Information Technology: Selected Agencies' Use of Commercial
Off-the-Shelf Software for Human Resources Functions (Letter Report,
07/31/2000, GAO/AIMD-00-270).

Pursuant to a congressional request, GAO provided information on the use
of commercial off-the-shelf (COTS) software applications to improve
human resource (HR) functions within federal agencies, focusing on: (1)
how five federal agencies were using COTS systems/applications to
improve their HR functions; and (2) for these five agencies, identify
the agencies' reported estimated costs and expected benefits from using
HR COTS systems.

GAO noted that: (1) the Department of Defense (DOD), the General
Services Administration, the Centers for Disease Control and Prevention
(CDC), the Department of Labor, and the Department of Veterans Affairs
(VA) all have efforts underway to use COTS systems and applications to
improve their HR functions; (2) quantifiable benefits expected included
requiring fewer employees to perform HR functions, reducing manager time
for transactions and data analysis, eliminating duplicative or multiple
systems, and implementing self-service HR functions, such as employee
changes to health and life insurance benefits; (3) nonquantifiable
benefits expected included a more user-friendly environment, easier
manager/employee access, better decision-making and data analysis,
improved data accuracy, and better information sharing; (4) despite
these expectations, four of the five agencies' systems efforts have
encountered delays, while three of the four agencies have increased cost
estimates; and (5) to date, three of the five agencies--DOD, Labor, and
VA--have reportedly achieved quantifiable benefits, such as full-time
equivalent reductions from their HR COTS systems or related efforts.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-00-270
     TITLE:  Information Technology: Selected Agencies' Use of
	     Commercial Off-the-Shelf Software for Human Resources
	     Functions
      DATE:  07/31/2000
   SUBJECT:  Productivity in government
	     Human resources utilization
	     Cost control
	     Commercial products
	     Computer software
	     Cost effectiveness analysis
	     Information systems
IDENTIFIER:  GSA Comprehensive Human Resources Integrated System
	     HHS Enterprise Human Resource Project
	     DOL PeoplePower System
	     VA HR LINK$ System
	     DOD Defense Civilian Personnel Data System

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GAO/AIMD-00-270

Accounting and Information
Management Division

B-285087

July 31, 2000

The Honorable Dan Burton
Chairman, Committee on Government Reform
House of Representatives

Dear Mr. Chairman:

Commercial off-the-shelf (COTS) systems and applications for human resources
(HR) functions are automated tools that can help streamline management
activities such as position management and classification, recruitment and
staffing, personnel action administration, benefits administration, labor
management and employee relations, and workforce development. In response to
your request, we reviewed the use of COTS software applications to improve
HR functions within federal agencies. You requested that we review the
Department of Health and Human Services' (HHS) Centers for Disease Control
and Prevention (CDC) and the Department of Veterans Affairs (VA); we chose
three other agencies--the Department of Defense (DOD), the General Services
Administration (GSA), and the Department of Labor (DOL)--based on their size
and type of COTS products used.

Accordingly, our objectives were to (1) determine how the five agencies were
using COTS systems/applications to improve their HR functions, and (2) for
these five agencies, identify the agencies' reported estimated costs and
expected benefits from using HR COTS systems.

In our review, we determined that the five agencies have acquired the
services of two primary HR COTS vendors--Oracle and PeopleSoft--to provide
most of the functional system requirements called for by the federal Joint
Financial Management Improvement Program (JFMIP),1 which issued a common set
of human resources and payroll systems requirements. In addition, DOD, CDC,
and VA have contracted with other vendors, such as Avue and Resumix, to
augment the services of the primary vendors in areas such as recruitment.

To determine HR system capabilities and assess the basis for investment
decision-making, we used criteria from the Government Performance and
Results Act of 1993, the Clinger-Cohen Act of 1996, and JFMIP's Human
Resources and Payroll Systems Requirements of April 1999. We reviewed
documentation of the five agencies' efforts to use the HR COTS systems and
interviewed HR and information technology (IT) officials about their
applications. We also observed demonstrations of implemented or planned
systems. We did not verify cost or benefit information provided by the
agencies. Finally, we provided representatives of the five agencies with
draft copies of the slides pertaining to their individual agencies;
clarifications and corrections have been made as appropriate.

On July 17, 2000, we briefed your staff on the results of our work, and this
report summarizes those results. The briefing slides are included as
appendix I.

We performed our work at the Washington, D.C., headquarters of each agency,
as well as at the Atlanta headquarters of CDC, from February through July
2000, in accordance with generally accepted government auditing standards.

DOD, GSA, HHS/CDC, Labor, and VA all have efforts underway to use COTS
systems and applications to improve their HR functions. Quantifiable
benefits expected included requiring fewer employees to perform HR
functions, reducing manager time for transactions and data analysis,
eliminating duplicative or multiple systems, and implementing self-service
HR functions, such as employee changes to health and life insurance
benefits. Nonquantifiable benefits expected included a more user-friendly
environment, easier manager/employee access, better decision-making and data
analysis, improved data accuracy, and better information sharing. Despite
these expectations, four of the five agencies' systems efforts have
encountered delays, while three of the four agencies have increased cost
estimates. To date, three of the five agencies--DOD, Labor, and VA--have
reportedly achieved quantifiable benefits, such as full-time equivalent
(FTE) reductions from their HR COTS systems or related efforts.

Based on a 1994 study, DOD decided to move to regional servicing of its
civilian personnel and a single, integrated information system, referred to
as the modern Defense Civilian Personnel Data System, that--when fully
implemented--is expected to contain records for about 800,000 employees. DOD
expects the quantifiable benefits to include enhanced productivity requiring
fewer field employees and the ability of personnel specialists to service
greater numbers of customers: from 1 for every 60 employees in 1996, to 1
for every 77 this year, to 1 for every 88 in 2001. Nonquantifiable benefits
expected include providing improved data to the DOD payroll system and a
more responsive, open systems environment.

According to DOD, the system was originally expected to be deployed by
September 1999; however, the current estimate is March 2001 because of the
need for additional testing and a delay in internal DOD committee approval.
The estimated cost has grown by $248 million to about
$1.3 billion, while estimated quantifiable benefits have decreased by $340
million, to about $2.4 billion. Cost increases were attributed to
developmental delays, vendor revisions to the COTS products, and limited
customization. Estimated monetary benefits have decreased, according to DOD,
because of increased regionalization costs and delayed implementation of the
modernized system.

To date, the system has been implemented at 3 of 25 regional/centralized
servicing sites. Total project costs reported, as of September 30, 1999,
were $351 million; total quantifiable benefits as of that date were $123
million.

In 1996, GSA began to plan for a new, integrated HR/payroll system, referred
to as the Comprehensive Human Resources Integrated System, to replace its
current legacy system. GSA expects fiscal year 2001 quantifiable benefits to
be $4.5 million, due to reduced costs for such activities as transaction
processing in HR offices, external recruitment, and internal competitive
staffing. Nonquantifiable benefits expected include more timely report
generation, better data control, and increased manager and employee
satisfaction.

The system is expected to be deployed next month, an 8-month delay from
original estimates. According to GSA, this delay was caused by a lack of
maturity in the Oracle product relative to the HR needs of federal agencies,
a lack of skilled resources, and GSA's decision to implement the system with
internal staff. System cost is estimated at $34 million.

At present, GSA is conducting parallel testing of the old and new systems.
The first test was completed on June 21, and the testing is continuing.
Pilot testing of some of the HR COTS products supporting the new system is
taking place in GSA's national capital region. As of December 6, 1999, total
reported costs incurred were $20 million.

HHS' aging legacy system was the driving force behind the October 1999
initiation of a new system to improve HR/payroll operations, called the
Enterprise Human Resource Project, which will be used at CDC. The new system
is a global module intended to allow customers to build fully integrated HR
processes and databases that are shared across the department. Savings of
$127 million are expected from having flexible processes to use in HR
actions and eliminating duplicative systems in various operating divisions.
Nonquantifiable benefits expected include improved decision-making and data
analysis, trend analysis, insight into combined civilian and commissioned
officer personnel data, assurance of regulatory compliance, and more
customer satisfaction.

Work on the new system started in October 1999, with HHS approving continued
work on June 2, 2000. System deployment is expected in February 2003. The
cost to build the system is set at $214 million, and total costs incurred as
of June 30, 2000, were reported as $2.2 million.

In 1998, Labor initiated a new, integrated HR/payroll system--referred to as
PeoplePower--after it was informed that its legacy HR system, an Air Force
personnel system, would not be made Year 2000 compliant. The department
expects quantifiable benefits of $226 million by replacing multiple systems
with a single system and reducing a number of FTEs over 15 years.
Nonquantifiable benefits expected include increased efficiency due to
reduction in cycle time, better information, higher staff satisfaction, and
time for more value-added work.

Work on the new system started in February 1998; full system deployment is
running 1 year late, now projected for September 2002. According to Labor,
this delay was caused by its decision to reexamine payroll alternatives. The
initial cost was estimated at $26.5 million, based on a
5-year time frame for system implementation. The estimated total cost has
now risen to $71 million because, according to Labor, it did not initially
account for operating costs after the system is fully deployed and because
it underestimated implementation costs, including database, hardware, and
end-user equipment needs. Further adding to the increase, according to the
department, were (1) lack of maturity of the vendor's COTS application and
(2) technical programming staff charges and billing rates that were higher
than expected.

The new system has already replaced the legacy HR system and currently
supports Labor processes for personnel actions, benefits administration,
training administration, position management, automated workflow, workforce
analysis, and HR reporting. As of June 30, 2000, reported costs incurred
totaled $15.3 million, while reported savings were estimated at $3 million
due to the elimination of about 30 FTEs.

VA's new system, referred to as HR LINK$, was initiated in October 1994 to
replace a 30-year-old legacy system; the new system is expected to
incorporate HR and payroll and include managers' and employees' modules--and
a presence at VA headquarters and at each field office. The system is
intended to push transaction processing to the lowest appropriate level,
changing HR from a gatekeeper role to one of strategic partner. Quantifiable
benefits are estimated at $664 million; nonquantifiable benefits expected
include employee and manager self-servicing, VA-wide information sharing,
and the "One VA" vision being achieved through integrating HR and payroll
processes.

System development began in 1994; system deployment is now expected to be
completed in September 2001--2 years later than originally planned. VA
attributes the delay to union negotiations, cultural change, additional
development and testing, and the desire for a seamless integration of all
COTS and custom-designed applications. The total estimated cost has risen as
well: from $170 million to $417 million. This rise, according to VA, is due
to inflation and cost overruns stemming from unanticipated expenditures for
extended development time frames, software maintenance for an added 2 years,
additional shared service center equipment, more marketing and contractor
services, upgrades to primary vendor software, and regulatory changes to
self-service functionality.

The shared service center was opened in February 1998; employee
self-servicing has been deployed, along with other personnel modules; and
total reported expenditures were $147 million as of March 30. Quantifiable
benefits as of that date were reported as $172 million.

As agreed with your office, we will not distribute this report until 30 days
after its issue date. At that time, we will send copies to Representative
Henry A. Waxman, Ranking Minority Member, Committee on Government Reform;
the Honorable David J. Barram, Administrator of General Services
Administration; the Honorable William S. Cohen, the Secretary of Defense;
the Honorable Hershel W. Gober, the Acting Secretary of Veterans Affairs;
the Honorable Alexis M. Herman, the Secretary of Labor; Jeffrey P. Koplan,
Director, Centers for Disease Control and Prevention; the Honorable Jacob J.
Lew, Director, Office of Management and Budget; and the Honorable Donna E.
Shalala, the Secretary of Health and Human Services. Copies will also be
made available to others upon request.

Should you have any questions on matters discussed in this report, please
contact me at (202) 512-6253 or Helen Lew, Assistant Director, at (202)
512-9356. We can also be reached by e-mail at [email protected] and
[email protected], respectively. Key contributors to this report were
Nabajyoti Barkakati, Mary J. Dorsey, Michael P. Fruitman, Amanda C. Gill,
Pamlutricia Greenleaf, Robert G. Kershaw, and Michael R. Sanchez.

Sincerely yours,

Joel C. Willemssen
Director, Civil Agencies Information Systems

July 17, 2000, Briefing to House Committee on Government Reform

(511832)
  

1. A joint undertaking of the Department of the Treasury, the Office of
Management and Budget, the Office of Personnel Management, and GAO. JFMIP's
mission is to work cooperatively to improve financial management practices
in government.
*** End of document. ***