USDA Telecommunications: Missed Opportunities to Save Millions (Letter
Report, 04/24/95, GAO/AIMD-95-97).

To its credit, the Agriculture Department (USDA) has identified
opportunities to significantly reduce telecommunications costs by
consolidating and optimizing its FTS 2000 telecommunications services.
However, USDA has not pursued all those options and, as a result, is
wasting millions of dollars each year.  USDA has hundreds of field
offices where multiple USDA agencies, located in the same building or
geographic site, obtain and use separate, and often redundant,
telecommunications services.  USDA officials estimate that the agency
could, during the next four years, save up to $800,000 each month--as
much as 26 percent of the agency's total annual FTS 2000
telecommunications costs--or a total of $40 million.  USDA's Office of
Information Resources Management, which manages the agency's
telecommunications resources, has not effectively carried out its
responsibility to reduce telecommunications costs.

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

 REPORTNUM:  AIMD-95-97
     TITLE:  USDA Telecommunications: Missed Opportunities to Save 
             Millions
      DATE:  04/24/95
   SUBJECT:  Federal agency reorganization
             Telecommunication
             Federal procurement
             Cost control
             Cost effectiveness analysis
             Agricultural programs
             Information resources management
             Systems management
             Telecommunication equipment
IDENTIFIER:  Federal Telecommunications System 2000
             FTS 2000
             USDA Info Share Program
             
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Cover
================================================================ COVER


Report to Congressional Requesters

April 1995

USDA TELECOMMUNICATIONS - MISSED
OPPORTUNITIES TO SAVE MILLIONS

GAO/AIMD-95-97

USDA Telecommunications

(511394)


Abbreviations
=============================================================== ABBREV

  APHIS - Animal and Plant Health Inspection Service
  FmHA - Farmers Home Administration
  FTS - Federal Telecommunications System
  IRM - Information Resources Management
  LATA - Local Access and Transport Area
  OIRM - Office of Information Resources Management
  SDP - Service Delivery Point
  TSD - Telecommunications Services Division
  USDA - U.S.  Department of Agriculture

Letter
=============================================================== LETTER


B-260880

April 24, 1995

The Honorable Richard G.  Lugar
Chairman, Committee on Agriculture,
 Nutrition, and Forestry
United States Senate

The Honorable Carolyn B.  Maloney
Ranking Minority Member
Subcommittee on Government Management,
 Information and Technology
Committee on Government Reform and Oversight
House of Representative

At your request, we are reviewing the Department of Agriculture's
(USDA) management and planning of telecommunications.  During our
review, we determined that USDA has opportunities to consolidate and
optimize long-distance communications services provided through the
Federal Telecommunications System (FTS) 2000 network.  Because
significant savings associated with these opportunities could be
missed unless immediate action is taken, we are reporting on this
issue at this time. 

Our specific objective for this part of our work was to determine
whether USDA is effectively consolidating and optimizing FTS 2000
telecommunications services across the Department to maximize
savings.  We are continuing our broader review of telecommunications
management and planning at the Department and will report later on
the results of that work. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

To its credit, USDA has identified opportunities to significantly
reduce telecommunications costs by consolidating and optimizing the
Department's FTS 2000 telecommunications services.  However, the
Department has not acted on all the identified opportunities and, as
a result, is wasting millions of dollars each year.  USDA has
hundreds of field office sites where multiple USDA agencies, located
within the same building or geographic area, obtain and use separate,
and often times redundant, telecommunications services.  USDA
officials estimate that the Department could save as much as $400,000
to $800,000 each month--between 13 percent and 26 percent of USDA's
total annual FTS 2000 telecommunications costs--or a total of between
$20 million to $40 million over the next 4 years.  USDA's Office of
Information Resources Management (OIRM), which has responsibility for
managing the Department's telecommunications resources, has not
effectively carried out its responsibility to reduce these
telecommunications costs. 


   BACKGROUND
------------------------------------------------------------ Letter :2

USDA delivers services through its component agencies and through
thousands of field offices in states, cities, and counties.  These
offices acquire and use various types of telecommunications services
to accomplish their missions and service customer needs. 

USDA reports show that the Department spends about $100 million
annually for telecommunications, of which about $37 million was for
FTS 2000 services in fiscal year 1994.  USDA is required to use FTS
2000 network services for basic long-distance communications; that
is, the inter-Local Access and Transport Area (LATA) transport of
voice and data communications traffic.\1 Under the FTS 2000 contract,
USDA agencies and offices use basic switched service for voice,
packet switched service for data, video transmission service, and
other types of services to support their communications needs. 

In addition to FTS 2000, USDA estimates that during fiscal year 1994
it spent another $50 million on local telecommunications and other
services obtained from about 1,500 telephone companies.  USDA
agencies and offices use these services to meet their local telephone
and data communications needs within LATAs.  Other telecommunications
services obtained from commercial carriers that are not available
under the FTS 2000 contract, such as satellite communications, are
also included in these costs.  USDA also estimates that between $10
million to $30 million is spent annually on telecommunications
equipment, such as electronic switches and telephone plant wiring,
and support services, such as maintenance for acquired
telecommunications equipment. 

The Federal Information Resources Management Regulation and USDA's
Telecommunications Policy (DR-3300-1) require that USDA's agencies
maximize use of all government telecommunications resources to
achieve optimum service at the lowest possible cost.  In addition,
Section 215 of the Department of Agriculture Reorganization Act of
1994,\2

requires USDA to reduce expenses by jointly using resources at field
offices where two or more agencies reside.  This includes sharing FTS
2000 telecommunication services. 

Strategies to reduce the costs associated with the use of FTS 2000
generally involve (1) consolidating separate FTS 2000 Service
Delivery Points (SDPs)\3 to increase the volume of communications
traffic among fewer points and to obtain associated volume discounts
and (2) optimizing services and types of access to SDPs by selecting
more cost-effective telecommunications service options based on
customers' particular needs.  Because there can be additional
equipment and transmission costs associated with implementing such
consolidation and optimization alternatives, these costs will offset
some of the savings.  For example, additional expenditures may be
required for telecommunications equipment, such as interface cards
and communications software to provide connectivity between systems,
and for additional services such as equipment maintenance and
purchasing of new leased telecommunications lines.  Consequently, a
cost-benefit analysis is generally performed to determine whether the
alternatives are practical and worthwhile. 

The senior USDA Information Resources Management (IRM) Official--the
Assistant Secretary for Administration--has delegated responsibility
for managing all aspects of the Department's telecommunications
program to the Director of OIRM.  This includes the responsibility
for ensuring that the Department maximizes use of its
telecommunications resources at the lowest possible cost.  Within
OIRM, the Associate Director for Operations is responsible for
managing telecommunications services on a departmentwide basis,
including services under governmentwide contracts such as FTS 2000. 

Public Law 103-354 authorized the Secretary of Agriculture to
reorganize USDA and begin streamlining the Department to achieve
greater efficiency, effectiveness, and economies.  In this regard,
the Secretary reduced the number of component agencies from 43 to 29,
and, on December 6, 1994, announced plans to reduce the number of
county field offices from about 3,700 to 2,531.  These 2,531 offices,
called Field Office Service Centers, will house multiple agencies to
provide USDA customers one-stop shopping for farm services, natural
resources conservation services, and rural housing and community
development services.  Other USDA agencies with offices throughout
the country, such as the Forest Service, are also planning to combine
offices and consolidate functions where it is feasible to do so. 


--------------------
\1 FTS 2000 is a network intended to satisfy the federal government's
long-distance voice, data, and video telecommunications needs in the
continental United States through 1998. 

\2 The Federal Crop Insurance Reform and the Department of
Agriculture Reorganization Act of 1994, Public Law 103-354, Title II,
108 Stat.  3209 (1994). 

\3 SDPs are places where the agency connects its equipment to receive
FTS 2000 services. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

To address our objective, we interviewed USDA officials and reviewed
USDA reports and other documentation to identify departmentwide
consolidation and optimization activities.  In addition, we reviewed
telecommunications reports and FTS 2000 cost and billing information
to determine expected savings associated with these efforts.  We also
visited USDA sites where consolidation and optimization activities
have been performed to assess whether consolidation and optimization
solutions were successfully implemented.  Appendix I provides further
details on our scope and methodology. 

We conducted our review between March 1994 and March 1995 in
accordance with generally accepted government auditing standards.  We
discussed the facts in our report with USDA officials, including the
Assistant Secretary and Deputy Assistant Secretary for Administration
and the Director of USDA's Office of Information Resources
Management, and have incorporated their comments where appropriate. 
We also provided a draft of this report to USDA for comment.  USDA's
comments are discussed in the report and are included in full in
appendix II. 


   USDA LOSES MILLIONS ANNUALLY BY
   NOT CONSOLIDATING AND
   OPTIMIZING FTS 2000
   TELECOMMUNICATIONS SERVICES
------------------------------------------------------------ Letter :4

USDA has not consolidated and optimized FTS 2000 telecommunications
services to the maximum extent possible.  USDA has hundreds of field
office sites where multiple USDA agencies, located within the same
building or geographic area, obtain and use separate, and often times
redundant, telecommunications services.  OIRM officials estimate that
by consolidating and optimizing FTS 2000 telecommunications services
at many of these sites, the Department could save $5 million to $10
million a year.\4 Although OIRM has identified these and other
cost-savings opportunities over the past 2.5 years, OIRM senior
management has not carried out its responsibility to reduce
departmentwide telecommunications costs where possible. 
Consequently, USDA pays millions more than is necessary for the use
of FTS 2000 services.  Moreover, although the Secretary has begun
restructuring agency field offices to consolidate operations at 2,531
new Field Office Service Centers, USDA has no operational plan or
time frame for consolidating and optimizing telecommunications at
these centers to ensure the most cost-effective use of FTS 2000
services. 



--------------------
\4 OIRM's cost-savings estimates were determined based on the
remaining life of the FTS 2000 contract, which expires in October
1998. 


      USDA HAS IDENTIFIED
      OPPORTUNITIES FOR SAVINGS
---------------------------------------------------------- Letter :4.1

USDA component agencies obtain telecommunications equipment and
services independently.  This has resulted in the use of redundant
telecommunications services within and among USDA field offices.  In
1990, when USDA transitioned from its departmental network to FTS
2000, OIRM was aware of consolidation and optimization opportunities. 
However, OIRM and the agencies jointly agreed not to address this
issue during the transition due to the concern that doing so would
complicate the transition and increase risks of disrupting service. 
Today, as in the past, hundreds of USDA field sites around the
country, that have multiple agency offices located within the same
building or geographic area continue to access and use FTS 2000
telecommunications services separately.  As a result, since 1991,
when USDA completed its transition to FTS 2000, these offices have
been paying for redundant and unnecessary services. 

A few USDA component agencies have taken the initiative to begin
eliminating the redundant use of FTS 2000 services by consolidating
and optimizing telecommunications.  For example, the Farmers Home
Administration (FmHA), which began consolidating and optimizing FTS
2000 services at field office sites in 1991, has achieved savings by
consolidating and optimizing telecommunications at several field
sites.  At just one multiagency office in Columbia, Missouri, USDA
documents show that FmHA reduced telecommunications service costs at
this site by about $120,000 per year, or about 55 percent.  Also, in
1991, at the Siuslaw National Forest in Corvallis, Oregon, the Forest
Service consolidated voice and data communications traffic between
ranger districts and forest laboratory offices.  By taking this
action, Forest Service officials at the Siuslaw National Forest told
us they achieved an annual savings of about $150,000. 

These independent efforts by Forest Service and FmHA are laudable,
and they demonstrate that substantial savings can be realized.  These
efforts, though, focused primarily on solutions that provide a
savings benefit to the individual agency and did not address
cross-agency solutions that provide additional savings to the
Department as a whole. 

USDA, recognizing that opportunities to consolidate and optimize FTS
2000 telecommunications services existed throughout the Department,
formed the Telecommunications Services Division (TSD) within OIRM in
April 1991.  TSD is to assist the Office in carrying out its
responsibilities to ensure that the Department's telecommunications
resources are being used in the most cost-effective way.  Among other
things, TSD was tasked with analyzing telecommunications data to
identify departmentwide opportunities to consolidate and optimize FTS
2000 services.  By consolidating and optimizing FTS 2000 services at
field office sites, service costs could be substantially reduced by
eliminating redundant FTS 2000 services between agency offices within
the same building or geographic area. 

Since its creation in 1991, TSD has identified opportunities to
consolidate and optimize FTS 2000 services.  For example: 

  -- In February 1992, TSD identified 30 USDA field office sites
     where the Department could achieve savings by consolidating and
     optimizing FTS 2000 services.  TSD's analysis of the first site
     showed that agencies' FTS 2000 costs would be reduced by as much
     as 60 percent. 

  -- In May 1993, TSD began developing a Network Analysis Model to
     identify cost-effective options for reducing FTS 2000
     telecommunications costs at USDA field office sites.  February
     1994 TSD estimates showed that use of the model departmentwide
     to consolidate and optimize FTS 2000 services could reduce costs
     by as much as $5 million to $10 million each year or $400,000 to
     $800,000 per month. 

  -- In February 1994, TSD reported that numerous USDA agencies were
     paying significantly higher than average charges for their use
     of FTS 2000 service.  According to TSD's report, costs could be
     reduced as much as $750,000 to $3.7 million annually by
     aggregating some FTS 2000 services at these agencies. 

  -- In June 1994, TSD identified opportunities to save as much as
     $150,000 to $600,000 annually by shifting some component agency
     data transmissions that are not time-critical outside peak
     business hours when transmission costs are lower.  According to
     FTS 2000 rates, costs to transmit data outside normal business
     hours can be as much as 50 percent less than during normal
     business hours.  Therefore, USDA component agencies could take
     advantage of these savings by transmitting data such as time and
     attendance reports, noncritical E-Mail messages, and other
     noncritical data files outside normal business hours. 


      TELECOMMUNICATIONS SAVINGS
      NOT REALIZED BECAUSE OIRM
      HAS NOT DISCHARGED ITS
      MANAGEMENT RESPONSIBILITIES
      EFFECTIVELY
---------------------------------------------------------- Letter :4.2

OIRM has departmentwide responsibility for managing
telecommunications and ensuring that the Department makes maximum use
of telecommunications resources at the lowest possible cost.  Under
authority delegated by USDA's Senior IRM Official, the Director of
OIRM is the executive agent responsible for planning, development,
acquisition, and use of the Department's telecommunications
resources.  According to federal regulations, the Director of OIRM is
supposed to exercise this authority by, among other things, providing
departmentwide leadership and direction for telecommunications
activities to ensure effective and economical use of resources;
developing and implementing systems, processes, and techniques to
improve operational effectiveness of telecommunications resources;
and reviewing the use of these resources to ensure that they conform
to all applicable federal and Department policies and procedures.\5

In addition, OIRM must review and approve component agencies'
acquisition of telecommunications resources by granting technical
approvals.\6

OIRM has not effectively discharged its management responsibilities. 
Specifically, OIRM has not gone far enough under its authority to
implement initiatives to consolidate and optimize FTS 2000
telecommunications services.  Consequently, USDA has not been
successful achieving telecommunications cost-savings identified by
TSD.  For example, despite being aware in February 1994 that TSD's
Network Analysis Model was an effective tool that USDA could use to
reduce overall FTS 2000 service costs by as much as $400,000 to
$800,000 per month, OIRM management never discussed these savings
opportunities with the Department's senior decisionmakers--USDA's
Under Secretaries and Assistant Secretaries--nor did it develop a
plan for implementing the actions necessary to achieve departmentwide
savings.  Consequently, as of December 1994, USDA still had not
realized these savings. 

In addition, OIRM did not act immediately to aggregate services with
higher than average FTS 2000 costs and to shift agency data
transmissions to off-peak hours.  Although TSD advised OIRM
management about these opportunities in February and June 1994,
respectively, component agencies were not informed by OIRM management
about the savings opportunities until October and November 1994.  At
that time, OIRM provided general information on the cost-savings
initiatives during meetings with USDA interagency advisory groups,
such as the Department's Management Council--an interagency advisory
group made up of component agencies' Deputy Administrators for
Management.  However, OIRM's Director for Operations acknowledged
that OIRM did not follow up these general meetings with additional
briefings or develop action plans for implementing these cost-savings
initiatives.  Consequently, as of December 1994, no progress has been
made to achieve these savings. 

In cases where some consolidation and optimization efforts have been
initiated by TSD, OIRM did not effectively discharge its management
responsibility to ensure full implementation of these initiatives. 
For example, TSD's 1992 plan to consolidate and optimize FTS 2000
services at 30 USDA field sites was not implemented because OIRM
management took no steps to resolve interagency disagreements.  In
this case, although OIRM gave TSD responsibility for managing the
effort, disagreements between agencies over responsibilities for
consolidating services at the first site precluded any further work
from getting underway.  A December 1992 memorandum shows that TSD
advised OIRM management of the problems it was having and asked for
assistance in gaining agency cooperation.  Nevertheless, OIRM
management did not respond to TSD's request and the matter was left
unresolved.  TSD continued to try to solicit agency support for the
initiative but these efforts were unsuccessful and no savings were
achieved.  OIRM's Associate Director for Operations was unable to
explain OIRM management's inaction in this case. 

In another case, although TSD determined in April 1994 that USDA
could save $65,000 annually by consolidating FTS 2000 services among
several agencies located in Colorado, about 40 percent of these
savings were not achieved because one agency--the Animal and Plant
Health Inspection Service (APHIS)--did not implement TSD's
recommendation to consolidate services at an APHIS office in Fort
Collins, Colorado.  While APHIS officials in Fort Collins agreed to
consider TSD's recommendation, APHIS took no subsequent action to
consolidate its FTS 2000 services despite several follow-up
discussions by TSD officials.  Moreover, APHIS did not provide TSD
with a reason for its inaction.  In July 1994, TSD's Chief of
Operations told us he informed OIRM management about APHIS' lack of
action.  However, OIRM management never attempted to resolve this
matter with APHIS senior management. 

In October 1994, we asked the APHIS Chief for Information Systems and
Communications at APHIS headquarters in Hyattsville, Maryland, to
explain the agency's apparent unwillingness to implement TSD's
recommendation for cost-savings in Fort Collins.  He stated that he
was personally unaware of this savings opportunity and could not
explain why APHIS officials in Fort Collins did not implement the
initiative.  Following our meeting, APHIS notified TSD that it would
implement TSD's recommendations and begin consolidating FTS 2000
services at the APHIS office in Fort Collins.  Consolidation work is
scheduled to begin during 1995. 

In December 1994, we discussed these cases with the Director of OIRM,
who agreed that opportunities for FTS 2000 telecommunications savings
have been missed.  Although the Director did not fully explain the
lack of action by OIRM in each case, he stated that (1) shifts in
departmental priorities to activities such as the Info Share
program\7 had prevented OIRM from making as much progress
consolidating and optimizing FTS 2000 services as he expected to make
during 1994 and (2) OIRM's lack of fiscal authority and control over
the agencies' telecommunications budgets and expenditures had made it
difficult to prompt agencies to act on cost-savings initiatives.  The
Director noted, however, that consolidated voice services have been
installed in 35 farm service field sites under USDA's Info Share
program. 

While the Department's consolidation of telecommunications services
at some field sites under Info Share is a step in the right
direction, it is only a fraction of the hundreds of USDA field sites
where savings opportunities exist.  More progress has not been made
because OIRM has not effectively exercised the authority it does have
to reduce telecommunications costs.  Specifically, OIRM has not (1)
met with USDA's senior decisionmakers to advise them about savings
opportunities, (2) developed departmentwide plans and implemented
actions to consolidate and optimize FTS 2000 telecommunications
services when opportunities for savings have been identified, and (3)
overseen and effectively managed cost-savings initiatives to ensure
that savings are achieved. 

In addition, OIRM has not effectively exercised its authority to
review and approve the acquisition of telecommunications resources. 
Although OIRM's Director stated that OIRM does not have control over
USDA component agencies' telecommunications budgets, the Office does
have authority to review and approve agencies' acquisition of
telecommunications resources.\8 However, OIRM has not used this
authority to ensure that opportunities to consolidate and optimize
FTS 2000 services are addressed.  In this regard, OIRM reviews and
approves component agencies' requests for procurement of
telecommunications resources under the Department's technical
approval process.  However, OIRM officials responsible for technical
approvals told us that they evaluate proposed procurements
individually and do not review them to assess whether or not
opportunities to consolidate and optimize FTS 2000 services have been
addressed before approving agency telecommunications acquisitions. 

While OIRM has, for the most part, been passive and not gone far
enough to fulfill its management responsibilities, it has sought
support for departmentwide telecommunications cost-savings
initiatives by discussing them with USDA interagency advisory groups. 
In this regard, OIRM's Director told us that OIRM had briefed USDA's
Management Council and other interagency advisory groups on some of
the savings opportunities that had been identified.  However, OIRM
did not have these discussions until October 1994, over 2.5 years
after the savings opportunities were first identified.  More
importantly, as discussed above, officials participating in these
groups are not senior decisionmakers.  In addition, no interagency
plans or actions to consolidate and optimize departmentwide FTS 2000
services were presented at or resulted from these meetings, and OIRM
officials involved in the meetings told us they did not follow up
with agency officials to solicit cooperation and support for
implementing these initiatives. 

Conversely, one recent effort to reduce telecommunications costs at
USDA's headquarters in Washington, D.C., demonstrates how savings can
be achieved when senior decisionmakers are involved.  In this case,
in November 1993, USDA began to consolidate and optimize
telecommunications services at USDA's headquarters offices after the
Secretary of Agriculture announced plans to reduce telecommunications
costs by $1 million.  In response to the Secretary's direction, OIRM
took action to enhance telecommunications service and reduce costs at
USDA's headquarters offices by concentrating telecommunications
circuits among component agency users, optimizing the use of FTS 2000
services and new technologies such as the Integrated Services Digital
Network, and establishing a central process to control the ordering
of equipment and services and the certification of billing.  To date,
OIRM records show that this effort has achieved several hundreds of
thousands of dollars in savings. 

The current reorganization effort underway to combine offices and
share resources among agencies further underscores the need for
OIRM's close involvement with senior decisionmakers in planning and
implementing cost-effective telecommunications.  As USDA restructures
and streamlines headquarters and field office operations, the
Department can take advantage of opportunities to consolidate and
optimize departmentwide FTS 2000 telecommunications services. 

At the time of former Secretary Espy's announcement to streamline
USDA's field structure, on December 6, 1994, OIRM had not met with
USDA senior management and developed a plan or time frame for
carrying out this formidable task.  On December 20, 1994, OIRM
established an agreement with one of the Info Share agencies to lead
efforts consolidating and optimizing telecommunications at sites
involving only the Info Share agencies.  However, the agreement,
dated January 11, 1995, was signed by the Director of OIRM and the
designated lead agency's Senior IRM Official, not USDA's senior
decisionmakers.  Moreover, the written agreement did not clearly
specify how consolidation and optimization activities would be
carried out and time frames for their completion. 


--------------------
\5 7 CFR Sec.  2700 (1994). 

\6 U.S.  Department of Agriculture, Acquisition of IRM Resources (DR
3130-1), Apr.  2, 1991. 

\7 Info Share is an ongoing program initiative designed to improve
operations and delivery of services to customers of the farm service
and rural development agencies.  Under Info Share, the Department is
attempting to reengineer business processes and acquire and develop
integrated information and telecommunications systems. 

\8 U.S.  Department of Agriculture, Acquisition of IRM Resources (DR
3130-1), Apr.  2, 1991. 


      AGENCY OFFICIALS CITE
      FACTORS THAT PRECLUDED
      ACTION ON SAVINGS
      OPPORTUNITIES
---------------------------------------------------------- Letter :4.3

Senior agency officials, including the Assistant Secretary of
Administration and the Director of OIRM, acknowledged the need to act
more swiftly when savings opportunities are identified.  However,
they pointed out that changes in some key USDA leadership positions
during the transition of administrations in 1993 made it difficult
for OIRM to gain the departmentwide attention that was needed.  We
recognize that a period of leadership transition can impact an
organization's progress on departmentwide initiatives.  However, as
discussed previously, we found no indication that OIRM management had
advised senior decisionmakers about departmentwide telecommunications
cost-savings opportunities, either before or after the 1993
transition. 

These officials also noted that it would have been inappropriate for
OIRM to have led widespread efforts to consolidate and optimize FTS
2000 services before the Secretary officially announced in December
1994 that 1,170 of USDA's 3,700 county-based field offices would be
closed or consolidated.\9 This is because OIRM believed the up-front
costs to consolidate and optimize telecommunications services, such
as service installation charges and equipment charges, would be
unrecoverable in offices that later closed or moved to another
location. 

We agree that it would be unwise to consolidate and optimize FTS 2000
services at offices where start-up costs cannot be recovered. 
However, we believe OIRM could have achieved substantial savings by
consolidating and optimizing FTS 2000 services at USDA offices
unaffected by the reorganization closures.  Specifically, the
closures did not include hundreds of state and district offices for
farm service agencies where USDA has a significant opportunity for
FTS 2000 cost savings.  It also did not include hundreds of other
USDA agency offices, such as Forest Service and APHIS. 

We also believe that OIRM wasted valuable time by not beginning to
plan consolidation and optimization work at the county-based offices
until after the Secretary announced the county-based office closures
in December 1994.  While we recognize that OIRM was not involved in
the reorganization decisions, OIRM did not effectively use
information provided by the Secretary in 1993 to begin planning
reorganization cost-savings activities.  Specifically, in September
1993, the Secretary publicly announced that the reorganization would
create USDA Field Office Service Centers by moving stand-alone
county-based offices to sites where more than one farm service agency
would be collocated within the same building.  According to
Department records from 1992, USDA had 2,463 county-based office
sites where farm service agencies were collocated.  On the basis of
this information, OIRM could have started collecting and analyzing
data at these collocated sites to (1) identify opportunities for
significant cost savings, (2) target consolidation and optimization
planning at specific sites with the largest payback, and (3) develop
implementation solutions for these sites.  By having cost-savings
solutions planned prior to the Secretary's announcement, OIRM would
have saved considerable time by being positioned to begin
implementing cost-savings solutions at many of the reorganized field
sites. 


--------------------
\9 USDA's office closures only involve county-based field offices for
three farm service agencies:  Agricultural Stabilization and
Conservation Service, Farmers Home Administration, and Soil
Conservation Service. 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

USDA has identified opportunities to achieve substantial
departmentwide savings by more cost-effectively acquiring and using
FTS 2000 services throughout the Department.  However, while OIRM is
responsible for exploiting these opportunities, it has not done so. 

In USDA, where component agencies act independently, implementing the
actions necessary to achieve departmentwide cost savings requires
effective management leadership.  However, OIRM has not demonstrated
this leadership.  While OIRM has begun to discuss savings
opportunities with component agency officials, it has not taken the
management steps necessary to carry out its responsibility to reduce
departmentwide FTS 2000 costs.  To do so, OIRM would need to (1)
involve senior decisionmakers, (2) establish implementation plans,
(3) oversee actions to ensure that savings are achieved, and (4)
ensure that opportunities to consolidate and optimize FTS 2000
services have been addressed prior to granting technical approval of
telecommunication acquisitions.  Unless these actions are taken
immediately, USDA and its component agencies will continue to waste
millions annually on the use of redundant FTS 2000 telecommunication
services. 


   RECOMMENDATION
------------------------------------------------------------ Letter :6

We recommend that the Secretary of USDA direct the Assistant
Secretary for Administration to take immediate and necessary action
to ensure that the Office of Information Resources Management
effectively fulfills its management responsibility to reduce the
Department's FTS 2000 telecommunications costs.  At a minimum, the
Assistant Secretary should: 

  -- advise appropriate Under Secretaries and Assistant Secretaries
     immediately about all opportunities identified by the Office of
     Information Resources Management and the Telecommunications
     Services Division to reduce telecommunications costs;

  -- work directly with the Under Secretaries and Assistant
     Secretaries to develop a plan for (1) consolidating and
     optimizing FTS 2000 telecommunications at USDA's new Field
     Office Service Centers and (2) identifying additional USDA
     headquarters and field office sites where it is cost-effective
     to consolidate and optimize FTS 2000 telecommunications
     services;

  -- establish, in cooperation with the Under Secretaries and
     Assistant Secretaries, an implementation team consisting of OIRM
     and agency staff who have the technical capabilities and
     resources necessary to implement departmentwide FTS 2000
     cost-savings solutions based on the established priorities;

  -- oversee implementation of all telecommunications cost-savings
     initiatives and report progress to the Secretary periodically as
     deemed appropriate; and

  -- preclude USDA component agencies and offices from obtaining and
     using redundant FTS 2000 telecommunications services by
     requiring that OIRM technical approvals be made contingent on
     the component agencies having considered and sufficiently
     addressed departmentwide consolidation and optimization of FTS
     2000 services. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :7

The Department of Agriculture provided written comments on a draft of
this report.  Their comments are summarized below and reproduced in
appendix II. 

In discussing USDA's comments with us, the Assistant Secretary for
Administration stated that the Department plans to fully implement
our recommendation.  Specifically, the Assistant Secretary stated
that he will (1) take immediate and necessary action to ensure that
OIRM effectively fulfills its management responsibility to reduce FTS
2000 telecommunications costs and (2) require the Director of OIRM to
report periodically on the status of the FTS 2000 cost-savings
actions that each USDA agency is undertaking. 

The Assistant Secretary added that USDA has already undertaken action
to begin implementing our recommendation.  For example, the Assistant
Secretary briefed the Under and Assistant Secretaries on the
importance of telecommunications management and cost-reduction
opportunities, and instructed them to develop an action plan to
identify and implement telecommunications cost-savings initiatives in
their mission area.  In this regard, the Assistant Secretary stated
that there is ample evidence from actual experience from several USDA
locations and from cost models that savings of thousands of dollars
per office per year are possible and that "...the potential for
savings are so great that the burden of proof is on the agencies to
justify why consolidation of telecommunications services is not
implemented in collocated offices."

The Assistant Secretary also said that USDA is taking action beyond
what we recommended.  For example, the Department has begun to
investigate consolidating telecommunications services with other
federal agencies.  OIRM recently signed a memorandum of agreement
with the Department of Interior to provide a framework for
consolidating and sharing telecommunications services among agencies
of these two departments. 

Although the Assistant Secretary agreed to take action on our
recommendation, he stated that the draft report did not give
sufficient weight to the changing management and organizational
environment in USDA over the last 2 years and did not adequately
recognize OIRM management and staff for their initiative and
creativity in developing tools to analyze telecommunications costs. 
The Assistant Secretary also believes that the report ignores the
responsibilities of information resources management officials in
USDA agencies for cost-effective management of their
telecommunication resources. 

We agree that the time between 1993 and 1995 was a period of
significant change in the Department and that many USDA officials
were deeply involved in planning and beginning to implement the
reorganization of the Department and its agencies.  However, as
discussed in our report, we believe that OIRM could have done more
during this time to achieve departmentwide cost savings.  We also
believe that the report does recognize OIRM and give it credit for
progress made developing analytical tools for analyzing
telecommunications costs and identifying cost-savings opportunities. 
Finally, while we agree that USDA agencies have responsibility for
managing telecommunications cost-effectively, it is OIRM and not the
agencies that have responsibility for identifying and directing
departmentwide savings opportunities. 


---------------------------------------------------------- Letter :7.1

As arranged with your offices, unless you publicly announce the
contents of this report earlier, we plan no further distribution
until 30 days from the date of this letter.  At that time, we will
provide copies of this report to the Secretary of Agriculture; the
Chairmen and Ranking Minority Members of the Senate Committee on
Governmental Affairs, the Senate and House Committees on
Appropriations, the House Committee on Agriculture, and the House
Committee on Government Reform and Oversight; the Director, Office of
Management and Budget; and other interested parties.  Copies will
also be made available to others upon request. 

Please contact me at (202) 512-6253 if you or your staff have any
questions concerning the report.  Other major contributors are listed
in appendix III. 

Joel C.  Willemssen
Director, Information Resources
 Management/Resources, Community,
 and Economic Development


SCOPE AND METHODOLOGY
=========================================================== Appendix I

To address our objective, we reviewed USDA policies addressing the
management of FTS 2000 telecommunications services, USDA reports on
FTS 2000 usage and costs, documentation related to USDA's transition
to the FTS 2000 network, and other materials outlining plans and
efforts by OIRM and USDA component agencies to identify opportunities
to consolidate and optimize telecommunications and implement
cost-savings solutions.  To identify the Department's overall FTS
2000 costs, we also reviewed USDA usage and cost information obtained
from OIRM and USDA's National Finance Center. 

To determine USDA's progress implementing consolidation and
optimizing initiatives for the cost-effective use of FTS 2000
telecommunications services, we interviewed both OIRM management and
field personnel involved in these activities.  We also reviewed (1)
USDA technical reports and internal correspondence describing the
status of initiatives and (2) billing reports to determine savings
associated with consolidation and optimization efforts.  In addition,
we visited locations identified by OIRM and USDA component agencies
where FTS 2000 services have been consolidated and optimized and
interviewed officials to determine whether the solutions were
successfully implemented. 

We interviewed senior-level representatives from USDA's 12 largest
users of FTS 2000 telecommunications services to determine what
actions USDA has taken to identify departmentwide opportunities to
consolidate and optimize FTS 2000 services involving these agencies. 
We also observed a demonstration of TSD's Network Analysis Model by a
USDA contractor.  This demonstration included an overview of the
methodology being used and the data being generated.  We did not test
the validity of the Network Analysis Model. 

We performed our audit work from March 1994 through March 1995, in
accordance with generally accepted government auditing standards. 
Our work was primarily done at USDA headquarters in Washington, D.C.;
USDA's National Finance Center in New Orleans, Louisiana; and USDA's
Telecommunications Services Division in Fort Collins, Colorado.  We
also conducted work at various USDA and component agency field
offices including USDA state offices in Lexington, Kentucky;
Richmond, Virginia; St.  Louis, Missouri; and Columbia, Missouri;
Forest Service headquarters in Rosslyn, Virginia; the Service's
Northwestern Region in Portland, Oregon; and the Service's National
Forest offices in Corvallis and Pendleton, Oregon; Agricultural
Research Service office, Greenbelt, Maryland; APHIS headquarters in
Hyattsville, Maryland; and regional office in Fort Collins, Colorado. 
Lastly, we visited Booze-Allen & Hamilton in McLean, Virginia, to
observe a demonstration of the Network Analysis Model. 




(See figure in printed edition.)Appendix II
COMMENTS FROM THE DEPARTMENT OF
AGRICULTURE
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

Stephen A.  Schwartz, Assistant Director
Mark D.  Shaw, Evaluator-in-Charge
William D.  Hadesty, Technical Assistant Director
Tomï¿½s Ramirez, Senior Evaluator

KANSAS CITY REGIONAL OFFICE

Troy G.  Hottovy, Senior Evaluator


*** End of document. ***