Case Study 6: From Information Technology, GAO-17-281, February 7, 2017

Department of Housing and Urban Development (HUD) relies extensively on IT to deliver services and manage programs in support of its mission. For fiscal year 2017, HUD requested $36 million for IT investments intended to deliver modernized enterprise-level capabilities that better support the department’s mission. Critical to the success of such efforts is the department’s ability to develop reliable cost estimates that project life cycle costs and provide the basis for, among other things, informed decision making and realistic budget formulation.

The cost estimates that HUD developed for the four selected information technology (IT) investments were unreliable and, thus, lacked a sound basis for informing the department’s investment and budgetary decisions. GAO’s Cost Estimating and Assessment Guide (Cost Guide) defines best practices that are associated with four characteristics of a reliable estimate—comprehensive, well documented, accurate, and credible. However, none of the cost estimates for the selected investments exhibited all of these characteristics. Only one estimate—for the Customer Relationship Management investment—more than minimally met best practices associated with any of the four characteristics because it partially met the practices for a comprehensive and accurate estimate. The remaining three investments minimally or did not meet the best practices associated with the four characteristics. For example, the Enterprise Data Warehouse estimate minimally met all four characteristics; the Enterprise Voucher Management System estimate did not meet the characteristic for being accurate and minimally met the other three characteristics; and the Federal Housing Administration Automation and Modernization estimate did not meet the characteristic for being credible, while minimally meeting the remaining characteristics.

The significant weaknesses in the cost estimates for the selected investments could largely be attributed to the department’s lack of guidance for developing reliable cost estimates. HUD officials responsible for the selected investments stated that the department had not required the development of estimates that exhibited the four characteristics of a reliable estimate. As a result, according to these officials, cost estimating practices had been decentralized and inconsistent across the department. While HUD drafted guidance in June 2015 that was intended to conform to the best practices in GAO’s Cost Guide, the department had not yet finalized the guidance because it had focused on establishing the infrastructure needed to support improved cost estimation practices. Until HUD finalized and ensured the implementation of guidance to improve its cost estimating practices, the department was at risk of continuing to make investment decisions based on unreliable information.

GAO recommended that to increase the likelihood that its IT investments develop reliable cost estimates, the Secretary of HUD should finalize, and ensure the implementation of, guidance that incorporates the best practices called for in the GAO Cost Estimating and Assessment Guide.

GAO reported its findings on February 7, 2017 in GAO, Information Technology: HUD Needs to Address Significant Weaknesses in Its Cost Estimating Practices, GAO-17-281.