purposes, but such evaluations were not always
captured in related planning documents. CBP does not require an
evaluation of alternatives for projects below $50 million. However, CBP
considers alternatives in its strategic resource assessments of real
property investments and for major capital projects that are reviewed
by DHS. In the previously cited example of the Nogales West land port
of entry, the strategic resource assessment of the Tuscan Field
Operations Office considered two options to improve the main building
at the Nogales West land port of entry: addition of new space and
reconfiguration of existing space.
The Selected Entities Have Established Review and Approval Frameworks
but Have Not Established Criteria to Rank and Select All Investments:
Establishing a decision-making framework that encourages the
appropriate levels of management review and approval is a critical
factor in making sound capital investment decisions. A framework
supported by the proper financial, technical, and risk analyses can
mean capital investment decisions are made more efficiently and
supported by better information. OMB's Capital Programming Guide states
that each agency should establish a formal process for senior
management review and approval of proposed capital assets. The cost of
a proposed asset, the level of risk involved in acquiring the asset,
and its importance to achieving the agency mission should be considered
when defining criteria for executive review. Our Executive Guide
describes how leading organizations use decision-making processes to
help them assess where they should invest for the greatest benefit.
Some organizations have processes that determine the level of review
and analysis based on the size, complexity, and cost of a proposed
investment or its organizationwide impact.
As a part of this framework, proposed capital investments should be
compared to one another to create a portfolio of major assets ranked in
priority order. It is generally beneficial, if not necessary, to rank
proposed projects because the number of requested projects often
exceeds available funding. OMB's guidance suggests that agencies choose
portfolios of capital investments that maximize return to the taxpayer
and the government--at an acceptable level of risk. The guide provides
one approach to devising a ranked list of projects drawn from multiple
best practices organizations: the use of a scoring mechanism that
assigns a range of values based on project strengths and weaknesses.
Higher scores are given to projects that meet or exceed positive
aspects of the decision criteria. Our Executive Guide describes
processes used by leading organizations for ranking and selecting
proposed capital projects. These organizations determined the
appropriate mix of projects by viewing all proposed investments and
existing capital assets as a portfolio. They selected projects based on
preestablished criteria and a relative ranking of investment proposals.
The organizations used their overall missions and strategic objectives
as a basis for establishing decision-making criteria, such as increased
cost savings, market growth, and link to organizational strategies, to
rank projects.
The entities reviewed in this study and the departments in which they
are located have established review and approval frameworks, although
problems exist with those at CBP and DHS. SC and EM investments with a
cost of $5 million or more are subject to DOE's formal review and
approval framework, which was established in October 2000. Investment
proposals are reviewed by a board of senior executives, the composition
of which varies depending on project costs and risk, and final approval
rests with a designated acquisition executive. Table 2 illustrates the
various DOE review boards and approving executives. For lower-cost
investments--defined as those below $5 million--review and approval
authority resides at the site level with some oversight by SC and EM.
For example, many of SC's national laboratories have site-level
advisory committees that review or make recommendations for lower-cost
investments.
Table 2: DOE Review and Approval Authority Thresholds for Investments
Costing $5 Million or More:
Cost threshold: $750 million[A];
Acquisition executive: Deputy Secretary of Energy;
Delegated executive: Cannot be delegated;
Review board: Energy Systems Acquisition Advisory Board (ESAAB).
Cost threshold: $100 million to $750 million[A];
Acquisition executive: Under Secretary;
Delegated executive: Head of program office (if $100 million.
Investment level: Level 2;
Review and approval: Joint Requirements Council reviews and approves;
Total acquisition cost: $50 million to $100 million.
Investment level: Level 3;
Review and approval: Component agency (e.g., CBP) head approves;
Total acquisition cost: $20 million to $50 million.
Investment level: Level 4;
Review and approval: Component agency (e.g., CBP) head approves;
Total acquisition cost: $100 million.
Investment level: Level 2;
Review and approval: Joint Requirements Council reviews and approves;
Total acquisition cost: $50 million to $100 million.
Investment level: Level 3;
Review and approval: Component agency (e.g., CBP) head approves;
Total acquisition cost: $20 million to $50 million.
Investment level: Level 4;
Review and approval: Component agency (e.g., CBP) head approves;
Total acquisition cost:
