Commonwealth of the Northern Mariana Islands: Recent Economic Trends and Preliminary Observations on Workforce Data

Pub. L. No. 110-229, enacted in 2008, amended the U.S.-CNMI covenant to apply federal immigration law to the CNMI after a transition period. The law required the Department of Homeland Security (DHS) to establish a temporary work permit program for foreign workers. DHS is required to decrease the number of permits issued annually, reducing them to zero by the end of the transition period, scheduled for December 31, 2019.

To implement the law, DHS established a new work permit program in 2011. Under the program, foreign workers can obtain, through their employers, nonimmigrant CW-1 status that allows them to work in the CNMI. The law was amended in August 2017 to, among other things, restrict future permits for workers in construction and extraction occupations.

Proposed legislation—Senate bill S. 2325—would, among other things, extend the transition period through December 31, 2029; increase the number of available permits from the 2018 level; and set required decreases in the annual numerical limit for the permits. (See figure for past numerical limits established by DHS and future limits proposed by S. 2325.)

This testimony discusses (1) recent trends in the CNMI economy and (2) preliminary observations about the number of approved CW-1 permits and characteristics of permit holders, drawn from GAO's ongoing work. GAO updated information about the CNMI's economy that it reported in May 2017 (see GAO-17-437 ). GAO also analyzed data and documents from U.S. agencies and the CNMI government.

The Commonwealth of the Northern Mariana Islands' (CNMI) inflation-adjusted gross domestic product (GDP) has grown each year since 2012, according to the Bureau of Economic Analysis. In 2016, the CNMI's GDP rose by 29 percent, partly as a result of construction investment. While tourism has fluctuated in recent years, visitor arrivals in the CNMI rose by nearly a third from 2016 to 2017. After nearly a decade of annual decline, the total number of workers employed in the CNMI increased from 2013 through 2016, according to the most recent available CNMI tax data. Foreign workers made up 53 percent of those employed in 2016, compared with roughly 75 percent in 2002.

GAO's preliminary analysis indicates that the number of approved CNMI-Only Transitional Worker (CW-1) permits for foreign workers in the CNMI grew from over 7,100 for fiscal year 2012 to nearly 13,000 for fiscal year 2017. In addition, GAO identified trends in the country of birth, occupation, and employment duration of foreign workers with CW-1 permits approved for fiscal years 2012 through 2018. Workers born in the Philippines received the highest number of CW-1 permits each year. As of January 2018, 750 CW-1 permits had been granted to construction workers for fiscal year 2018—a 75 percent decline from the prior fiscal year. GAO estimated that approximately 2,350 foreign workers with approved CW-1 permits maintained continuous employment in the CNMI from fiscal year 2014 through January 2018. About 80 percent of these workers were born in the Philippines.

Thank you for the opportunity to discuss preliminary observations from  our ongoing review of workforce data on the Commonwealth of the  Northern Mariana Islands (CNMI).

The 1976 covenant defining the political relationship between the CNMI  and the United States exempted the CNMI from certain federal  immigration laws but reserved the right of the U.S. government to apply  federal law in these exempted areas without the consent of the CNMI  government.

The Consolidated Natural Resources Act of 2008 amended the U.S.– CNMI covenant to establish federal control of CNMI immigration  beginning in 2009. The act required, among other things, that the U.S.  Department of Homeland Security (DHS) establish a temporary work  permit program for foreign workers and decrease annually the number of  permits issued, reducing them to zero by the end of a transition period  now set to occur on December 31, 2019. This program enables foreign  workers to obtain, through their employers, CNMI-Only Transitional  Worker (CW-1) permits that allow them to work temporarily in the CNMI.  Senate bill S. 2325 would modify the law by, among other things,  extending the transition period by 10 years, or through December 31,  2029, and increasing the number of available permits from the fiscal year  2018 level.

As we reported in May 2017, the CNMI’s economy is dependent on  foreign labor. Although the number of foreign workers fell by nearly two  thirds—from over 36,000 to fewer than 13,000—in 2001 through 2015,  foreign workers represented the majority of the CNMI workforce in 2015.  We found that the number of unemployed domestic workers in the CNMI,  estimated at nearly 2,400 in 2016, was insufficient to replace the foreign  workers who had CW-1 permits. We estimated—using the CNMI’s 2015  gross domestic product (GDP) and workforce information—that removing  all CW-1 workers by 2019 could reduce the CNMI’s 2015 GDP by  between 26 and 62 percent.

In my statement today, I will discuss (1) recent trends in the CNMI  economy and (2) preliminary observations about the number of approved  CW-1 permits and characteristics of permit holders from our ongoing work  for a forthcoming report.

To identify recent trends in the CNMI economy, we analyzed data from  the U.S. Department of Commerce and the CNMI government. We  updated our prior analysis of CNMI GDP data for 2002 through 2015 with  GDP data for 2016. We added CNMI tourism data for 2017 to our prior  analysis of tourism data for 1990 through 2016. To show employment  trends, we updated our prior analysis of CNMI tax records for 2001  through 2015 with tax records for 2016. We determined that the data  used in our analyses were sufficiently reliable for our purposes.

To provide preliminary observations on the numbers of CW-1 permits  granted for fiscal years 2012 through 2018 and characteristics of foreign  workers who held them, we analyzed record-level data for fiscal years  2012 through 2018 provided by DHS’s U.S. Citizenship and Immigration  Services (USCIS), which administers the CNMI-Only Transitional Worker  program (CW program). According to USCIS officials, as of January 26,  2018, USCIS was continuing to adjudicate CW-1 petitions for fiscal year  2018. To determine the reliability of the data, we interviewed cognizant  USCIS officials in Washington, D.C., and at the USCIS California Service  Center, where petitions for CW-1 permits are adjudicated. We also  discussed our methodologies and assumptions for data processing and  the results of our preliminary analysis with officials in Washington, D.C.,  who used their own methodologies to conduct a technical review of our  tables showing numbers of permits approved and permit holders’  countries of birth and occupations (see tables 2, 3, and 4). We also  conducted electronic testing of the data to identify and resolve  inconsistencies in personally identifiable information for permit holders, to  ensure accuracy in tracking these individuals over time. We determined  that the USCIS CW-1 permit data were sufficiently reliable for our  purposes.

We conducted the work on which this statement is based 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.

Part of the Mariana Islands Archipelago, the CNMI is a chain of 14 islands  in the western Pacific Ocean, just north of Guam and about 3,200 miles  west of Hawaii. The CNMI has a total population of 53,890, according to  the CNMI’s 2016 Household, Income, and Expenditures Survey. Almost  90 percent of the population (48,200) resided on the island of Saipan,  with an additional 6 percent (3,056) on the island of Tinian and 5 percent  (2,635) on the island of Rota.

Application of Federal Immigration Laws to the CNMI

The Consolidated Natural Resources Act of 2008 amended the U.S.– CNMI covenant to apply federal immigration law to the CNMI after a  transition period. To provide for an orderly transition from the CNMI  immigration system to the U.S. federal immigration system under the  immigration laws of the United States, DHS established the CW program  in 2011. Under the program, foreign workers are able to obtain, through  their employers, nonimmigrant CW-1 status that allows them to work in  the CNMI for up to a year.

The Consolidated Natural Resources Act of 2008 requires DHS to  annually reduce the number of CW-1 permits until the number reaches  zero by the end of the transition period. The act was amended in  December 2014 to extend the transition period through December 31,  2019. The act was further amended in August 2017 to, among other  things, (1) add 350 CW-1 permits to the fiscal year 2017 cap; (2) restrict  future permits for workers in construction and extraction occupations;  and (3) increase the CNMI education funding fee that employers must  pay for each permit from $150 to $200.

DHS determines the annual cap on CW-1 permits and the terms and  conditions of the CW program. In November 2017, DHS set the cap for  CW-1 permits for fiscal year 2018 through the end of the program (see  table 1).

Proposed Legislative Changes Affecting the CW Program

The proposed bill, the Northern Mariana Islands U.S. Workforce Act  (S. 2325), includes the following provisions, among others, that would  affect the CW program: (1) the number of permits to be allocated each  year, (2) the distribution of the permits, and (3) a new CW-3 worker  designation.

Under the terms of S. 2325, the number of permits issued may not  exceed 13,000 during fiscal year 2019. Starting in fiscal year 2020, the  number of permits issued may not exceed a number that is 500 fewer  than the number issued during the immediately preceding fiscal year.

Figure 1 shows the past and future numerical limits on CNMI-Only  Transitional Worker permits established by DHS and the proposed  numerical limits for permits under S. 2325. The limits shown for S. 2325 in  figure 1 assume that employers would petition for, and DHS would issue,  the maximum number of available permits for fiscal year 2019 and for  each subsequent year.

Under S. 2325, as under the current law, a permit for construction and  extraction occupations would be issued only to extend a permit that was  first issued before October 1, 2015. Also, S. 2325 would require the  Secretary of Homeland Security to consider, in good faith, any comments  or advice submitted by the CNMI governor, including any  recommendation to reserve a number of permits each year for  occupational categories necessary to maintain public health or safety in  the commonwealth.

S. 2325 proposes a new CW-3 worker designation. Foreign workers who  are otherwise admissible would be eligible for CW-3 permits if they were  admitted to the CNMI as CW-1 workers during fiscal year 2014 and every  subsequent fiscal year beginning before the date of the enactment of  S. 2325. These workers would receive a permit to remain in the CNMI for  a 3-year period beginning on the date of S. 2325’s enactment. CW-3  permits could be renewed in 3-year increments during the transition  period for workers who remain outside the United States for a continuous  period of not less than 30 days during the 180-day period immediately  preceding each such renewal. CW-3 permits would count against the  numerical caps specified in S. 2325.

The CNMI’s inflation-adjusted gross domestic product (GDP) has grown  each year since 2012. The U.S. Department of Commerce’s Bureau of  Economic Analysis (BEA) estimates that the CNMI’s GDP increased by  almost 29 percent in 2016 after increasing by about 4 percent in 2015.  BEA attributes this economic growth to a significant increase in visitor  spending, particularly for casino gambling, and investment in the  construction of a casino resort in Saipan and other hotel construction.  Figure 2 shows the casino’s development site in Saipan before and  during construction. The new casino opened for business on July 6, 2017.

Since 1990, the CNMI’s tourism market has experienced considerable  fluctuation, as evidenced by total annual visitor arrivals (see fig. 3). Visitor  arrivals to the CNMI declined from a peak of 726,690 in fiscal year 1997  to a low of 338,106 in fiscal year 2011, or by 53 percent. However, since  2011, visitor arrivals have nearly doubled, reaching 653,150 in fiscal year  2017, and increased by 30 percent from 2016 to 2017.

Data from the Marianas Visitors Authority show that the downward trend  in Japanese arrivals from 2013 to 2017 was offset by the growth in  arrivals from China and South Korea. While eligible Japanese and South  Korean visitors enter the CNMI under the U.S. visa waiver program,  Chinese visitors are not eligible for the program and are allowed to be  temporarily present in the CNMI under DHS’s discretionary parole  authority, according to DHS officials. DHS exercises parole authority to  allow, on a case-by-case basis, eligible nationals of China to enter the  CNMI temporarily as tourists when there is significant public benefit,  according to DHS.

Following consecutive annual decreases in the total number of employed  workers from 2005 through 2013, employment has increased annually  since 2014, according to CNMI tax data. Figure 4 shows the numbers of  employed workers, both foreign and domestic, in the CNMI from 2001  through 2016. From 2013 to 2016, the number of employed workers  increased by approximately 25 percent, from 23,344 to 29,215.

As figure 4 shows, while the number and percentage of foreign workers  fell between 2001 and 2016, foreign workers still constitute the majority of  the CNMI workforce. Of the nearly 30,000 employed workers in the CNMI  in 2016, more than half were foreign workers, according to CNMI tax  data. The number of foreign workers fell from a peak of over 38,000 in  2002—roughly 75 percent of employed workers—to fewer than 16,000 in  2016. In contrast, since 2002, the number of domestic workers has  fluctuated from year to year, ranging from about 10,500 to almost 13,700,  but increased by 28 percent from 2013 to 2016.

Preliminary Observations on CW- 1 Permits for Fiscal Years 2012-2018

The CNMI economy continues to experience growing demand for  workers. In fiscal years 2012 through 2016, the number of CW-1 permits  almost doubled, and since fiscal year 2016, the number of permits has  approached the numerical limits on permits for those years. Our  preliminary analysis indicates that the number of approved CW-1 permits  grew from 7,127 in fiscal year 2012 to more than 13,000 in fiscal year  2016. On October 14, 2016—2 weeks into fiscal year 2017—USCIS  announced that it had received enough petitions to reach the CW-1 cap  for fiscal year 2017 and would not accept requests for new permits for  that year during the remaining 11 months. In May 2017, USCIS  announced that it had received a sufficient number of petitions to reach  the CW-1 cap for fiscal year 2018. Table 2 shows the CW-1 permit caps  and numbers of permits approved for fiscal years 2012 through 2018.

According to USCIS officials, as of January 26, 2018, fiscal year 2018  petitions were still being adjudicated.

Characteristics of Foreign Workers with CW-1 Permits

Our preliminary analysis of USCIS CW-1 permit data for fiscal years 2012  through 2018 identified trends in CW-1 workers’ country of birth,  occupation, and duration of employment.

USCIS data showed a decline in the numbers of CW-1 permits for fiscal  years 2017 through 2018 for workers born in each of the five countries  listed most frequently on the petitions—the Philippines, China, South  Korea, Bangladesh, and Japan (see table 3). As of January 17, 2018, the  number of permits approved for workers born in the Philippines, who  received the most permits for all 7 years of the CW program, had declined  by 13 percent from fiscal year 2017 to fiscal year 2018 and by 26 percent  from fiscal year 2015 to fiscal year 2018. Concurrent with construction of  the casino and other tourism infrastructure, the number of CW-1 permits  for workers born in China increased by almost 3,800 from fiscal year 2015  to fiscal year 2016 and declined by about 3,500 from fiscal year 2017 to  fiscal year 2018.

Our preliminary analysis indicates that as of January 17, 2018, USCIS  had approved 750 CW-1 permits for construction workers for fiscal year  2018. This number represents a 75 percent decline from the nearly  3,000 permits approved for fiscal year 2017 (see table 4). This decline  reflects new restrictions on future permits for workers in construction  occupations.

Of the 8,228 foreign workers who had been granted fiscal year 2018  permits as of January 17, 2018, 2,352 had maintained continuous  employment in the CNMI since fiscal year 2014 (see table 5).

Of the 2,352 workers with continuous employment in fiscal years 2014  through 2018, 1,905 workers (81 percent) were born in the Philippines.

Chairman Murkowski, Ranking Member Cantwell, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  respond to any questions you may have at this time.

For further information regarding this statement, please contact David  Gootnick, Director, International Affairs and Trade at (202) 512-3149 or  gootnickd@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this  statement. Individuals making key contributions to this testimony included  Emil Friberg (Assistant Director), Julia Ann Roberts (Analyst-in-Charge),  Sada Aksartova, Andrew Kurtzman, Reid Lowe, Moon Parks, and John  Yee. Technical support was provided by Chris Keblitis, Mary Moutsos,  and Alexander Welsh.

This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.

The Department of Homeland Security issues temporary work permits to eligible foreign workers in the Commonwealth of the Northern Mariana Islands. Current U.S. law requires DHS to set annual limits on the number of permits it issues and to stop issuing them by the end of calendar year 2019. Proposed legislation would make the permits available through the end of calendar year 2029.

We testified that the Commonwealth's economy relies on foreign workers—they made up 53% of all workers in 2016—and demand for these workers continues to rise. In 2016 and 2017, DHS issued about as many permits as the limits allowed.


Interstate Pipeline Inspections: Additional Planning Could Help DOT Determine Appropriate Level of State Participation

PHMSA oversees the safety of interstate and intrastate natural gas and hazardous liquid pipelines. PHMSA certifies states to oversee intrastate pipelines, and some states also act as PHMSA's “agents” to supplement the federal inspection workforce for interstate pipelines. In recent years PHMSA has signaled a move away from using interstate agent agreements. Recent funding increases have enabled PHMSA to hire additional federal inspectors. States may receive annual grants to reimburse up to 80 percent of the cost of their pipeline safety activities.

Congress included a provision in statute for GAO to review the federal and state responsibilities and resources used to inspect interstate pipelines. This report addresses (1) how state participation has affected interstate pipeline oversight and (2) PHMSA's assessment of the resources needed to conduct interstate pipeline inspections. GAO reviewed relevant laws and PHMSA guidance on state participation in these inspections; analyzed the most recent 6 years of PHMSA funding and inspector staffing data; and interviewed pipeline safety officials from PHMSA and 22 states selected based on level of participation in interstate inspections.

State involvement in interstate pipeline inspections can enhance oversight, although the three types of agreements that the Pipeline and Hazardous Materials Safety Administration (PHMSA) uses to allow state participation are not used extensively. Annual interstate agent agreements —held by 9 states—allow states to participate in all inspection activities and can bolster interstate pipeline oversight. For instance, an inspection conducted in 2014 by New York state officials led to $61,900 in federal civil penalties. Temporary interstate agreements —used in 6 states to date—allow PHMSA to request states to participate in specific interstate pipeline inspections. PHMSA officials said these agreements provide the agency greater flexibility. Some current interstate agents GAO interviewed said that temporary interstate agreements are useful, but are not substitutes for interstate agent status because states do not participate in the full range of inspections. Finally, PHMSA as authorized by federal law recently established joint inspections allowing states to request to participate in interstate inspections. However, state officials were concerned that their role is limited and that they must bear the full cost to participate. PHMSA officials said they intend to clarify the state inspector role in joint inspections and acknowledged that federal grants cannot be used by states to support joint inspection activities.

PHMSA allocated recently hired inspectors based on regional workload, but has not assessed future resource needs. From fiscal years 2012 to 2017, PHMSA's appropriations increased over 40 percent, allowing the agency to expand its inspector workforce by about 25 percent. PHMSA allocated the additional inspectors across the agency's five regions based on workload. For example, PHMSA's central region received a greater percentage of inspectors than other regions to help oversee a number of new pipeline construction projects. However, PHMSA has not planned for future workforce needs for interstate pipeline inspections. In particular, it has not assessed the resources and benefits that states can provide through the three types of agreements. Leading practices for workforce planning indicate that such forward-looking analyses are essential for effective workforce planning. Without such analyses, PHMSA cannot proactively plan for future inspection needs to ensure that federal and state resources are in place to provide effective oversight of interstate pipelines.

PHMSA should develop a workforce plan for interstate pipeline inspections, considering, among other things, the additional resources and safety oversight that state pipeline officials can provide. DOT concurred with our recommendation and provided technical comments, which we incorporated as appropriate.

The U.S. energy pipeline network is composed of over 2.7 million miles of  pipeline transporting gas, oil, and other hazardous liquids both within  states (intrastate) and from one state to another (interstate). Inspections  of pipeline operator programs and facilities are key oversight activities at  both the federal and state level. At the federal level, the Pipeline and  Hazardous Materials Safety Administration (PHMSA) is responsible for  developing safety-related regulations for these pipelines. In general,  PHMSA conducts inspections and enforces regulations for interstate  pipelines, while certified states generally oversee intrastate pipelines.  Historically, PHMSA has also entered into agreements with some state  pipeline safety offices to act as “agents” to supplement the federal  inspection workforce for interstate pipelines. Over the years, however, the  number of interstate agents has declined from 22 in 1973 to 9 today. In  recent years, PHMSA has not accepted additional applications for  interstate agent agreements and has signaled a move away from these  agreements. Instead, PHMSA has introduced other means of participation  for states interested in pursuing an interstate agreement.

The Protecting our Infrastructure of Pipelines and Enhancing Safety Act  of 2016 included a provision that GAO assess and report on the  resources used in carrying out interstate pipeline safety agreements.  This report examines (1) how state participation has affected interstate  pipeline oversight and (2) PHMSA’s assessment of the resources it needs  to conduct future interstate pipeline inspections.

To address both objectives, we reviewed relevant statutes, literature  related to pipeline safety agreements and PHMSA guidance on state  participation. To determine the effects of state participation in interstate  pipeline oversight, we interviewed officials from PHMSA headquarters  and 5 regional offices and 22 state pipeline safety offices. (See table 1).  For our sample, we selected the following:  Our interviews provide a range of views, but are not generalizable across  all state pipeline safety offices.

To analyze PHMSA’s assessments of interstate pipeline inspection  resources needed, we obtained information on PHMSA’s appropriations  and inspector staffing levels for fiscal years 2012 through 2017. We  interviewed PHMSA officials on their data collection and verification  procedures and based on these steps determined the data was reliable  for our purposes. We also interviewed PHMSA officials about the  agency’s staffing allocation analyses on inspection staff required to  conduct interstate pipeline inspections. We assessed the extent to which  PHMSA’s inspector staffing activities and processes met leading  practices for workforce planning that we have identified in our prior work.

We conducted this performance audit from June 2017 to May 2018 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.

The U.S. pipeline network includes both interstate and intrastate  pipelines, the vast majority of which fall into the latter category:  Interstate pipelines: Interstate pipelines are primarily large-volume  transmission pipelines that carry gas or hazardous liquid–sometimes  over hundreds of miles—to communities and large-volume users  (e.g., factories). At the start of 2017, there were about 340,000 miles  of interstate transmission pipelines nationwide. Newly tapped  domestic gas and oil deposits have resulted in an increase in the  existing pipeline infrastructure to transport natural gas and oil.

Intrastate pipelines: Intrastate pipelines are primarily composed of gas  distribution and some transmission pipelines that transport natural gas  pipelines to residential, commercial, and industrial customers. As of  2015, there were about 2.2 million miles of distribution pipelines  nationwide. In addition, an estimated 18,000 miles of federally  regulated gathering pipelines carry natural gas or hazardous liquids  from production areas to processing facilities where the product is  refined before continuing in transmission pipelines.

At the federal level, PHMSA is responsible for developing regulations for  domestic interstate and intrastate natural gas and hazardous liquid  pipelines. Its regulatory programs are focused on ensuring safety in the  design, construction, operation, and maintenance of pipelines. Inspectors  from PHMSA’s five regional offices and states are responsible for  inspecting nearly 3,000 companies that operate 2.7 million miles of  pipelines.

Each year, PHMSA uses its Risk Ranking Index Model (RRIM) as one  input to determine its annual inspection priorities. RRIM categorizes each  of the nation’s pipeline systems regulated by PHMSA into high, medium,  and low-risk tiers. Pipeline risk are proposedbased on a combination of  categories, such as the type of pipeline material and time since last  inspection. PHMSA’s guidance specifies that high-risk pipelines should be  inspected at least once every 3 years, medium-risk pipelines every 5  years, and low-risk pipelines every 7 years. PHMSA’s goal each year is to  inspect, at a minimum, pipeline systems where the time since last  inspection meets or exceeds the PHMSA guidance for the tier.

Under federal pipeline safety laws, states may assume inspection and  enforcement responsibilities for intrastate gas and hazardous liquid  pipelines, which are primarily natural gas distribution pipelines. States  assume that responsibility by annually certifying their state pipeline safety  program to PHMSA, which PHMSA must validate. As part of a state’s  certification, states must establish pipeline laws similar to federal pipeline  safety regulations for intrastate pipelines, but may also impose more  stringent pipeline safety regulations. PHMSA reimburses certified state  agencies up to 80 percent of the total cost of operating their pipeline  safety program through an annual grant.

PHMSA may permit certified states to participate in interstate inspections  through three types of agreements. (See fig.1):  Interstate agent agreement: At PHMSA’s discretion, certified states  may enter into an interstate agent agreement for either their natural  gas program, hazardous liquid program, or both on an annual basis.  As of April, 2018, nine state pipeline agencies hold these agreements.  On PHMSA’s behalf, these agencies assume inspection  responsibilities for the range of interstate inspection activities, as  agreed upon by PHMSA and prioritized by PHMSA during the  agency’s annual inspection planning process. States may also  propose and conduct additional inspections as they believe  necessary.  While state inspectors can identify violations, PHMSA is  ultimately responsible for enforcement of interstate pipeline  regulations and uses a range of enforcement tools from Warning  Letters to more stringent Notices of Probable Violation with either  proposed compliance orders or proposed civil penalties.

Temporary interstate agreement: These agreements allow PHMSA to  request a state that has had its certification validated by PHMSA to  perform interstate pipeline inspections on a temporary basis.  According to PHMSA guidelines, these agreements are used typically  for new construction inspections, but may include assistance such as  inspection of specific operators, witness to repairs or testing, or  investigation of incidents. Since 2010, PHMSA has entered into  temporary interstate agreements with six states.

Joint inspection: The Pipes Act of 2016 included a requirement for  PHMSA to allow certified states to participate in the inspection of an  interstate pipeline safety facility, if requested by the state pipeline  safety agency. As of April, 2018, no states have requested to  participate in joint inspections.

State Involvement in Interstate Pipeline Inspections, While Not Extensive, Can Enhance Oversight Activities

Interstate Agent Agreements Can Bolster Oversight in Participating States

According to PHMSA regional officials we met with, interstate agents  conduct high-quality inspections of interstate pipelines and provide an  important supplement to the federal inspection workforce. PHMSA  regional officials generally agreed that interstate agents have well-trained  staff and leverage their local knowledge to enhance interstate pipeline  inspections within their state. Additionally, interstate agents, if authorized  by PHMSA, may conduct inspections of interstate pipelines within their  state more frequently than PHMSA. For instance, officials in one PHMSA  region noted that an interstate agent in their jurisdiction ensured each  interstate operator was inspected once every 2 years, regardless of  PHMSA’s risk ranking. Similarly, in two of 5 regions that have interstate  agents, PHMSA regional officials stated that they needed interstate  agents to supplement their current allocation of federal inspectors. For  instance, in one region, PHMSA officials said that if interstate agent  agreements were discontinued, the region would need to hire 3 to 4  additional inspectors. In another region, officials said that interstate  agents provided the equivalent of 5 to 10 additional inspectors. Officials in  one PHMSA region said that, although the region could absorb the  interstate agent workload if needed, doing so would lead to less extensive  inspections because there would more pipelines to inspect with fewer  federal inspectors.

Interstate agents may also enhance pipeline safety oversight within their  state by going above and beyond the annual interstate inspection  activities required under their agreement with PHMSA. Specifically, as  part of the annual inspection planning process, PHMSA’s regional offices  work with interstate agents to develop an annual inspection plan. While  interstate agents must prioritize PHMSA’s inspection priorities, such as  participation in new construction inspections and PHMSA-led systems  inspections, they can also propose additional inspections of interstate  pipelines within their state. Officials in half of the nine states with  interstate agent agreements stated that they proposed and obtained  PHMSA’s approval for additional interstate pipeline inspections that would  not otherwise have been included in PHMSA’s annual inspection plan.  For instance, PHMSA’s Western Region reported that between January  1, 2015 and December 31, 2016 Washington State’s pipeline safety  agency—which holds an interstate agent agreement—proposed and  conducted 13 inspections beyond those identified in PHMSA’s inspection  plans.

During these additional inspections conducted by interstate agents, state  officials have identified violations of pipeline safety regulations. Some  violations, including the four illustrative examples below, were deemed  serious enough that PHMSA imposed civil penalties.

In 2015, the Connecticut Department of Energy and Environmental  Protection inspected an interstate pipeline that traverses the state.  During the inspection, Connecticut inspectors found the pipeline  operator had failed to employ properly qualified welders in  constructing a section of the pipeline. As a result, PHMSA issued a  civil penalty of $26,200 to the pipeline operator. In response to the  findings, the operator ensured its welders were properly qualified and  replaced the 14 welds completed by improperly qualified welders.

In 2014, the New York Department of Public Service’s Pipeline  Division inspected an interstate pipeline that traverses the state.  During that inspection, New York inspectors identified violations  related to the operator’s corrosion-control practices. Inspectors also  found that the operator failed to prepare, and follow, a manual for  conducting operations and maintenance activities, as well as for  emergency response. As a result, PHMSA issued a civil penalty of  $61,900. In response to the findings, the operator took action to  address the corrosion control-related violations and revised its  operations and maintenance manual.

In 2011, the New York Department of Public Service’s Pipeline  Division inspected an interstate pipeline that traverses the state.  During that inspection, a New York inspector identified violations  related to corrosion-control practices. As a result, PHMSA issued a  civil penalty of $78,900. PHMSA also issued a Compliance Order,  requiring the operator to remediate the identified violations, or face an  additional civil penalty.

In 2014, Arizona’s Corporation Commission’s Pipeline Safety Section  inspected two interstate gas transmission lines that traverse the state.  During the inspection, PHMSA and Arizona inspectors found that the  operator had committed probable violations by not properly odorizing  its pipeline, and providing insufficient information to the public about  its pipeline odorization methods. As a result, PHMSA issued a  Notice of Probable Violation, proposed civil penalties totaling  $162,700, and issued a Proposed Compliance Order.

Although state involvement in interstate inspections can enhance  oversight, officials from almost all of our selected states that do not  currently have an interstate agent agreement expressed little interest in  pursuing such an agreement. Specifically, some officials in we spoke with  plan to focus their limited resources on intrastate pipeline safety oversight  activities. For example, although Texas has over 50,000 miles of  interstate pipeline, officials in that state have focused exclusively on  intrastate inspection activity, citing the heavy workload of their inspection  staff, as well as challenges in recruiting and retaining additional  inspectors. In another instance, California’s state pipeline safety agency  responsible for hazardous liquid oversight voluntarily withdrew from the  interstate agent program in 2013, citing staffing shortages stemming from  a difficult economic climate.

Although PHMSA’s current policy stance does not prohibit the agency  from entering into a formal interstate agent agreement if the  circumstances warrant, the agency prefers that state agencies enter into  temporary interstate agreements. PHMSA officials explained that,  historically, PHMSA has used interstate agents to supplement federal  inspection resources and that the current nine interstate agents  supplement the federal workforce by approximately 10–15 inspectors.  PHMSA officials stated that they do not intend to discontinue current  interstate agent agreements, but due in part to a recent staff increase the  agency has sufficient staff to meet its inspection needs without adding  additional interstate agents. PHMSA officials also told us that intrastate  pipelines pose the highest safety risk to states and, consequently, state  pipeline safety agencies should focus their efforts on intrastate pipeline  oversight rather than participating in interstate pipeline inspections.  During the last 7 years, four states that applied for an agent agreement— New Hampshire, Virginia, Maryland, and Nevada—were not accepted  by PHMSA for these reasons. (See app. I.) In 2013, PHMSA decided not  to renew another state pipeline safety agency’s interstate agent  agreement, citing the state agency’s inability to staff its program properly,  among other things.

PHMSA’s Other Means of State Participation in Interstate Inspections Have Not Been Used Extensively

While temporary interstate agreements provide an opportunity to  participate in interstate pipeline oversight, officials from some state  agencies told us that the agreement’s limited scope and ad hoc nature  can create obstacles to state participation. For instance, in states without  an interstate agent agreement, state inspectors’ day-to-day work focuses  exclusively on intrastate pipeline oversight activities. In the event PHMSA  requested assistance with certain interstate inspections, state inspectors  may be unfamiliar with the interstate pipeline systems and operators. As a  result, some state officials said that their inspectors may have a steep  learning curve when conducting inspections under a temporary interstate  agreement. However, PHMSA officials disagreed that most interstate  agent states would have such steep learning curve because they  currently inspect intrastate transmission pipelines; the regulations for  interstate and intrastate pipelines are for the most part identical. Another  obstacle some state officials identified relates to the fact that state  pipeline safety agencies may not have sufficient inspection staff available,  when needed, to participate in ad hoc interstate inspections.

Due to the limited state role and competing priorities, state pipeline safety  agencies rarely enter into temporary interstate agreements. According to officials in five of the 6 states that have that have entered into temporary  interstate agreements, the agreements were used for limited, ad hoc  inspections that were initiated by PHMSA. The sixth temporary interstate  agreement was initiated by PHMSA in lieu of the Virginia pipeline safety  agency’s 2017 application for an interstate agent agreement for natural  gas. PHMSA offered to enter into a longer-term, temporary interstate  agreement, which would permit the state agency to inspect the installation  of two large interstate pipeline systems. The state agency accepted the  temporary interstate agreement, which may be extended annually until  the completion of the pipeline construction. To meet its new interstate  inspection obligations, the state agency told us it hired two additional  inspectors. According to state officials, those two inspectors will be  dedicated to intrastate pipeline inspection, which will allow two of the  state agency’s more experienced inspectors to conduct interstate pipeline  inspections.

Current interstate agents do not consider temporary interstate  agreements to be an adequate substitute for an interstate agent  agreement. According to officials we spoke with that are currently  interstate agents, an interstate agent agreement allows state agencies  and their inspectors to develop a strong understanding of operators and  pipelines within their state. A few state officials stressed that the greatest  benefit of interstate agent status was the ability to leverage their local  knowledge—such as the proximity and familiarity with interstate pipelines  within their states—to allow for quick responses to public concerns and  pipeline incidents. PHMSA officials emphasized that temporary interstate  agreements are not intended to replicate an interstate agent agreement;  instead, these agreements are designed to provide PHMSA the flexibility  to request targeted, short-term assistance from state pipeline safety  agencies with interstate pipeline inspections.

Joint inspections offer states the most limited role in interstate pipeline  inspections and may be entered into only if the state meets certain  conditions. In response to the requirement in the PIPES Act, PHMSA  created joint inspections and established certain criteria for state  participation. For instance, to ensure that participation in joint inspections  does not compromise intrastate pipeline safety, PHMSA only allows state  inspectors to participate if the state agency has accomplished the  required minimum number of inspection days during the preceding  calendar year. PHMSA also requires state agencies to bear the cost of  participating in joint inspections—including travel and inspection time for  the state inspectors—rather than allowing states to include this activity in  their annual pipeline safety program grant reimbursement. According to  PHMSA officials, this requirement is designed to focus limited federal  funds intended to support states’ intrastate pipeline safety programs.

While it is too early to know whether states will participate in joint  inspections over the long term, no states have participated to date.  Despite general agreement among some state pipeline safety officials  that collaborating with PHMSA on interstate pipeline inspections could be  beneficial, they noted that PHMSA’s criteria reduces the incentive to  participate. For instance, a few of the state officials we spoke to generally  expressed concern over the requirement that states bear the entire cost  of their participation. Additionally, state officials perceive the current joint  inspection policy as restricting state inspectors to an observer role.  However, PHMSA officials we spoke with noted that the role of state  inspectors can vary based on the levels of training and knowledge among  state inspectors. PHMSA officials told us they intend to clarify this role for  states.

PHMSA Used a Regional Workload Analysis to Allocate Inspection Resources, but Has Not Assessed Future Resource Needs

PHMSA Has Allocated Increased Inspection Resources Based on Regional Workload

From fiscal year 2012 to 2017, PHMSA’s funding increased by nearly 40  percent, allowing the agency to hire additional pipeline inspectors.  Specifically, PHMSA’s funding increased from $110 million in fiscal year  2012 to $154 million in fiscal year 2017. PHMSA’s inspection and  enforcement division received the majority of the increased funding,  allowing that division to hire additional staff. From fiscal year 2012  through 2017, the number of inspectors hired increased by over 25  percent, from 107 to 147 across the five PHMSA regions. (See fig. 2).

In recent years, PHMSA has improved its analysis of the number of  pipeline inspectors needed to address the inspection workload in each  region. Before 2014, PHMSA allocated inspectors evenly across the  agency’s five regions. Since 2014, PHMSA has used a regional workload  analysis to allocate its interstate inspectors. Unlike the previous analysis,  the regional workload analysis takes into account federal inspector  workload, pipeline construction, and the amount of pipeline mileage in  areas where the consequences of an accident are greater (such as  populated and environmentally sensitive areas) to help ensure that  PMHSA has appropriate resources in each region. For example,  PHMSA’s central region received a greater percentage of inspectors than  most other regions to help oversee a number of new pipeline construction  projects. (See table 2). According to PHMSA officials, the regional  workload analysis has resulted in a better match between workforce  staffing and needs.

PHMSA Lacks an Inspection Workforce Plan That Assesses Future Resource Needs for Interstate Pipeline Inspections

While PHMSA has improved how it allocates its current inspection staff  among the regions, the agency lacks a forward-looking workforce plan for  interstate pipeline inspections. Workforce planning helps agencies take a  strategic, forward-looking approach to put the right people with the right  skills in the right places at the right time. We have previously identified  leading practices for effective strategic workforce planning. These  approaches may vary with each agency’s particular needs and mission,  but share certain principles. These may include:  identifying skills and competencies to fill critical workforce gaps and  the strategies needed to recruit them; developing specific strategies that are tailored to address gaps in  number, deployment, and alignment of human capital; and monitoring and evaluating the agency’s progress toward its human  capital goals.

However, PHMSA has not developed a plan that systematically identifies  the anticipated interstate pipeline inspection workload or the number of  inspection staff needed to meet that workload. In light of the diminishing  role that interstate agents currently provide in bolstering PHMSA’s  inspection workforce, a plan for conducting future interstate pipeline  inspections should also account for the reduction in resources and  expertise state inspectors can potentially provide.

According to PHMSA officials, they have not developed a workforce plan  for interstate pipeline inspections because the agency’s focus has been  on allocating and training the recently hired inspectors and ensuring that  pipeline inspections are completed. Further, the lack of an inspector  workforce plan may be symptomatic of a wider-ranging workforce  planning issue. A November, 2017 DOT Inspector General (IG) report  found that PHMSA had not developed a comprehensive workforce plan  since 2005 and recommended that PHMSA develop such a plan.  PHMSA agreed with the recommendation and anticipates completing the  plan by the end of December 2018. Of note, PHMSA’s 2005 workforce  plan did not include an analysis of federal and state inspectors needed for  interstate pipeline inspections. In the absence of a workforce plan for  interstate inspections, PHMSA cannot proactively plan for future  inspection needs to ensure that federal and state resources are in place  to provide effective pipeline oversight.

PHMSA has an important role in overseeing interstate pipelines and  operators to ensure pipeline safety, and the agency’s partnership with  interstate agents has proven beneficial in fulfilling that role. Recent  increases in funding have allowed PHMSA to increase its own inspection  workforce and reduce its reliance on state agents. However, the agency  does not have an inspection workforce plan to ensure that it is making the  correct decisions regarding its mix of federal inspectors versus state  resources. Therefore, it does not have reasonable assurance that it will  be able to provide adequate oversight of interstate pipelines going  forward.

PHMSA should develop a workforce plan for interstate pipeline  inspections that is consistent with leading practices in workforce planning,  which should include a consideration of the additional resources and  safety oversight that state pipeline officials can provide.  (Recommendation 1)

We provided DOT with a draft of this report for review and comment. In its  comments, reproduced in appendix II, the Department of Transportation concurred with our recommendation. The Department of Transportation  also provided technical comments, which we incorporated as appropriate.

We are sending copies of this report to relevant congressional  committees, the Secretary of Transportation, and other interested parties.  In addition, this report will also be available at no charge on GAO’s  website at http://www.gao.gov  If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or flemings@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 key contributions to this  report are listed in appendix II.

Appendix I: States That Have Applied and Have Not Been Accepted for Interstate Agent Status

In the past 7 years, four additional state pipeline safety agencies have  applied for interstate agent agreements:

New Hampshire: In 2014, the state legislature passed a law requiring  the state’s pipeline safety agency to apply for interstate agent status  on an annual basis. State pipeline safety officials cited New  Hampshire inspectors’ local knowledge of interstate pipelines, as well  as concerns over the frequency of PHMSA’s interstate pipeline  inspection activity, as reasons for seeking an agreement. To date,  PHMSA has not accepted the state agency’s annual applications for  interstate agent status citing an increase in the federal inspection  workforce, a preference for states to focus on intrastate pipeline  oversight, and the ability for state agencies to participate in interstate  inspections through other means, such as temporary interstate  agreements.

Virginia: In 2016, the Virginia General Assembly passed legislation  requiring the state pipeline safety agency to apply for interstate agent  status for natural gas. The state agency applied the following year,  citing the need to conduct construction inspections of the Virginia  section of two large interstate natural gas transmission pipelines.  PHMSA did not accept the state agency’s application, citing  increasing federal inspection resources as well the agency’s lack of  full authority over its intrastate gas operators. Instead, PHMSA  provided the state agency a temporary interstate agreement,  renewable on an annual basis, to conduct the desired inspections.

Maryland: Maryland’s pipeline safety agency applied for interstate  agent status in 2014 in response to public concern over proposed  construction of a new interstate pipeline. PHMSA did not accept the  agency’s application for interstate agent status, citing an increase in  federal resources and PHMSA’s preference that the state agency  focus its inspection efforts on intrastate pipelines. According to state  agency officials, public interest has waned and the state has no plans  to reapply.

Nevada: Nevada’s pipeline safety agency applied for interstate agent  status in 2011. According to state pipeline safety officials, they did so  to help retain staff, rather than as a result of pipeline safety concerns.  PHMSA did not accept the agency’s request, citing a preference only  to enter into new interstate agreements when additional state support  was needed, as well as the preference for states to focus on intrastate  pipeline facilities. According to state officials, they do not plan to  reapply.

Appendix II: Comments from the Department of Transportation

Appendix III: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Sara Vermillion (Assistant  Director), Nick Nadarski (Analyst-in-Charge), Mike Duane, David Hooper,  Delwen Jones, Malika Rice, and Kelly Rubin made key contributions to  this report.

The Pipeline and Hazardous Materials Safety Administration (PHMSA) oversees the safety of natural gas and hazardous liquid pipelines. States sometimes work with PHMSA to inspect and oversee these pipelines.

We looked into federal and state responsibilities for interstate pipeline inspections, and found that PHMSA expanded its inspector workforce by 25% between 2012 and 2017. However, the agency hasn't planned for future workforce needs—for example, it hasn't assessed how states can help with pipeline inspections and safety oversight. We recommended that they do so.


VA IT Modernization: Preparations for Transitioning to a New Electronic Health Record System Are Ongoing

VA provides health care services to almost 9 million veterans and their families and relies on its health information system—VistA—to do so. However, the system is more than 30 years old, is costly to maintain, and does not support interoperability with DOD and private health care providers. Since 2001, VA has pursued multiple efforts to modernize the system. In June 2017, VA announced plans to acquire the same system—the Cerner system—that DOD is implementing.

GAO was asked to summarize preliminary observations from its ongoing review of VistA and the department's efforts to acquire a new system to replace VistA. Specifically, the statement summarizes preliminary observations regarding (1) costs incurred for the system and related activities during the last 3 fiscal years; (2) key components that comprise VistA and are to be replaced; and (3) actions VA has taken to prepare for its transition to the Cerner system. The statement also discusses common factors critical to the success of IT acquisitions that GAO has previously identified.

GAO reviewed its prior reports on the VistA modernization and on critical success factors of major IT acquisitions. GAO also reviewed records of obligations for VistA for fiscal years 2015, 2016, and 2017; analyzed VA documentation that describes the scope of VistA, and reviewed program documentation.

According to the Department of Veterans Affairs (VA), the Veterans Health Information Systems and Technology Architecture (VistA) and related costs, as approximated by funding obligations, were approximately $1.1 billion, $899 million, and $946 million in fiscal years 2015, 2016 and 2017, respectively. These obligations total about $3.0 billion over 3 years to support the system. As identified by the department, the obligations were to cover the costs for three programs (VistA Evolution, Interoperability, and Virtual Lifetime Electronic Record Health) and other supporting investments for activities such as networks and infrastructure sustainment. The following table provides a summary of the total VistA and VistA-related obligations.

GAO's preliminary results indicate that VA is working to define VistA and identify system components to be replaced by the new system. However, according to VA officials, there is no single information source that fully defines the scope of VistA. This situation is partly due to differences in VistA at various facilities. In the absence of a complete definition of VistA, program officials have taken a number of steps to define the system's scope and identify the components that the new system will replace. These steps have included conducting analyses, performing preliminary site (medical facility) assessments, and planning for a detailed assessment of each site where the new system will be deployed.

Since VA announced in June 2017 that the department would acquire the same electronic health record system as the Department of Defense (DOD), GAO's preliminary results indicate that VA has begun taking actions to prepare for the transition from VistA. These actions have included standardizing VistA, clarifying the department's approach to interoperability, establishing governance for the new program and the framework for joint governance with DOD, and preparing initial program plans. VA is early in its effort to transition from VistA to the Cerner system and the department's actions are ongoing.

In 2011, GAO reported on nine common factors critical to the success of major IT acquisitions. Such factors include ensuring active engagement of senior officials with stakeholders and having qualified, experienced program staff. These critical success factors can serve as a model of best practices that VA could apply to enhance the likelihood that the acquisition of a new electronic health record system will be successfully achieved.

Thank you for the opportunity to participate in today’s hearing on the  planned implementation of the Department of Veterans Affairs’ (VA)  Electronic Health Record Modernization (EHRM) program.

As you know, the use of information technology (IT) is crucial to helping  VA effectively serve the nation’s veterans and, each year, the department  spends billions of dollars on its information systems and assets. Over  many years, however, VA has experienced challenges in managing its IT  projects and programs. These challenges have spanned a number of  critical initiatives related to modernizing major systems within the  department, including its electronic health information system—the  Veterans Health Information Systems and Technology Architecture  (VistA).

We have issued numerous reports on the challenges that the department  has faced in managing VistA and working to increase the interoperability  of health information. We also have ongoing work for the Committee on  Veterans’ Affairs to review VistA and the department’s transitional efforts  to replace the system with a new, commercial-off-the-shelf (COTS)  system that it is acquiring from Cerner Government Services, Inc.  (Cerner) under the EHRM program.

At your request, my testimony today summarizes preliminary  observations from our ongoing review. Specifically, the statement  discusses our preliminary observations regarding (1) costs incurred for  the system and related activities during the last 3 fiscal years; (2) key  components that comprise VistA and are to be replaced; and (3) actions  VA has taken to prepare for its transition to the Cerner system. In  addition, the statement discusses critical success factors related to major  information technology acquisitions. We have previously reported that  these success factors could enhance the likelihood that the new  electronic health record system acquisition will be successful.

In developing this testimony, we considered our previously published  reports that discussed the history of the department’s VistA modernization  efforts. In addition, we relied on our prior report that discussed critical  success factors of major IT acquisitions. The reports cited throughout  this statement include detailed information on the scope and methodology  for our prior reviews.

Further, we considered preliminary observations from our ongoing review  of VistA’s costs, components, and the actions VA has taken to prepare for  transitioning from VistA to the Cerner system. With regard to the total  costs of VistA, we obtained records of obligations for VistA-related  programs for fiscal years 2015, 2016, and 2017, as tracked by the  Veterans Health Administration (VHA) and VA’s Office of Information and  Technology (OI&T). We then combined the amount of those obligations  with the amount of other obligations, such as those for supporting  interoperability and infrastructure, identified by VA as being closely  related to the development and operation of VistA. We interviewed VA  officials to understand the source and relevance of the obligations  identified by the department and determined that the data were reliable  for our purposes.

To identify the key components of VistA and the extent to which they  support health record capabilities for the department, we analyzed VA  documentation that describes the scope of the system. This  documentation included the department’s Health Information System  Diagram, the VA Monograph, the VA Systems Inventory, and the VistA  Product Roadmap. We also reviewed program documentation identifying  components of VistA to be replaced by the Cerner system. We analyzed  these documents for consistency to provide a reasonable basis for our  observations.

To summarize the actions VA has taken to prepare for its transition from  VistA to the Cerner system under the EHRM program, we reviewed  available program briefings, governance documents, and draft plans for  the EHRM program related to, for example, interoperability, data  migration, change management, and requirements. We supplemented  our analysis with information obtained through interviews with relevant VA  officials.

The work upon which this statement is based is being or was conducted  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audits 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.

VA’s mission is to promote the health, welfare, and dignity of all veterans  in recognition of their service to the nation by ensuring that they receive  medical care, benefits, social support, and lasting memorials. In carrying  out this mission, the department operates one of the largest health care  delivery systems in the United States, providing health care services to  approximately 9 million veterans throughout the United States,  Philippines, Virgin Islands, Puerto Rico, American Samoa, and Guam.

In 2015, we designated VA health care as a high-risk area for the federal  government, and we continue to be concerned about the department’s  ability to ensure that its resources are being used cost-effectively and  efficiently to improve veterans’ timely access to health care. In part, we  identified limitations in the capacity of VA’s existing IT systems, including  the outdated, inefficient nature of certain systems and a lack of system  interoperability as contributors to the department’s challenges related to  health care.

Providing health care to veterans requires a complex set of clinical and  administrative capabilities supported by IT. VA’s health information  system—VistA—has been essential to the department’s ability to deliver  health care to veterans. VistA contains an electronic health record for  each patient that supports clinical settings throughout the department. For  example, clinicians can use the system to enter and review patient  information; order lab tests, medications, diets, radiology tests, and  procedures; record a patient’s allergies or adverse reactions to  medications; request and track consults; enter progress notes, diagnoses,  and treatments for encounters; and enter discharge summaries.

VistA was developed in house by clinicians and IT personnel in various  VA medical facilities and has been in operation since the early 1980s.  Over the last several decades, VistA has evolved into a technically  complex system comprised of about 170 modules that support health  care delivery at 152 VA Medical Centers and over 1,200 outpatient sites.  In addition, customization of VistA, such as changes to the modules by  the various medical facilities, has resulted in about 130 versions of the  system—referred to as instances.

According to VA, VistA modules are comprised of one or more software  applications that support various health care functions, such as providing  care coordination and mental health services. In addition to VistA, the  department has other health information systems that must interface with  VistA to send, exchange, or store related health (e.g., clinical and patient)  data.

Since 2001, VA has identified the need for enhancements and  modifications to VistA and has pursued multiple efforts to modernize the  system. Two major efforts have included the VistA Evolution program  and, most recently, the planned acquisition of the same electronic health  record system that the Department of Defense (DOD) is acquiring.

In 2013, VA established VistA Evolution as a joint program between OI&T  and VHA that was comprised of a collection of projects and efforts  focused on improving the efficiency and quality of veterans’ health care.  This program was to modernize the department’s health information  systems, increase VA’s data exchange and interoperability capabilities  with DOD and private sector health care partners, and reduce VA’s time  to deploy new health information management capabilities.

In June 2017, the former VA Secretary announced a significant shift in the  department’s approach to modernizing VistA. Specifically, rather than  continue to use VistA, the Secretary stated that the department planned  to acquire the same Cerner electronic health record system that DOD has  been acquiring.

Accordingly, the department awarded a contract to Cerner in May 2018  for a maximum of $10 billion over 10 years. Cerner is to replace VistA  with a commercial electronic health record system. This new system is to  support a broad range of health care functions that include, for example,  acute care, clinical decision support, dental care, and emergency  medicine. When implemented, the new system will be expected to  provide access to authoritative clinical data sources and become the  authoritative source of clinical data to support improved health, patient  safety, and quality of care provided by VA.

As previously mentioned, this acquisition is being managed by VA’s  EHRM program. According to program documentation, EHRM is also to  deliver program management support and the infrastructure  modernization required to install and operate the new system.

According to EHRM program documentation, the department has  estimated that an additional $5.8 billion in funding, above the contract  amount, would be needed to fund project management support and  infrastructure improvements over the 10-year period. This amount does  not fully include government employee costs.

Deployment of the new electronic health record system at the initial sites  is planned for within 18 months of October 1, 2018, with a phased  implementation of the remaining sites over the next decade. Each VA  medical facility is expected to continue using VistA until the new system  has been deployed at that location.

VA Has Reported Obligating about $3.0 Billion to VistA and Related Activities from Fiscal Years 2015 through 2017

According to VA, the department’s costs for VistA and related activities  are approximated by funding obligations of about $1.1 billion, $899  million, and $946 million in fiscal years 2015, 2016 and 2017,  respectively, for a total of about $3.0 billion over 3 years to support the  system. Specifically, VHA and OI&T reported obligations to cover the  costs for the VistA Evolution program, including costs for development,  operation and maintenance, and payroll for government employees over  the 3 fiscal years.

Further, in their efforts to fully determine the costs associated with VistA,  VA officials also reported obligations for activities that supported VistA,  but were not included in the VistA Evolution program. These other  obligations were for investments in interoperability initiatives, such as  increasing data standardization and data sharing between VA, DOD, and  other government and non-government entities, and the Virtual Lifetime  Electronic Record Health. These obligations also include other VistA- related technology investments, such as networks and infrastructure  sustainment, continuation of legacy systems, and overall patient safety,  security, and system reliability.

Table 1 provides a summary of the total VistA and related obligations that  VA identified for fiscal years 2015 through 2017.

VA Is Working to Define VistA’s Scope and Identify Components to Be Replaced by the Cerner System

Understanding the scope of VA’s current health information system is  essential to effectively planning for the new system. However, according  to VA officials, there is no single information source that fully defines the  scope of VistA. Instead, existing definitions of the system, including the  components that comprise it, are identified by multiple sources. These  sources include the VA Systems Inventory, VistA Document Library, and  VA Monograph.

Each of these sources describes VistA from a different perspective. For  example, the VA Monograph provides an overview of VistA and non-VistA  applications used by VHA. The monograph also describes modules and  their associated business functions, but does not document all  customization at local facilities. The VA Systems Inventory is a database  that identifies current IT systems at VA, including systems and interfaces  that are related to VistA. The VA Document Library is an online resource  for accessing documentation on VA’s nationally released software  applications, including VistA.

In the absence of a complete definition of VistA, EHRM program officials  have taken a number of steps to define the system’s scope and identify  the components that the Cerner system will replace. These steps have  included conducting two analyses, performing preliminary site  assessments, and planning for Cerner to perform a detailed assessment  of each site where the new system will be deployed.

Specifically, EHRM program subject-matter experts undertook an analysis  that identified 143 VistA modules and 35 software applications as  representing the scope of the system. They then compared the  functionality provided by the VistA modules to the Cerner system’s  capabilities to identify the VistA components that are expected to be  replaced by the Cerner system. The analysis identified 131 (92 percent)  of the 143 VistA modules and 32 (91 percent) of the 35 applications that  are expected to be replaced by the Cerner system. For example, the  analysis determined that the Care Management and Mental Health  modules would be replaced by the new system.

EHRM program officials also undertook a subsequent, broader analysis to  identify, among other things, the scope of VistA, as well as the  department’s other health IT systems that could also be replaced by the  Cerner system. These other systems include, for example, dentistry and  oncology applications. As part of this analysis, the department combined  data from the VA Systems Inventory, the VistA Document Library, the VA  Monograph, and other sources to identify the health information  technology environment at a typical VA medical center.

The resulting analysis of VA’s health IT environment identified a total of  330 applications that support health care delivery at a medical center, of  which 119 applications (approximately 36 percent) have been identified  as having similar functionality as a capability of the Cerner system.  Further, 128 of the 330 applications are identified as VistA applications.  Of the 128 applications designated as VistA, 58 (approximately 45  percent) have been identified as having similar functionality as a  capability of the Cerner system, including pharmacy, laboratory, and  scheduling capabilities.

In addition to the analyses discussed above, VA has taken steps to  understand differences in VistA at individual facilities. Specifically,  according to EHRM officials, representatives from VA and Cerner have  visited 17 VA medical facilities to conduct preliminary site assessments.  The intent of these assessments is to obtain a broad perspective of the  current state of the systems, applications, integration points, reporting,  and workflows being utilized at individual facilities. These site visits  identified VistA customization that may be site specific. The identification  of such site specific customization is intended to help Cerner plan for  implementation of its system at each location. According to EHRM  program officials, full site assessments that are planned at each location  in preparation for implementation of the Cerner system are expected to  identify the full extent of VistA customization.

VA’s Preparations for Transitioning from VistA to the Cerner System Are Ongoing

Since the former VA Secretary announced in June 2017 that the  department would acquire the same electronic health record system as  DOD, VA has taken steps to position the department for the transition to  the new system. These actions, which are ongoing, have included  standardizing VistA, assessing the department’s approach to increasing  interoperability, establishing governance for the new program and the  framework for joint governance with DOD, and preparing initial program  plans.

VA’s goal is for all instances of VistA being used in its medical facilities to  be standardized where practical. Such standardization is intended to  better position the department to switch to the Cerner system. To  increase standardization, the VistA Evolution program has been focused  over the last 5 years on standardizing a core set of VistA modules related  to interoperability which, according to the department, accounts for about  60 percent of VistA.

In addition, the program has focused on identifying software that is  common to each VistA instance. VA refers to this collection of standard  software as the gold instance. As part of its effort to standardize VistA, VA  has implemented a process to compare the system at each site with the  gold instance. Sites that are identified as having variations from the gold  instance must apply for a waiver to gain approval for continuing to  operate a non-standard VistA instance. OI&T and VHA assess the  waivers, which may be approved if a site needs non-standard functionality  that is deemed critical to that site. Alternatively, waivers are not approved  if the assessment determines that a site’s needs can be met by reverting  to the gold instance of VistA.

Assessing the Approach to Increasing Interoperability

VA has identified increased interoperability as a key expected outcome of  its decision to switch from VistA to the Cerner system. To ensure that the  contract with Cerner will improve interoperability with community care  providers (i.e., non-VA and third party providers), the former VA Secretary  announced in December 2017 that the department had taken a “strategic  pause” on the electronic health record acquisition process. During the  pause, an independent study was undertaken to assess the approach to  interoperability with the new acquisition. The assessment made  recommendations to improve imported data, address data rights and  patient safety risks, and improve data access for patients. VA agreed with  all of the resulting recommendations and, according to EHRM program  officials, included provisions in the contract with Cerner to address the  recommendations.

Establishing a Program Office and Governance

Our prior work has identified strong agency leadership support and  governance as factors that can increase the likelihood of a program’s  success. Such leadership and governance can come from the  establishment of an effective program management organization and a  related governance structure.

VA has taken steps to establish a program management office and  drafted a structure for technology, functional, and joint governance of the  electronic health record implementation. Specifically, in January 2018, the  former VA Secretary established the EHRM Program Executive Office  (PEO) that reports directly to the VA Deputy Secretary. According to  EHRM program officials, this office supported the contract negotiations  with the Cerner Corporation and is expected to continue to manage the  program going forward.

Program officials stated that the office is beginning the process of hiring  full-time employees. In addition, to support the program office, the  department has awarded a contract for project management support and  has also reassigned a number of VA staff to the PEO.

Further, VA has drafted a memorandum that describes the role of  governance bodies within VA, as well as governance intended to facilitate  coordination between DOD and VA. For example, according to the draft  memorandum, within VA, the EHRM Steering Committee is expected to  provide strategic direction for the efforts while monitoring progresses  toward goals and advising the Secretary on the progress and  performance of the EHRM efforts. This committee is to include the Deputy  Secretary, the Undersecretary for Health, and the Chief Information  Officer, among others, and is to meet quarterly or as necessary to make  its reports to the Secretary.

Additionally, according to EHRM program documentation, VA is in the  process of establishing a Functional Governance Board, a Technical  Governance Board, and a Governance Integration Board comprised of  program officials intended to provide guidance; coordinate with DOD, as  appropriate; and inform the Steering Committee. Further, a joint  governance structure between VA and DOD has been proposed that  would be expected to leverage existing joint governance facilitated by the  DOD/VA Interagency Program Office.

Nevertheless, while the department’s plans for governance of the EHRM  program provide a framework for high-level oversight for program  decisions moving forward, EHRM officials have noted that the  governance bodies will not be finalized until October 2018.

Program planning is an activity for ensuring effective management of key  aspects of an IT program. These key aspects include identification of the  program’s scope, responsible organizations, costs, and schedules.

VA has prepared initial program plans, including a preliminary timeline for  deploying the new electronic health record system to its medical facilities.  The department also has a proposed 90-day schedule that depicts key  program activities currently underway now that the contract has been  awarded. For example, the department’s preliminary plans include an 8- year deployment schedule beginning with planned implementation at  initial sites within 18 months of October 1, 2018.

According to the executive director for the EHRM program, the  department also intends to complete a full suite of planning and  acquisition management documents to guide the program. These  documents include, for example, a life cycle cost estimate, a data  migration plan, a change management plan, and an integrated master  schedule to establish key milestones over the life of the project. EHRM  PEO officials have stated that the department intends to complete the  development of its initial plans for the program within 30 to 90 days of  awarding the contract (between mid-June and mid-August 2018), and  intends to update those plans as the program matures. The plans are to  be reviewed during the milestone reviews identified in the department’s  formal project management framework.

Critical Factors Underlying Successful Major Acquisitions

Our prior work has determined that successfully overcoming major IT  acquisition challenges can best be achieved when critical success factors  are applied. Specifically, we reported in 2011 on common factors critical  to the success of IT acquisitions, based on seven agencies having each  identified the acquisition that best achieved the agency’s respective cost,  schedule, scope, and performance goals. These factors remain relevant  today and can serve as a model of best practices that VA could apply to  enhance the likelihood that the acquisition of a new electronic health  record system will be successfully achieved.

Among the agencies’ seven IT investments, agency officials identified  nine factors as having been critical to the success of three or more of the  seven investments. These nine critical success factors are consistent with  leading industry practices for IT acquisition. The factors are:

Active engagement of senior officials with stakeholders.

Qualified and experienced program staff.

Support of senior department and agency executives.

Involvement of end users and stakeholders in the development of  requirements.

Participation of end users in testing system functionality prior to formal  end user acceptance testing.

Consistency and stability of government and contractor staff.

Prioritization of requirements by program staff.

Regular communication maintained between program officials and the  prime contractor.

Officials for all seven selected investments cited active engagement with  program stakeholders—individuals or groups (including, in some cases,  end users) with an interest in the success of the acquisition—as a critical  factor to the success of those investments. Agency officials stated that  stakeholders, among other things, reviewed contractor proposals during  the procurement process, regularly attended program management office  sponsored meetings, were working members of integrated project  teams, and were notified of problems and concerns as soon as  possible. In addition, officials from two investments noted that actively  engaging with stakeholders created transparency and trust, and  increased the support from the stakeholders.

Additionally, officials for six of the seven selected investments indicated  that the knowledge and skills of the program staff were critical to the  success of the program. This included knowledge of acquisitions and  procurement processes, monitoring of contracts, large-scale  organizational transformation, Agile software development concepts,  and areas of program management such as earned value management  and technical monitoring.

Finally, officials for five of the seven selected investments identified  having the end users test and validate the system components prior to  formal end user acceptance testing for deployment as critical to the  success of their program. Similar to this factor, leading guidance  recommends testing selected products and product components  throughout the program life cycle. Testing of functionality by end users  prior to acceptance demonstrates, earlier rather than later in the program  life cycle, that the functionality will fulfill its intended use. If problems are  found during this testing, programs are typically positioned to make changes that would be less costly and disruptive than ones made later in  the life cycle.

Use of the critical success factors described above can serve as a model  of best practices for VA. Application of these acquisition best practices  presents opportunities for the department to increase the likelihood that  its planned acquisition of a new electronic health record system will meet  its cost, schedule, scope, and performance goals.

In conclusion, VA continued to obligate billions of dollars for its VistA  system. Recently, the department has undertaken important analyses to  better understand the scope of the system and identify capabilities that  can be provided by the Cerner electronic health record system it is  acquiring. VA has additional key activities underway, such as establishing  program governance and EHRM program planning. Based on these  preliminary observations and as the department continues its activities to  transition from VistA to the Cerner electronic health record system, critical  success factors can serve as a model of best practices that VA could  apply to enhance the likelihood that the acquisition of the new system will  be successfully achieved. While it is early in VA’s acquisition of the  Cerner system, it will be important for the department to leverage all  available opportunities to ensure that its transition to a new system is  carried out in the most effective manner possible. Our experience has  shown that challenges can successfully be overcome through using a  disciplined approach to IT acquisition management.

Chairman Roe, Ranking Member Walz, and Members of the Committee,  this concludes my prepared statement. I would be pleased to respond to  any questions that you may have.

If you or your staffs have any questions about this testimony, please  contact David A. Powner at (202) 512-9286 or pownerd@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this testimony statement. GAO  staff who made key contributions to this statement are Mark Bird  (Assistant Director), Jennifer Stavros-Turner (Analyst in Charge), John  Bailey, Rebecca Eyler, Jacqueline Mai, Scott Pettis, and Charles  Youman.

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