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GAO: Cost estimates are typically faulty on major IT projects

Jul. 26, 2012 - 05:14PM   |  
By NICOLE BLAKE JOHNSON   |   Comments
Sen. Susan Collins, R-Maine, has requested that the GAO examine the reliability of project cost estimates.
Sen. Susan Collins, R-Maine, has requested that the GAO examine the reliability of project cost estimates. (Sheila Vemmer / Staff)

Managers are routinely using faulty cost estimates when making key decisions affecting major information technology projects, a new audit has found.

Fifteen of the 16 IT projects reviewed, valued at a combined $52 billion, are using unreliable cost estimates, according to a July report by the Government Accountability Office.

Most of the cost estimates “did not provide a sound basis for informed program and budget decisions,” GAO said.

Fifteen of those programs failed to apply best practices when developing cost estimates, the report found.

“It is reckless to enter into a contract without knowing how much what you are buying should cost,” said Sen. Susan Collins, R-Maine, in a statement to Federal Times. Collins requested that the GAO examine the reliability of project cost estimates.

“It is alarming to discover that, despite past cost overruns and failed IT projects, agencies still have not put in place effective cost estimate policies. The time for a dramatic improvement in acquisition planning is now,” she added.

The GAO report reviewed IT projects at the Environmental Protection Agency, Agriculture, Commerce, Defense, Homeland Security, Justice, Labor, and Veterans Affairs departments.

Projects reviewed included VA’s Veterans Benefits Management System, the Unified Financial Management System at Justice, and Agriculture’s Web-based Supply Chain Management program.

The Navy’s Consolidated Afloat Networks and Enterprise Services, a program to provide a common network system for its fleet, was the only program that fully complied with best practices for developing cost estimates, the report said.

The program’s cost estimates provided government and contractor costs for the life of the program. The cost estimates reflect the current acquisition strategy, and the program’s schedule, labor rates and inflation indexes are documented, according to the report.

Of the agencies reviewed, most do not require key personnel to have cost estimating training, and they have not created a central and independent cost estimating team, which are best practices.

All but the EPA agreed with GAO’s recommendations to modify cost-estimating polices and update future cost estimates for the major programs reviewed.

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