Cost Estimate for New Information Reporting System Needs to be Made More Reliable
January 31, 2012
The 2011 Information Reporting and Document Matching (IRDM) cost estimate, used to justify the program's projected budgets of $115 million for fiscal years 2012 through 2016, generally does not meet best practices for reliability. The cost estimate did not fully meet any of the four best practices for a reliable cost estimate.
For example, the cost estimate minimally meets best practices for a well documented estimate because the Internal Revenue Service (IRS) did not provide detailed support for staff resources, and the cost estimate documentation only justified about 6 out of the 86 requested full time equivalent staff for IRDM, among other things. If documentation does not provide source data or cannotexplain the calculations underlying the cost elements, the estimate's credibility may suffer. Although IRS has an independent office of cost estimators that can develop and update cost estimates using cost modeling software that generally follows GAO's best practices, this office did not develop the 2011 IRDM cost estimate. IRS policy does not require project teams to work with the office to update cost estimates. Additionally, IRS's cost estimation guidance for project managers is inconsistent regarding how cost estimates should be related to a budget, an inconsistency that could lead to budget requests that do not accurately estimate program funding needs.
The IRDM program's earned value management (EVM) data did not meet data reliability criteria in the areas GAO reviewed. For example, the IRDM project schedule was not properly sequenced—meaning activities were not properly linked in the order in which they are to be carried out. In addition, surveillance was not conducted on IRDM's EVM system, as required by the Office of Management and Budget and the Department of the Treasury. Surveillance involves having qualified staff review an EVM system. Because IRDM's 2011 cost estimate is based on unreliable EVM data, it does not provide adequate support for IRDM's budget requests. Until IRS addresses deficiencies in the EVM data, it cannot provide a reliable cost estimate for IRDM.