Information Technology: Effective Practices Have Improved Agencies' FITARA Implementation

Congress has long recognized that IT has the potential to enable federal agencies to accomplish their missions more quickly, effectively, and economically. However, fully exploiting this potential has presented challenges to covered agencies, and the federal government's management of IT has produced mixed results.

As part of its effort to reform the government-wide management of IT, in December 2014 Congress enacted FITARA. The law included specific requirements related to enhancing Chief Information Officers' (CIO) authorities, improving the risk management of IT investments, reviewing agencies' portfolio of IT investments, consolidating federal data centers, and purchasing software licenses. GAO has reported numerous times on agencies' effectiveness in implementing the provisions of the law and highlighted agencies that have had success in implementing selected provisions.

In this report, GAO identifies practices that agencies have used to effectively implement FITARA. GAO selected five provisions of FITARA to review: (1) CIO authority enhancements; (2) enhanced transparency and improved risk management; (3) portfolio review; (4) data center consolidation; and (5) software purchasing. GAO then selected nine agencies that had success in implementing at least one of the five provisions. GAO compiled practices where at least one agency was better positioned to implement a provision or realized an IT management improvement or cost savings.

Nine selected agencies (the Departments of Agriculture, Commerce, Health and Human Services, Homeland Security, Justice, and Veterans Affairs; the Agency for International Development; the National Aeronautics and Space Administration; and the General Services Administration) identified 12 practices that helped them to effectively implement one or more Federal Information Technology Acquisition Reform Act provisions (commonly referred to as FITARA). The following figure identifies the 12 practices, including the four overarching ones, considered vital to implementing all provisions.

By applying the overarching practices, covered agencies were better positioned to implement FITARA. In addition, by implementing the practices relative to the five FITARA provisions GAO selected, covered agencies realized information technology (IT) management improvements, such as decommissioning old systems and cost savings.

Congress has long recognized that information technology (IT) has the  potential to enable federal agencies to accomplish their missions more  quickly, effectively, and economically. However, fully achieving this  potential has presented longstanding challenges to agencies. In this  regard, the federal government’s management of IT has produced mixed  results despite a continued increase in federal IT spending, which is  planned to be more than $92 billion in fiscal year 2019.

As part of its effort to reform the government-wide management of IT, in  December 2014, Congress enacted the Federal Information Technology  Acquisition Reform provisions (commonly referred to as FITARA) of the  Carl Levin and Howard P. ‘Buck’ McKeon National Defense Authorization  Act for Fiscal Year 2015. FITARA holds promise for improving covered  agencies’ management and acquisitions of IT, facilitating Congress’  monitoring of agencies’ progress, and holding those agencies  accountable for reducing duplication and achieving cost savings.

Since its enactment, we have reported numerous times on agencies’  efforts toward implementing FITARA. Our work has highlighted various  agencies’ successes, as well as challenges, in implementing selected  provisions of the act.

This report responds to your request that we conduct a review of FITARA  implementation practices. Our specific objective was to identify practices  that federal agencies have used to effectively implement the provisions of  the act.

To address this objective, we first identified the specific provisions of the  act to include in our review. To do so, we (1) reviewed our previously  issued reports that have examined various aspects of the act; (2) met  with relevant officials from the Office of Management and Budget’s (OMB)  Office of Electronic Government and Information Technology; and (3)  reviewed data contained on the IT Dashboard, as well as other relevant  information supporting the House of Representatives Committee on  Oversight and Government Reform’s biannual scorecards on the 24  covered agencies’ progress in addressing the act’s requirements.

As a result of these activities, combined with our professional judgment,  we identified five FITARA provisions that were most relevant to enabling  agencies’ IT management improvements. These provisions were: Chief  Information Officer (CIO) authority enhancements, enhanced  transparency and improved risk management in IT investments, portfolio  review, the federal data center consolidation initiative, and the  government-wide software purchasing program.

We then identified nine agencies that had implemented at least one of the  five FITARA provisions we included in our review. Our identification of the  nine agencies was based on information in our previous reports that  indicated each agency had realized an IT management improvement or  cost savings with respect to one or more of the five selected FITARA  provisions. Additionally, we considered other relevant information  supporting the House of Representatives Committee on Oversight and  Government Reform’s scorecards that indicated an agency had  effectively implemented FITARA. These nine agencies were the  Departments of Agriculture (USDA), Commerce (Commerce), Health and  Human Services (HHS), Homeland Security (DHS), Justice (Justice), and  Veterans Affairs (VA); and the Agency for International Development  (USAID); the National Aeronautics and Space Administration (NASA);  and the General Services Administration (GSA). These nine agencies  account for about $27 billion (or about 59 percent) of the $45.8 billion in  estimated non-defense IT spending for fiscal year 2019.

To gain additional information on the nine agencies’ FITARA  implementation, we obtained and reviewed relevant documentation, such  as FITARA implementation plans, capital planning and investment control  processes, data center optimization plans, and software licensing  policies. Additionally, we conducted interviews with relevant officials at  these agencies to discuss actions taken to implement the provisions of  the act. These officials included a FITARA Program Manager, a Director  of FITARA Operations, and staff within department-level CIO offices  responsible for implementing the provisions of the act.

We compiled practices where at least one agency had taken action to  implement one of the five selected provisions that led to an IT  management improvement or cost savings. We then compiled  descriptions of the actions that the nine agencies had taken. Additionally,  we reviewed actions the agencies have taken in response to our previous  recommendations to corroborate the IT management improvements and  cost savings. Agencies also identified overarching practices that were not  unique to a specific provision but, instead, better positioned agencies to  implement one or more of the five provisions. Further, we shared the  practices with the nine agencies’ Inspectors General to provide additional  assurance that the practices were consistent with the agencies’ activities  to address FITARA. In addition, we solicited comments on a draft of this  report from the nine agencies included in our review and OMB.

We conducted this performance audit from January 2018 to April 2019 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 objective.

Although the federal government has undertaken numerous initiatives to  better manage the billions of dollars that federal agencies annually invest  in IT, these investments too frequently fail or incur cost overruns and  schedule slippages, while contributing little to mission-related outcomes.  We have previously reported that the federal government has spent  billions of dollars on failed IT investments. These investments often  suffered from a lack of disciplined and effective management, such as  project planning, requirements definition, and program oversight and  governance. As a result of these failures, we added Improving the  Management of IT Acquisitions and Operations to our biennial high-risk  list in 2015.

With its enactment in 2014, FITARA was also intended to improve  agencies’ acquisitions of IT and facilitate Congress’ efforts to monitor  agencies’ progress and hold them accountable for reducing duplication  and achieving cost savings. The act included specific provisions related  to seven areas, including the five areas selected for our review:

CIO authority enhancements—Covered agencies’ CIOs are  required to (1) approve the IT budget requests of their respective  agencies, (2) certify that agencies’ IT investments are adequately  implementing OMB’s incremental development guidance, (3) review  and approve contracts for IT, and (4) approve the appointment of  other agency employees with the title of CIO (e.g., component agency  CIOs).

Enhanced transparency and improved risk management in IT  investments—OMB and covered agencies are to make detailed  information on federal IT investments publicly available, and  department-level CIOs are to categorize their major IT investments by  risk. Additionally, in the case of major investments rated as high risk  for 4 consecutive quarters, the act required that the department- level CIO and the investment’s program manager conduct a review  aimed at identifying and addressing the causes of the risk.

Portfolio review—OMB and the CIOs of covered agencies are to  implement a process to assist agencies in reviewing their portfolios of  IT investments. This review process is intended to, among other  things, identify or develop opportunities to consolidate the acquisition  and management of IT services; identify potential duplication, waste,  and cost savings; develop a multi-year strategy to identify and reduce  duplication and waste within the agencies’ portfolios, including  component agency investments, and to identify projected cost savings  resulting from such a strategy.

Federal data center consolidation initiative—Agencies are required  to provide OMB with a data center inventory, a strategy for  consolidating and optimizing the data centers (to include planned cost  savings), and quarterly updates on progress made. The act also  requires OMB to develop a goal for how much is to be saved through  this initiative, and provide annual reports on cost savings achieved.

Government-wide software purchasing program—GSA is to  develop a strategic sourcing initiative to enhance government-wide  acquisition and management of software. In doing so, the law states  that, to the maximum extent practicable, GSA should allow for the  purchase of a software license agreement that is available for use by  all executive branch agencies as a single user.

GAO Has Previously Reported on Agencies’ FITARA Implementation and Identified Areas for Improvement

We have issued a number of reports that have identified actions that  OMB and federal agencies needed to take to improve their  implementation of the FITARA provisions.

In reporting on incremental software development in November 2017, we  noted that department-level CIOs certified only 62 percent of major IT  software development investments as implementing adequate  incremental development in fiscal year 2017. Officials from 21 of the 24  agencies in our review reported that challenges had hindered their CIOs’  ability to implement incremental development. These challenges included:  (1) inefficient governance processes; (2) procurement delays; and (3)  organizational changes associated with transitioning from a traditional  software methodology that takes years to deliver a product, to  incremental development, which delivers products in shorter time frames.  We made recommendations to department-level CIOs to improve  reporting accuracy and update or establish certification policies. As of  February 2019, agencies had taken steps to address eight of the 19  recommendations.

Additionally, our August 2018 report on department-level CIOs noted that  none of the 24 agencies had policies that fully addressed the role of their  CIOs consistent with federal laws and guidance, including FITARA. In  addition, the majority of the agencies had not fully addressed the roles of  their CIOs for any of six key areas that we identified. Although officials  from most agencies stated that their CIOs were implementing the  responsibilities even when not addressed in policy, the 24 CIOs  acknowledged in a survey that they were not always very effective in  implementing all of their responsibilities.

Further, the shortcomings in agencies’ policies were attributable, at least  in part, to incomplete guidance from OMB. We noted that, until OMB  improved its guidance to clearly address all CIO responsibilities, and  agencies fully addressed the role of CIOs in their policies, CIOs would be  limited in effectively managing IT and addressing long-standing  management challenges. We made 27 recommendations for agencies to  improve the effectiveness of CIOs’ implementation of their  responsibilities. Most agencies agreed with the recommendations and  described actions they planned to take to address them.

Enhanced transparency and improved risk management  In June 2016, we reported on rating the risk of IT investments and noted  that agencies underreported the risk of almost two-thirds of the  investments their CIOs reviewed. All 17 selected agencies incorporated  at least two of OMB’s factors into their risk rating processes and nine  used all of the factors, interpreted differently, less often than on a monthly  basis. Our assessments generally showed more risk than the associated  CIO ratings.

We also issued a series of reports about the IT Dashboard that noted  concerns about the accuracy and reliability of the data on the Dashboard.  In total, we have made 25 recommendations to OMB and federal  agencies to help improve the accuracy and reliability of the information on  the Dashboard and to increase its availability. Most agencies agreed with  the recommendations or had no comments. As of February 2019, 11 of  these recommendations remained open.

In April 2015, we reported on actions needed by 26 federal agencies to  ensure portfolio savings were realized and tracked. We noted that these  agencies had decreased their planned PortfolioStat savings by at least  68 percent from what they reported to us in 2013. Specifically, while the  agencies initially had planned to save at least $5.8 billion between fiscal  years 2013 and 2015, these estimates were decreased to approximately  $2 billion. We made recommendations to OMB and the Department of  Defense aimed at improving the reporting of achieved savings,  documenting how savings are reinvested, and establishing time frames  for PortfolioStat action items. As of February 2019, OMB had addressed  one of the five recommendations.

Our September 2016 report on application inventories noted that most of  the 24 agencies in the review fully met at least three of the four practices  we identified to determine if agencies had complete software application  inventories. Additionally, six of the agencies relied on their investment  management processes and, in some cases, supplemental processes to  rationalize their applications to varying degrees. However, five of the six  agencies acknowledged that their processes did not always allow for  collecting or reviewing the information needed to effectively rationalize all  their applications. We made recommendations that 20 agencies improve  their inventories and five of the agencies take actions to improve their  processes to rationalize their applications more completely. Agencies had  addressed four of the 25 recommendations as of February 2019.

Federal data center consolidation initiative  We have reported annually on agencies’ efforts to meet FITARA  requirements related to the federal data center consolidation initiative. For  example, in March 2016 we reported that, as of November 2015, the 24  agencies participating in the initiative had identified a total of 10,584 data  centers, of which they reported closing 3,125 through fiscal year 2015.  In total, 19 of the 24 agencies reported achieving an estimated $2.8 billion  in cost savings and avoidances from fiscal years 2011 to 2015. We  recommended that 10 agencies take action to address challenges in  establishing, and to complete, planned data center cost savings and  avoidance targets. We also recommended that 22 agencies take action to  improve optimization progress, including addressing any identified  challenges. As of February 2019, agencies had addressed 14 of our 32  recommendations.

Our May 2018 report on data center consolidation noted mixed progress  toward achieving OMB’s goals for closing data centers by September  2018. Over half of the agencies reported that they had either already  met, or planned to meet, all of their OMB-assigned goals by the deadline.  This was expected to result in the closure of 7,221 of the 12,062 centers  that agencies reported in August 2017. However, four agencies reported  that they did not have plans to meet all of their assigned goals and two  agencies were working with OMB to establish revised targets. No new  recommendations were made to agencies in this report because agencies  had yet to fully address our previous recommendations.

In May 2014, we reported on 24 federal agencies’ management of  software licenses and the potential for achieving significant savings  government-wide. Specifically, we found that OMB and the vast majority  of the 24 agencies reviewed did not have adequate policies for managing  software licenses. We also reported that federal agencies were not  adequately managing their software licenses because they generally did  not follow leading practices in this area. Consequently, we could not  accurately describe the most widely used software applications across  the government, including the extent to which they were over and under  purchased. We recommended that the 24 agencies improve their policies  and practices for managing licenses. Most agencies generally agreed  with the recommendations or had no comments.

We then reported in September 2014 that the 24 agencies had either  provided a plan to address most of the recommendations we made to  them, partially disagreed with the report’s prior findings, or did not provide  information on their efforts to address the recommendations. As of  February 2019, the agencies had addressed 109 of the 136  recommendations.

Selected Agencies Identified Practices That Facilitated Effective Implementation of FITARA Provisions

The nine selected agencies identified a total of 12 practices that helped  them to successfully implement the FITARA provisions considered in our  review. Among the practices, a number of the agencies identified four that  were overarching—that is, the practices were not unique to a specific  provision, but, instead, better positioned agencies to implement the five  provisions selected for our review. In addition, agencies identified one practice that helped ensure effective implementation of CIO one practice that helped ensure enhanced transparency and improved one practice that ensured effective portfolio review,  four practices that facilitated data center consolidation, and one practice that facilitated software purchasing.

Figure 1 identifies the 12 practices that the nine agencies used to  effectively implement the selected FITARA provisions. In addition, the  narrative following the figure provides details on how these agencies  implemented the provisions and realized associated IT management  improvements or cost savings.

Overarching Practices Vital to Implementing FITARA

Four of the nine agencies that we reviewed—Commerce, HHS, NASA,  and USDA—identified one or more overarching practices that have been  vital to their efforts in implementing FITARA: obtain support from senior leadership,  treat the implementation of FITARA as a program, establish FITARA performance measures for component agencies, appoint an executive accountable for FITARA implementation in each  component agency.

As a result of implementing these practices, each of the agencies was  better positioned to implement FITARA.

Obtain support from senior leadership  Three of the agencies—USDA, NASA, and Commerce—emphasized that  the support of senior leadership was essential to implementing  requirements in FITARA. This support was demonstrated, for example, by  senior officials highlighting the act’s importance during key executive-level  meetings and in their key memorandums and other communications to  the agencies’ workforce. We have previously reported that having senior  leadership support is critical to the success of major programs.

According to USDA’s Director of FITARA Operations, the agency made a  decision to raise the topic of FITARA implementation at each monthly  executive leadership meeting that is attended by the Deputy Secretary,  Chief Operating Officer, and Assistant Secretary for Administration, in  order to keep attention focused on the act’s implementation. In addition,  the agency’s October 2016, Concept of Operations for The Oversight,  Management, and Operations of FITARA document, which is the primary  document used by the agency to assist with the implementation and  execution of the act, was signed by the Deputy Secretary, CIO, and  Deputy CIO. The officials reported that obtaining support from senior  leadership had helped ensure buy-in to changes resulting from  implementing provisions of the act.

NASA officials also highlighted senior leadership support as being  essential to their actions to implement FITARA. For example, the NASA  Deputy Administrator and Associate Administrator for Mission Support  signed and distributed a memorandum in August 2010 that emphasized  the agency’s commitment to the data center consolidation effort. The  memorandum stated that Mission Directorate Associate Administrators  and Center Directors shall direct their staff to cooperate fully and openly  with NASA’s data center consolidation plan. An official in the Office of the  CIO stated that the memorandum was evidence of the support the  agency had from senior leadership to close data centers.

Further, a Commerce official stated that FITARA implementation activities  at the agency have had support from agency leadership, including the  Deputy Secretary and the CIO. For example, according to the official, the  Deputy Secretary provided each of the component agency FITARA  sponsors with a signed memorandum asking for assistance from the  components. This action resulted in increased cooperation throughout the  agency when components were asked to respond to FITARA-related  requests for information.

Treat implementation of FITARA as a program  Commerce and USDA reported that treating FITARA implementation as if  it were an IT program was important to implementing the requirements of  the act. The two agencies demonstrated this practice by assigning staff to  manage implementation of FITARA and regularly discussing  implementation of the act at meetings with senior-level officials.

According to a Commerce lessons learned document, the agency has  managed FITARA like a program by reporting regularly on its  implementation status to internal agency stakeholders. In addition, the  agency has assigned a program manager to assist with implementation of  the act and to track progress on implementing the act’s provisions. As a  result, Commerce officials reported that the importance of FITARA has  been regularly discussed throughout the agency in bi-weekly meetings  within the Office of the Secretary. These meetings led to an increased  sense of cooperation between different disciplines (e.g., IT, budget,  acquisition, legal, and human resources) and reduced the impression that  FITARA was solely focused on the department-level CIO office.

Further, USDA created the position of Executive Director for FITARA  Operations within the department-level CIO office. This position has  responsibility for, among other things, establishing the processes and  procedures to bring the agency into compliance with the act and IT  management controls that meet the FITARA requirements. The Director  stated that treating the implementation of FITARA as if it were an IT  program has led the agency to develop key documentation that has  assisted in the implementation of the act, including its Concept of  Operations for the Oversight, Management, and Operations of FITARA  and Data Center Closure Process.

Establish FITARA performance measures for component agencies  HHS established internal FITARA performance measures for its  component agencies that officials believe have led to increased  effectiveness in implementing the act. Specifically, the agency undertook  an effort to increase its FITARA scorecard grades—called “A by May”— with a goal to attain an ‘A’ on the May 2018 FITARA 6.0 scorecard. As  part of this effort, HHS created its own internal scorecard for each of its  component agencies that mirrored the agency’s FITARA scorecard.

According to an HHS lessons learned document, aligning the FITARA  metrics to component agency performance resulted in greater  transparency between the department-level CIO and component agency  CIOs. The effort to establish internal performance measures received  support from senior agency leadership. Specifically, it was endorsed by  the Assistant Secretary for Administration and the Principal Deputy for  Administration, which agency officials believed was a key factor in the  effort’s success.

HHS officials also reported that their internal scorecard was helpful  because it let component agencies know how well they were doing  relative to each other. The officials also believed that establishing FITARA  performance measures led to increased cooperation and communication  between component agencies and the department-level CIO office. For  example, the increased cooperation allowed HHS to more easily collect  data required to update the House Committee on Oversight and  Government Reform’s FITARA scorecard.

At the December 2018 House Committee on Oversight and Government  Reform hearing on FITARA, the HHS Acting CIO attributed the agency’s  increased scorecard grade—from a ‘D’ on the initial November 2015  scorecard to a ‘B+’ on the December 2018 scorecard—to the “A by May”  initiative. According to this official, the measurement of component  agencies’ performance had elevated the importance of meeting FITARA  objectives and paved the way for agency-wide participation in  improvement efforts.

Appoint an executive accountable for FITARA implementation in  each component agency  According to a Commerce memorandum, the Assistant Secretary for  Administration asked each component agency to identify a FITARA  executive sponsor. The sponsors were assigned responsibility for  gathering the necessary information on component agencies’ efforts to  implement FITARA and for alerting the agency’s CIO of any issues that  needed to be addressed. Once the sponsors were identified, the  Commerce Deputy Secretary sent a letter to each sponsor, asking them  to help ensure cooperation between their component agencies and the  department’s CIO office. A Commerce official reported that having a  sponsor in component agencies with responsibility for providing the  information needed to report on FITARA results to the department’s CIO  office had increased component agencies’ responsiveness to information  requests and improved cooperation throughout the agency.

Commerce and DHS developed policies to explain how the specific  authorities that FITARA provided to the agency CIO are to be carried out.  The agencies identified the policies as essential to their ability to  implement the CIO authority enhancements provision in FITARA.  Commerce officials stated, for example, that their agency established a  policy to ensure that the CIO certified major IT investments as adequately  implementing incremental development. Specifically, Commerce’s capital  planning guidance required component agency CIOs or other  accountable officials within the component agencies to certify the  adequate implementation of incremental development for these  investments. Commerce’s guidance described the role of the CIO in the  certification process and how the CIOs’ certification should be  documented. The guidance also included definitions of incremental  development and time frames for delivering functionality. Officials in  Commerce’s Office of the CIO reported that the certification policies  assisted them in overseeing the management of IT investments and  ensuring the use of incremental development throughout the agency, as  called for by FITARA.

Also, Commerce changed its personnel policy to require the department- level CIO to approve all senior level IT positions, which addressed the  FITARA requirement for the CIO to approve the appointment of other staff  with the title of CIO (e.g., component agency CIOs). Specifically, in  February 2016, Commerce developed a new human capital policy to give  its department-level CIO input into the hiring of all senior level IT  positions, including component CIOs. As a result, a Commerce official  reported that the policy ensures that the CIOs’ authority has been  enhanced to include significant involvement in the hiring of IT leaders  throughout the agency.

For its part, DHS established a policy to ensure that the department-level  CIO certified major IT investments as adequately implementing  incremental development. Specifically, DHS’s technical investment review  guidance states that the CIO is to conduct a review of each investment  using an investment review checklist that includes information provided  by project managers as to whether the investments have used  incremental development adequately. The CIO is to certify whether the  project is implementing incremental delivery at least every 6 months and  is to document this certification in the checklist. As a result, officials in  DHS’s Office of the CIO said that they can now use information from the  incremental certification checklist to improve incremental development  processes and to make corrections to projects that were not adequately  implementing incremental development.

Enhanced Transparency and Improved Risk Management

Three agencies—Commerce, DHS, and USDA—identified one practice  that was key to their effective implementation of the enhanced  transparency and improved risk management provision of FITARA. The  practice is to implement a risk rating process for IT investments that  incorporates risks (e.g., funding cuts or staffing changes).

Commerce’s Office of the CIO implemented a process where this office  reviewed at least the top three risks for each investment, verified that  these risks were specific to the investment and were appropriately  managed and mitigated, and verified that the risk register was updated  regularly. In addition, DHS implemented a process that included a review  of investment risks, ensured that the risks were current, and that risk  mitigation plans were in place. Also, in November 2017, USDA updated  its risk rating process to incorporate risks. Specifically, it updated its risk  management scoring criteria to include an evaluation of the management  and risk exposure scores of risks.

The actions that Commerce, DHS, and USDA took to incorporate reviews  of risks into their risk rating processes better positioned the agencies to  provide more detailed and accurate information on their IT investments to  the public.

Four of the agencies—GSA, Justice, DHS, and USAID—identified  performing application rationalization activities as vital to their effective  implementation of the portfolio review provision of FITARA. Application  rationalization activities can include establishing a software application  inventory, collecting information on each application, or evaluating an  agency’s portfolio of IT investments to make decisions on applications  (e.g., retire, replace, or eliminate). We have previously reported that the  principles of application rationalization are consistent with those used to  manage investment portfolios.

GSA and Justice performed application rationalization by engaging in  efforts to establish complete and regularly updated application  inventories. To do so, component agencies specified basic application  attributes in their inventories (e.g., application name, description, owner,  and function supported), and regularly updated the inventories. As we  have previously reported, by having an application inventory that is  complete and regularly updated, agencies such as GSA and Justice are  better positioned to realize cost savings and efficiencies through activities  such as consolidating redundant applications.

For its part, DHS utilized application rationalization to identify duplicate  investments and consolidate systems. Part of the effort included the  regular assessment of programs against criteria such as the program’s  cost, schedule, and performance relative to established targets.  According to the agency, this resulted in the consolidation of site services,  including help desk operations. DHS reported that this consolidation  resulted in savings that cumulatively accrued to $202 million by fiscal year  2015.

In addition, as an application rationalization activity, USAID reviewed its  portfolio of IT investments in order to identify systems to potentially retire  or decommission—a requirement of the portfolio review provision of  FITARA. Specifically, the agency developed an information system  decommissioning plan to retire old systems. The plan described USAID’s  three-step approach to decommissioning systems: (1) identifying  decommissioning candidates, (2) conducting system reviews and  decommissioning decisions and (3) decommissioning planning and  execution.

As a result of this approach to implementing the portfolio review provision  of FITARA, the agency reported in its Information Systems  Decommissioning Plan that it has decommissioned 78 old systems and  identified additional systems to decommission in future years. Agency  officials reported that USAID achieved cost savings of almost $10 million  since 2016 as a result of decommissioning systems.

GSA, Justice, NASA, USAID, and USDA identified four practices that  were essential to their effective implementation of the data center  consolidation provision of FITARA and resulted in agencies realizing cost  savings or other IT management improvements:  conduct site visits to all data centers,  transition to a virtual or cloud-based environment,  incentivize component agencies to accelerate the pace of data center  consolidation, and utilize data centers with excess capacity.

Agencies’ actions to implement these practices have led to the retirement  of older systems, increased cost savings and future cost avoidance, and  a reduction in the number of data centers. In addition, as a result of  applying these practices, the agencies were better able to make progress  in consolidating and optimizing data centers.

Conduct site visits to all data centers  USDA and Justice conducted site visits to all of their data centers to more  effectively address the data center provision of FITARA. Both agencies  stated that the site visits had allowed them to more thoroughly document  the inventory of applications and IT hardware in each of the data centers  and to validate progress made toward closing data centers.

USDA officials stated that conducting site visits to their data centers  played a pivotal role in the successful implementation of data center  consolidation by providing more direct communication with data center  staff to address concerns and issues that staff had about consolidation of  the centers. Additionally, agency officials reported that they were able to  obtain more detailed information necessary to meet the FITARA  requirements for reporting to OMB on USDA’s data center inventory and  progress made on data center closures as a result of conducting site  visits.

Further, Justice officials stated that site visits conducted by staff in the  CIO’s office that were responsible for data center consolidation played a  key role in the closure of many of the agency’s data centers. Specifically,  the officials said that conducting site visits in person showed data center  staff that data center consolidation was a priority for the agency. The  officials added that the site visits also showed data center staff that they  were valued as partners in the consolidation effort.

Transition to a virtual or cloud-based environment  USDA, GSA, NASA, and USAID have taken actions to transition to a  virtual or cloud-based environment as a way to effectively implement the  data center consolidation provision of the act. The agencies’ actions  consisted of moving data from agency-owned data centers to cloud- based environments, which helped the agencies make progress toward  meeting the cost savings and data center optimization requirements of  FITARA.

USDA officials reported that the agency has been successful in having its  components use cloud technology to reduce the number of data centers.  For example, the USDA Forest Service developed a migration strategy to  move all of the Forest Service production systems and applications from  its data centers to USDA’s Enterprise Data Center and Cloud  Infrastructure as a Service located at the National Information Technology  Center in Kansas City, Missouri. As a result of moving its production  systems and applications, the Forest Service increased virtualization,  resolved many long-term security vulnerabilities, and reduced the number  of duplicative and stand-alone applications by 70 percent. The Forest  Service reported that it had identified cost savings of up to $6.1 million  annually as a result of these efforts.

In addition, GSA developed a data center consolidation strategy which  included migrating services from agency-owned data centers to more  flexible and optimized cloud computing environments, shared service and  co-location centers, and more optimized data centers within their own  inventory. For example, the agency migrated numerous systems to  provisioned services via cloud computing services. GSA officials reported  that their agency has encouraged virtualization and cloud computing as  preferred options above new physical implementations. The agency also  continues to migrate away from hardware-dependent operating systems  and to utilize, build upon, and mature its enterprise service virtualization  platform offerings and capabilities. As a result of these actions, the  agency has been able to more effectively retire older systems in order to  shift them to newer, virtualized technologies.

NASA officials stated that their agency is transitioning to a cloud-based  environment to close its data centers. For example, NASA moved all of  the data from the Earth Observing System to a new commercial cloud- based model that hosts all the data in one location. The Earth Observing  System was designed over a decade ago and its data were held at  different partner locations based on science discipline (e.g., land, oceans,  and atmosphere) and provided data that were used by the public in  various capacities. The agency funded data center hardware at each of  the locations and transported data between the locations, as necessary,  to create integrated data products. According to NASA officials,  transitioning to a cloud-based environment has resulted in easier access  to NASA data by the public, elimination of recurring capital investments in  data center hardware, and improved IT security.

USAID reported that it saved money and increased efficiency by  consolidating all of its data centers into a single data center in 2012 and  then transitioning its single data center to a cloud-based environment.  USAID completed the migration of its data center to the cloud in June  2018. According to the agency, moving to the cloud is expected to result  in $36 million in future cost avoidance for the agency.

Incentivize component agencies to accelerate the pace of data  center consolidation  Data center consolidation activities can be costly, requiring agencies to  use resources to, for example, analyze the need for IT equipment (e.g.,  servers, processors, networking, and other hardware) and to move such  equipment between locations. Our May 2018 report on the results of  agencies’ efforts to consolidate data centers noted mixed progress toward  achieving OMB’s goals for closing data centers.

Justice incentivized a component agency to accelerate its participation in  data center consolidation by providing supplemental funding for costs  associated with consolidation. For example, the agency’s CIO office  provided funding for a component agency to offset the cost to move  servers and data center equipment to another location. Justice officials  noted that the agency has seen increased cooperation from component  agencies as a result of offering supplemental funding to participate in its  data center consolidation effort.

Utilize data centers with excess capacity  A part of GSA’s strategy for consolidating data centers was to move  existing data to other government data centers that had the capacity to  store its data. To do so, GSA established shared service agreements with  the Environmental Protection Agency’s National Computer Center and  NASA’s Stennis Space Center data centers. As a result of moving its  data to other government data centers with excess capacity, GSA was  able to consolidate numerous data centers, resulting in increased  efficiency and cost savings.

USDA, VA, GSA, NASA, and USAID identified the practice of centralizing  the management of software licenses as essential to their effective  implementation of the software purchasing provision of FITARA. These  five agencies did this by, for example, establishing a software  management team, creating contracts with vendors to centrally manage  licenses, and establishing governance processes for software license  management.

USDA employed a centralized software license management approach by  establishing a Category Management Team. This team was responsible  for the oversight of all software license enterprise agreements, which  included collecting, reviewing, consolidating, and reporting on all software  procurements. The agency also created Enterprise IT Category  Management guidance that supported the central oversight authority for  managing enterprise software license agreements. Further, according to  USDA officials, management has been supportive in ensuring that all  organizations and components join existing enterprise contracts that are  already in place.

USDA’s actions to centralize the management of its software licenses  have led to effective agency-wide decisions regarding software purchases  that the agency reported have yielded cost savings. For example, the  agency identified instances where multiple software contracts at different  price points among component agencies could be consolidated into one  contract at the lowest price. This resulted in reducing the cost per license  for a software product from $250 to $15.75, saving the agency  approximately $85,000 between 2016 and 2017, according to USDA  documentation.

VA established an Enterprise Software License Management Team to  centralize the management of its efforts to purchase software. According  to officials in VA’s Office of Information and Technology, this team  consisted of knowledgeable staff that had experience with software  management and development, and was familiar with software that was  deployed across the entire agency. These officials also stated that the  Enterprise Software License Management Team conducted weekly  meetings with GSA to discuss software licensing and category  management to ensure they were aware of other opportunities for cost  savings. VA also established an Enterprise Software Asset  Management Technical Working Group that was formed to define and  document a framework that employed a centralized software license  management approach.

By centralizing the management of its software licenses, VA has been  able to make effective agency-wide decisions regarding the purchase of  software products and reported that it has realized cost savings.  Specifically, VA provided documentation showing that it had implemented  a solution to analyze agency-wide software license data, including usage  and costs. The agency identified approximately $65 million in cost  savings between 2017 and 2020 due to analyzing one of their software  licenses.

We previously reported that GSA and USAID had centralized the  management of their software licenses. We reported that GSA’s server- based and enterprise-wide licenses were managed centrally, whereas  non-enterprise-wide workstation software licenses were generally  managed regionally. GSA also issued a policy that established  procedures for the management of all software licenses, including  analyzing software licenses to identify opportunities for consolidation.

Centralizing the management of its purchase of software licenses has led  GSA to make effective agency-wide decisions regarding its software  licenses and avoid future costs, according to agency documentation. For  example, in fiscal year 2015, the agency consolidated licenses for one of  its software products, saving the agency over $400,000 and avoiding over  $3 million in future costs.

For its part, USAID had a contract in place with a vendor for centrally  managing licenses for all of its operating units. Further, according to  officials within USAID’s Office of the CIO, the agency established a  governance process to manage the introduction of new software. As part  of this governance process, USAID’s Software and Hardware Approval  Request Panel was responsible for reviewing requests to procure new  software.

USAID’s actions on centralizing the management of its software licenses  have led to effective agency-wide decisions regarding software purchases  that the agency reported have yielded cost savings. For example, USAID  identified opportunities to reduce costs on its software licenses through  consolidation or elimination of software. This resulted in the agency  reporting a cumulative savings from fiscal year 2016 to fiscal year 2018 of  over $2.5 million on software licenses.

NASA issued a software license management policy that included the  roles and responsibilities for central management of the agency’s  software licenses. In addition, in May 2017, NASA’s Administrator  issued a memorandum requiring component agencies to use the  agency’s Enterprise License Management Team to manage software  licenses.

By employing a centralized software license management approach,  NASA made effective agency-wide decisions on software licenses which  the agency reported led to cost avoidance. For example, the agency  increased the number of software agreements managed by its enterprise  license management team from 24 to 42 in fiscal year 2014, and  analyzed its software license data to identify opportunities to reduce costs  and make better informed investments moving forward. As a result, NASA  reported that it realized cost avoidance of approximately $224 million from  fiscal years 2014 through 2018.

In summary, as a result of applying the practices identified in this review,  the selected agencies were better positioned to implement FITARA  provisions and realized IT management improvements and cost savings.

We requested comments on a draft of this report from each of the nine  agencies included in our review, as well as from OMB. In response, one  agency—USAID—provided written comments, which are reprinted in  appendix I. Another agency—DHS—provided technical comments, which  we incorporated in the report, as appropriate. The other 7 agencies and  OMB did not provide comments on the draft report.

In its comments, USAID described actions that it had taken to enhance  the authority of its CIO. Specifically, the agency stated that it had  proposed that the CIO report directly to the Administrator and had notified  the congressional committees of jurisdiction about this intended action.  Further, USAID stated that, as of April 2019, the Administrator would be  expected to approve revisions to internal policy to clarify and strengthen  the authority of the CIO in line with FITARA and our report.

We are sending copies of this report to the appropriate congressional  committees, the heads of the Departments of Agriculture, Commerce,  Health and Human Services, Homeland Security, Justice, and Veterans  Affairs; the General Services Administration; the National Aeronautics  and Space Administration; the U.S. Agency for International  Development; the Director of the Office of Management and Budget; and  other interested parties. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.

If you or your staffs have any questions on matters discussed in this  report, please contact me at (202) 512-4456 or harriscc@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  major contributions to this report are listed in appendix II.

Appendix I: Comments from the US Agency for International Development

Appendix II: GAO Contact and Staff Acknowledgments

Carol C. Harris, (202) 512-4456 or harriscc@gao.gov.

In addition to the contact named above, Dave Powner (Director), Mark  Bird (Assistant Director), Eric Trout (Analyst-in-Charge), Justin Booth,  Chris Businsky, Quintin Dorsey, Rebecca Eyler, Dave Hinchman, Valerie  Hopkins, Kaelin Kuhn, Sabine Paul, Monica Perez-Nelson, Meredith  Raymond, Bradley Roach, Andrew Stavisky, Niti Tandon, Christy Tyson,  Adam Vodraska, Kevin Walsh, Jessica Waselkow, and Eric Winter made  key contributions to this report.

To reform government-wide information technology management, Congress enacted the Federal Information Technology Acquisition Reform Act (commonly referred to as FITARA) in 2014.

What practices have federal agencies put in place to implement the law?

We reviewed nine agencies and found 12 practices officials said helped them to effectively implement one or more of the FITARA provisions.

For example, five of the agencies said that centralizing the management of software licenses was essential to meeting the software purchasing provision of the law. By doing so, agencies were able to make agency-wide purchasing decisions that saved them money.


Federal Advertising: Contracting with Small Disadvantaged Businesses and Those Owned by Minorities and Women Has Increased in Recent Years

The federal government spends close to $1 billion annually for advertising activities that, among other things, inform the public about programs and services. The government seeks to provide procurement opportunities for these services to businesses such as SDBs and those owned by minorities and women. SDBs are those primarily owned by one or more socially and economically disadvantaged individuals.

GAO was asked to analyze federal advertising obligations to these types of businesses. This report discusses (1) the amount federal agencies have obligated towards advertising contracts over the most recent 5 fiscal years (2013 through 2017) and the amount going to SDBs and businesses owned by minorities and women; and (2) the agencies that have directed the most advertising contract obligations to these businesses and how this has changed over time.

GAO analyzed data on advertising contracts from the Federal Procurement Data System – Next Generation database for fiscal years 2013 through 2017. GAO also interviewed Small Business Administration officials.

The Small Business Administration provided technical comments on this report, which GAO incorporated as appropriate.

Federal advertising contract obligations to small disadvantaged businesses (SDB) and businesses of all sizes owned by minorities and women (specified businesses) generally increased from fiscal years 2013 through 2017, and constituted 13 percent of all advertising obligations over this period. This figure is consistent with the percentage of all federal contract obligations to these businesses over this period. Overall, advertising contract obligations to all three categories of businesses increased between fiscal years 2013 and 2017, as shown in the figure below. Within the minority-owned business category, which includes businesses owned by Asian-Pacific-, Subcontinent-Asian-, Black-, Hispanic-, and Native-Americans, over half of the obligations went to those owned by Hispanic-Americans.

Three agencies—the departments of Defense (DOD), Health and Human Services, and Homeland Security—were responsible for nearly three-quarters of advertising contract obligations to the three categories of businesses from fiscal years 2013 through 2017. These agencies were associated with much of the increase in these obligations to specified businesses over the 5-year period. Although some agencies obligated higher shares of their advertising contract obligations to these businesses, they generally obligated fewer dollars than DOD and the two other agencies. For example, the National Aeronautics and Space Administration directed 98 percent of its obligations to these businesses, but the agency's total advertising contract obligations were $21 million over the 5-year period. DOD obligated $2.6 billion for these contracts over the same period.

In recent years, federal spending on advertising contracts has  approached $1 billion annually, making the federal government one of the  top advertisers in the country. Federal agencies contract with advertising  agencies, public relations firms, and other organizations to provide,  among other things, information to the public about programs and  services. As it does for virtually all of the products and services it  procures, the government seeks to provide procurement opportunities to  socially and economically disadvantaged small businesses as well as  minority- and women-owned businesses. For example, the Small  Business Act, as amended, requires federal agencies to, among other  things, establish annual goals for contracting with small businesses  owned and controlled by socially and economically disadvantaged  individuals.

Given the federal government’s advertising spending and its emphasis on  contracting with certain business types, you requested that we report on  federal advertising contracts with minority-owned businesses and women- owned businesses, regardless of size, and small disadvantaged  businesses (SDB)—which are those that self-identify as an SDB, those  that have been certified by the Small Business Administration (SBA) as participants in the agency’s 8(a) businesses development program, or  both. We determined (1) the amount federal agencies have obligated on  advertising contracts over the most recent five fiscal years (2013 through  2017) and the amount going to these business categories; and (2) the  agencies that have directed the most advertising contract obligations to  these business categories and how this has changed over time.

To address both objectives, we analyzed data from the Federal  Procurement Data System – Next Generation (FPDS-NG) database for  fiscal years 2013 through 2017. The FPDS-NG database includes data  for most federal contract actions that have an estimated value of over  $3,500. We reviewed obligations data for contracts coded under the  “support – management: advertising” or “support – management: public  relations” product service codes, focusing on those contracts categorized  as being awarded to (1) SDBs, 8(a) businesses, or both, (2) businesses  owned by minorities and/ or (3) businesses owned by women.  Businesses may self-identify in the government’s System for Award  Management as an SDB, minority-owned, or women-owned, among other  categories. For purposes of this report, we refer to the three categories  of businesses we examined as “specified businesses.” In addition to  analyzing FPDS-NG data, we interviewed SBA officials, who are  responsible for assessing government-wide and agency contracting with  small and other business categories, about their perspectives on trends in  federal contracting.

We assessed the reliability of FPDS-NG data through steps such as  considering known strengths and weaknesses based on our past work  and looking for obvious errors and inconsistencies in the data we used for  our analysis. We also interviewed SBA officials, who use FPDS-NG data  in assessing federal contracting, about the database’s reliability. Based  on these steps, we concluded that the data were sufficiently reliable for  our purposes. Additional details on our scope and methodology can be  found in appendix I.

We conducted this performance audit from October 2017 to July 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.

Federal statutes and a number of executive orders reflect the federal  government’s policy to encourage the participation of small businesses,  including those owned and controlled by socially and economically  disadvantaged individuals, in federal contracting. One key statute is the  Small Business Act, which established SBA and directed it to aid,  counsel, assist, and protect the interests of small business concerns,  among other things. The Small Business Act, as amended over the  years, as well as executive orders, emphasize the government’s policies  on contracting with SDBs and businesses owned by women and  minorities.

The Small Business Act sets a minimum government-wide goal for small  business participation of not less than 23 percent of the total value of all  prime contracts for each fiscal year and makes SBA responsible for  reporting annually to the President and Congress on agencies’ progress  in meeting this goal, and making this information available on a public  website. SBA reported that the federal government reached this goal for  the fifth consecutive year in fiscal year 2017, awarding about 24 percent  of total federal contract dollars to small businesses. SBA also negotiates  specific goals with agencies to ensure the government-wide goal is met.

Each agency’s progress toward meeting its goals is generally based on  the percentage of obligations on contracts with small businesses.

The three categories of businesses we examined for this report are small  disadvantaged, minority-owned, and women-owned.

Small disadvantaged business. Because SBA’s 8(a) business  development program and SDB criteria are similar, in this report we use  the term “small disadvantaged business” or “SDB” to refer to both  categories of businesses. Section 8(a) of the Small Business Act  established the 8(a) business development program, which authorizes the  SBA to enter into contracts with other agencies and award subcontracts  for performing those contracts to firms eligible for program participation.  To be certified under the 8(a) program, a business must, in general,  satisfy requirements for size, be at least 51 percent unconditionally  owned and controlled by one or more socially and economically  disadvantaged individuals who are U.S. citizens, and demonstrate  potential for success. Similar to the 8(a) program, SDBs are defined as  those that are primarily owned and controlled by one or more socially and  economically disadvantaged individuals, though there are some  differences in criteria for the 8(a) program and SDB classification. For  example, businesses in the 8(a) program must demonstrate the potential  for success and business principals must demonstrate good character,  but the requirements to demonstrate these do not apply to SDB  classification. A business’s self-identification as SDB in the federal  government’s System for Award Management does not automatically lead  to acceptance into SBA’s 8(a) business development program.

Minority-owned business. Businesses of all sizes that are at least 51  percent owned by one or more members of a minority group may self- identify as minority-owned businesses in the federal government’s  System for Award Management. Minority-owned businesses are further  broken down into businesses owned by Asian-Pacific-, Subcontinent- Asian-, Black-, Hispanic-, Native-Americans, and other.

Women-owned business. Businesses of all sizes that are at least 51  percent owned by one or more women and whose management and daily  business operations are controlled by one or more women may self- identify as a women-owned business in the System for Award  Management.

These three categories of specified businesses overlap. For example, an  SDB may be women-owned and therefore be counted in FPDS-NG as  both an SDB and a women-owned business. To avoid double-counting  when presenting consolidated data, we counted obligations and  businesses classified under more than one category only once.

As we have previously reported, there are several types of activities that  are supported by federal advertising contracts. Table 1 provides  descriptions and examples of some of these activities.

Federal Agencies Have on Average Directed 13 Percent of Advertising Contract Obligations to Specified Businesses over the Past 5 Years

Specified Businesses Generally Received an Increasing Share of Advertising Dollars

Over the past 5 fiscal years (2013 through 2017), federal agencies have  obligated on average about $870 million annually for advertising  contracts, with about 13 percent (approximately $114 million annually) of  these obligations going to specified businesses. This share of  advertising contract obligations going to these businesses over fiscal  years 2013 through 2017 was consistent with the share of total federal  contracting obligations going to these businesses (also on average 13  percent over this period).

Advertising contract obligations to specified businesses and the number  of these businesses receiving advertising contract obligations have both  generally increased over fiscal years 2013 through 2017. The amount of  advertising contract obligations going to these businesses nearly doubled  from fiscal year 2013 to 2017 (from $75 million to $147 million) and also  increased as a percent of total advertising contract obligations (from 9  percent of these obligations to 16 percent). Specified businesses also  represented an increasing share of businesses receiving advertising  contract obligations, from 30 percent (194 businesses) in fiscal year 2013  to 39 percent (250 businesses) in fiscal year 2017. Figure 1 shows  advertising contract obligations to specified businesses and the number  of these businesses receiving these obligations over fiscal years 2013  through 2017.

In the 5 years from fiscal year 2013 through 2017, a relatively small  number of specified businesses received a relatively large amount of  federal advertising contract obligations. For example, the top five  businesses received about 40 percent of annual advertising contract  obligations to specified businesses over the 5-year period. Consistent  with findings from our previous work, obligations were also concentrated  among a relatively small number of contracts. Figure 2 shows the  distribution of advertising contract obligations among specified  businesses, with amounts going to the five largest businesses (in terms of  advertising contract obligations received) and all others.

Federal advertising contract obligations to all three categories of specified  businesses generally increased between fiscal years 2013 and 2017,  although some years showed decreases. (The amount going to women- owned businesses declined between fiscal years 2014 and 2015 and the  amounts going to minority-owned businesses and SDBs declined  between fiscal years 2016 and 2017.) The most notable increase over the  5-year timeframe, both in dollars and percentage terms, was in the  women-owned category, which increased by $56 million, or 93 percent.  Figure 3 shows the amounts obligated to each specified business  category, and to the three categories combined. Table 2 in appendix II  shows the amounts obligated to each specified business category, in  dollars and as a percentage of federal advertising contract obligations, in  each of the 5 years.

SBA officials we interviewed told us that a program they started in 2011,  the Women-Owned Small Business Federal Contracting Program, may  have accounted for some of the increase in contracting rates with women- owned businesses over the past 5 years. This is because the program  aims to help women-owned small businesses have an equal opportunity  to participate in federal contracting and to assist agencies in achieving  their goals for contracting with women-owned small businesses. The  program generally allows women-owned small businesses to compete for  set-aside contracts or receive sole source awards in industries where  these businesses are underrepresented or substantially  underrepresented.

Changes in advertising contract obligations to specified businesses were  in some cases associated with a small number of contracts. For example,  the $29 million increase in advertising contract obligations to women- owned businesses between fiscal years 2016 and 2017 was due in large  part to two contracts with an advertising agency with combined  obligations of about $22 million in fiscal year 2017. In addition, two  contracts that had each been classified under both the SDB and minority- owned categories contributed to the decrease in these two categories  between fiscal years 2016 and 2017. Obligations to these two contracts  declined by about $16 million over this period, a substantial portion of the  overall declines in these two categories. (Obligations to SDBs declined by  about $23 million; those to minority-owned businesses declined by about  $21 million.) Although obligations to the SDB and minority-owned  categories decreased from fiscal year 2016 to 2017, the numbers of these  businesses receiving advertising contract obligations both increased. The  number of SDBs receiving these obligations went from 123 to 134; the  number of minority-owned businesses went from 95 to 98.

Federal agencies are also required to set-aside procurements exclusively  for small businesses or businesses in the 8(a) program under certain  circumstances, and specific authorities exist to allow award of a contract  on a sole source basis to a business in the 8(a) program. However, these  authorities were in place prior to fiscal year 2013 and therefore, according  to SBA officials, it is unlikely they would have caused a change in  contracting activity over the past 5 years.

As mentioned above, businesses may be classified as more than one  category, and thus there is overlap in obligations and contracts among  specified business categories. For example, about one-quarter ($147  million) of the $570 million in advertising contract obligations directed to  specified businesses over the 5-year period went to businesses classified  under all three categories. Figure 4 shows the amount of advertising  contract obligations going to each business category and combination of  categories.

Over Half of Federal Advertising Contract Obligations to Minority- Owned Businesses Went to Those Owned by Hispanic-Americans

Among the different types of minority-owned businesses, those classified  as being owned by Hispanic-Americans received the most obligations  (just over half) from federal advertising contracts over fiscal years 2013  through 2017. Figure 5 shows the breakdown of amounts obligated over  these fiscal years to minority-owned businesses.

As with the other specified business categories, advertising obligations to  specific minority groups were concentrated among a relatively small  number of businesses. For example, advertising contract obligations to  one particular Native-American-owned business—for graphic design,  print, and other communications services—represented 34 percent of all  obligations to Native-American-owned businesses. See table 3 in  appendix II for additional details on each business category’s contracts.

DOD, DHS, and HHS Directed the Most Advertising Contract Obligations to Specified Businesses, though Other Agencies Directed Greater Percentages of These Obligations to the Businesses

DOD, DHS, and HHS Were Responsible for Nearly Three-Fourths of Federal Advertising Obligations to Specified Businesses

The departments of Defense (DOD), Homeland Security (DHS), and  Health and Human Service (HHS) were responsible for 73 percent of the  $570 million of federal advertising contract obligations that went to  specified businesses over fiscal years 2013 through 2017. Thirty four  other agencies were responsible for the remaining 27 percent of these  obligations. Figure 6 shows the breakdown of total federal advertising  contract obligations, with the amount of obligations going to specified  businesses, and amounts obligated by DOD, HHS, DHS, and all other  agencies.

For each of the 5 years we reviewed, DOD, HHS, and DHS were  consistently the top three agencies in terms of the amount of advertising  contract obligations they directed to specified businesses. Additionally, all  three generally increased the amounts they obligated to these  businesses. For example, in fiscal year 2013, these three agencies  obligated over 60 percent of all federal advertising contract obligations to  specified businesses; in 2017 they accounted for more than 80 percent of  these obligations. Figure 7 shows breakdowns of these and all other  agencies’ advertising contract obligations to specified businesses.

Much of the increase in these obligations from year to year is associated  with increases in obligations by DOD, DHS, and HHS. For example,  advertising contract obligations to these businesses increased by about  $37 million between fiscal years 2015 and 2016, with these three  agencies responsible for about $22 million, or 60 percent, of the increase.

DOD, DHS, and HHS are also among the agencies that obligated the  most to advertising contracts overall. Together they obligated about $3.4  billion for these types of contracts over the 5-year period, which  represents 79 percent of the federal government’s obligations. DOD  obligated the most—over $2.6 billion—to advertising contracts over the 5- year period, which accounted for over 60 percent of these obligations  over fiscal years 2013 through 2017. Table 4 in appendix II provides more  details on the agencies that obligated the most overall for advertising  contracts and those that directed the most to specified businesses.

In our prior report on advertising contract obligations going to small  disadvantaged and minority-owned businesses, we highlighted annual  obligations data for five agencies. As an update to that analysis, we  examined annual advertising contract obligations to the five agencies that  obligated the most on advertising contracts over the past 5 years – DOD,  DHS, HHS, and the departments of Transportation (DOT) and Veterans  Affairs (VA). Figure 8 illustrates these agencies’ advertising contract  obligations and the percent going to specified businesses in each year.

As shown in the figure above, top-spending agencies’ obligations to  specified businesses fluctuated over fiscal years 2013 through 2017.

DOD. DOD’s obligations to specified businesses increased for most of  the fiscal years over the 5-year period, regardless of whether its total  advertising obligations increased or decreased. For example, in fiscal  year 2016, DOD’s total advertising obligations declined by over $100  million; however, its obligations to specified business categories  increased. In fiscal year 2017, DOD obligated the most of any agency  to specified businesses.

HHS. Similarly, HHS, which obligated approximately $151 million to  specified businesses, the most of any agency over the 5-year period,  also increased its obligations to those businesses regardless of its  overall advertising obligations from year to year. For example, from  fiscal years 2016 to 2017 HHS’ advertising contract obligations to  specified businesses increased from $35 to $37 million, even though  they declined as a percentage of its overall advertising contract  obligations, going from 65 percent to 57 percent.

DOT. DOT generally increased its total advertising obligations during  the 5-year period from approximately $46 million in 2013 to $57  million in 2017. However, during this time DOT’s obligations to  specified businesses generally decreased, from approximately $1.8  million in 2013 to approximately $560,000 in fiscal year 2017.

DHS. DHS generally increased its total advertising obligations each  year of the 5-year period and generally increased its obligations to  specified businesses. DHS obligated the third largest amount of  money (behind HHS and DOD) to these businesses from fiscal years  2013 through 2017.

VA. VA has generally decreased its total advertising obligations from  approximately $63 million in fiscal year 2013 to approximately $15  million in fiscal year 2017, and its obligations to specified businesses,  from approximately $8 million in fiscal year 2013 to approximately  $1.3 million in fiscal year 2017.

Table 5 in appendix II shows the 20 agencies that have obligated the  most for advertising contracts over fiscal years 2013 through 2017 and  the amounts they directed to specified businesses.

Agencies with Greater Percentages of Advertising Contract Obligations Going to Specified Businesses Generally Obligated Lower Amounts Overall

In several cases agencies directed more than half of their advertising  contract obligations to specified businesses, though these agencies in  general obligated less to advertising contracts than top-spending  agencies. Ten agencies with advertising contract obligations of at least $1  million over fiscal years 2013 through 2017, such as the departments of  Justice and Energy, directed at least half of their obligations to specified  businesses. With the exception of DHS, which obligated about $200  million for advertising contracts over the 5-year period, these agencies all  obligated less than $25 million for advertising contracts over this  timeframe. In contrast, DOD directed a relatively small share (5 percent)  of its advertising contract obligations to specified businesses, making it  29th out of 37 agencies when ranked according to the percentage of  advertising contract obligations going to these businesses. However,  because the department obligated a large amount for advertising  contracts ($2.6 billion over the 5-year period), it ranked second in terms of  the amount obligated to specified businesses.

Some agencies directed all or nearly all of their advertising contract  obligations to specified businesses, but because these agencies’  advertising contract obligations were relatively low, the amounts they  directed to these businesses were also relatively low. For example, the  Nuclear Regulatory Commission directed all of its federal advertising  contract obligations—totaling approximately $1 million—to specified  businesses from fiscal years 2013 through 2017. Additionally, the  National Aeronautics and Space Administration directed 98 percent of its  approximately $21 million in advertising contract obligations to these  businesses from 2013 through 2017. Table 6 in appendix II shows the top  20 agencies in terms of share of advertising contract obligations going to  these businesses.

We provided a draft of this report to the SBA Administrator for comment.  SBA provided technical comments, which we incorporated as appropriate.

We are sending copies of this report to the appropriate congressional  committees, SBA, and other interested parties. In addition, the report is  available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-6806 or nguyentt@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 III.

Appendix I: Objectives, Scope, and Methodology

Our objectives were to identify and analyze (1) the amount federal  agencies have obligated on advertising contracts over the 5 most recent  fiscal years (2013 through 2017) and the amount going to small  disadvantaged businesses (SDB) and those owned by minorities and  women; and (2) the agencies that have directed the most advertising  contract obligations to these businesses and how this has changed over  time.

To address both objectives, we analyzed data from the Federal  Procurement Data System-Next Generation (FPDS-NG) database for  fiscal years 2013 through 2017. This database captures information on  the federal government’s contract awards and obligations and includes  data for most federal contract actions that have an estimated value of  more than $3,500. We reviewed obligations data for contracts coded  under the “support – management: advertising” or “support –  management: public relations” product service codes. For reporting  purposes, we refer to these two contract types collectively as “advertising  contracts.” Every contract action reported in FPDS-NG is categorized by  a product service code to indicate what was purchased. Additionally,  contracts reported in FPDS-NG are categorized by a North American  Industry Classification System (NAICS) code, which indicates the industry  within which the product or service falls. For purposes of this report, we  used the product service codes mentioned above to identify advertising  contracts because product service codes are assigned at the individual  contract or order level. The Small Business Administration (SBA) uses  NAICS codes to identify the predominant service or supply on a contract.  NAICS codes are an integral element of size standards and the  determination whether the business receiving the contract award is a  small business.

In addition to analyzing FPDS-NG data, we interviewed SBA officials  responsible for assessing government-wide and agency contracting with  small and other business categories about their perspectives on trends in  federal contracting.

We assessed the reliability of these data by considering known strengths  and weaknesses of FPDS-NG data, based on our past work and looking  for obvious errors and inconsistencies in the data we used for our  analysis. We also interviewed SBA officials, who use FPDS-NG data in  assessing federal contracting, about the database’s reliability. Based on  these steps, we concluded that the data were sufficiently reliable for our  purposes.

We focused our analysis of FPDS-NG data on those advertising contracts  categorized as being awarded to (1) SDBs, 8(a) businesses, or both; (2)  business owned by minorities and/ or (3) businesses owned by women.  SDBs, minority-owned, and women-owned businesses may self-identify  in the government’s System for Award Management as these types of  businesses. For purposes of this report, we refer to the three categories  of businesses we examined as “specified businesses.” Criteria for  certification as an 8(a) business are similar to those for SDB  classification, including that businesses be primarily owned by a person  or people who are socially and economically disadvantaged. In addition,  8(a) businesses must also demonstrate the potential for success and  business principals must demonstrate good character. Because of these  similarities, for analysis and reporting purposes we combined 8(a)  businesses and SDBs into one group, which we refer to in this report as  “small disadvantaged businesses” or “SDBs.” We interviewed SBA  officials to obtain their perspectives on the changes, but did not attempt to  identify root causes for changes over the past 5 years, as it was beyond  our scope.

We analyzed FPDS-NG data at the government-wide level to identify  overall trends in obligations for advertising contracts and the amounts  going to specified business categories. We focused on the amount of  advertising contract obligations going to these business categories  individually and combined, and examined how these amounts had  changed over the past 5 fiscal years. Within the minority-owned business  category, we also analyzed the amounts of obligations going to  businesses owned by Asian-Pacific-, Subcontinent-Asian-, Black-,  Hispanic-, and Native-Americans, and “other minority” owned businesses.  Businesses self-identify as these categories in the federal government’s  System for Award Management. We also examined data on the number  of contracts and businesses receiving obligations through advertising  contracts.

There is overlap among the three specified business categories—SDBs  and those owned by minorities and women. For example, a business may  be classified as both an SDB and a women-owned business. We  accounted for this overlap when calculating and presenting data on the  amount of advertising contract obligations going to the three business  categories combined so that we did not double or triple count obligations.

We also analyzed FPDS-NG data on specific agencies’ obligations for  advertising contract obligations and the amounts they obligated to  specified businesses. We used these data to identify the agencies that  ranked highest (in dollars and as a percentage of total advertising  contract obligations) in advertising contract obligations to specified  businesses. We also examined how agency obligations to these  businesses have changed over the past 5 years.

Appendix II: Agencies’ Advertising Obligations to Specified Businesses

Table 2 shows the amounts of advertising contract obligations that went  to specified businesses over fiscal years 2013 through 2017. As shown,  the amounts directed to these business categories generally increased  both in dollars and as a percentage of total advertising obligations.

Specified business categories each received at least $300 million in  obligations over fiscal years 2013 through 2017. There were variations in  the number of businesses receiving obligations and the concentration of  obligations among contractors. Table 3 provides additional details on  these characteristics.

Table 4 below shows the agencies that obligated the most for advertising  contracts overall, and those that obligated the most through these  contracts to specified businesses.

Specified businesses are those classified as small disadvantaged  businesses (including those that self-identify as small disadvantaged  businesses and those that are certified by SBA for the 8(a) business  development program); minority-owned businesses; and women-owned  businesses. Minority-owned businesses include those categorized as  being owned by Asian-Pacific-, Sub-continent-Asian-, Black-, Hispanic-,  and Native-Americans, as well as “other minorities.”

Table 5 shows the 20 agencies that obligated the most for federal  advertising contracts over fiscal years 2013 through 2017, with the  percentages of these obligations going to specified businesses.

Specified businesses are those classified as small disadvantaged  businesses (including those that self-identify as small disadvantaged  businesses, and those that are certified by SBA for the 8(a) business  development program); minority-owned businesses; and women-owned  businesses. Minority-owned businesses include those categorized as  being owned by Asian-Pacific-, Sub-continent-Asian-, Black-, Hispanic-,  and Native-Americans, as well as “other minorities.”

Table 6 shows the 20 agencies that directed the greatest share of these  obligations to specified businesses.

Appendix III: GAO Contact and Staff Acknowledgments

Other GAO staff who made contributions to this report include Carol Henn  (Assistant Director); Ann Marie Cortez; Jenny Chanley; Kristine  Hassinger; Julia Kennon; Kathleen Padulchick; and Erik Shive.

The federal government is one of the country's largest advertisers, spending nearly $1 billion annually on advertising contracts.

As it does for virtually all of the products and services it buys, the government seeks to provide procurement opportunities for these contracts to certain socially and economically disadvantaged small businesses and to businesses of any size owned by minorities and women.

We found the government has generally directed an increasing share of its advertising contract dollars to these businesses, averaging about 13 percent over the past five years.