Customs Service Modernization: ACE Poses Risks and Challenges

Published by the Government Accountability Office on 1997-05-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                          United States General Accounting Office

GAO                       Testimony
                          Before the Subcommittee on Trade, Committee on Ways
                          and Means, House of Representatives

For Release on Delivery
Expected at
2 p.m.
                          CUSTOMS SERVICE
May 15, 1997              MODERNIZATION

                          ACE Poses Risks and
                          Statement of Linda D. Koontz
                          Associate Director, Information Resources
                          Management/General Government Issues
                          Accounting and Information Management Division

                   Mr. Chairman and Members of the Subcommittee:

                   I am pleased to be here today to discuss issues related to the U. S.
                   Customs Service systems modernization. My remarks will focus primarily
                   on Customs’ efforts to address risks associated with the agency’s
                   modernization of its automated systems. We made recommendations to
                   help Customs address these risks in our May 1996 report1 to this
                   Subcommittee. I will also identify challenges Customs faces as it plans and
                   develops the Automated Commercial Environment or ACE—which is
                   critical because this system is planned to support improvements to
                   Customs’ trade compliance (import) process through greater use of
                   information technology.

                   One of Customs’ primary responsibilities is to assess and collect duties,
Trade Compliance   taxes, and fees on imported merchandise. Today, this is accomplished
Process Redesign   with a variety of processes for handling, inspecting, and accounting for
                   imports that have grown paper intensive, inefficient, and ineffective.
                   Customs is acutely aware that its ability to process the growing volume of
                   imports while improving compliance with trade laws depends heavily on
                   successfully modernizing its trade compliance process and its supporting
                   automated systems. In recognizing this need to modernize, Customs
                   undertook a major initiative to redesign the trade compliance process.
                   Also, the Congress enacted legislation in 1993 that enabled Customs to
                   streamline trade compliance processing through automation by
                   establishing the National Customs Automation Program (NCAP). The
                   legislation eliminated certain mandated paper requirements and specified
                   critical functions that NCAP must provide, including the ability for members
                   of the trade community to electronically file import entries at remote
                   locations and for Customs to electronically process “drawback” claims,
                   which are refunds of duties and taxes paid on imported goods that are
                   subsequently exported or destroyed.

                   In 1994, Customs began the ACE project that is planned to replace the
                   Automated Commercial System—Customs’ existing automated import
                   system—with an integrated, automated information system for collecting,
                   disseminating, and analyzing import data and ensuring the proper
                   collection and allocation of revenue. The NCAP prototype, intended as the
                   first operational demonstration of ACE, is planned to implement selected
                   features of the NCAP legislation beginning in October 1997. Customs is also

                   Customs Service Modernization: Strategic Information Management Must Be Improved for National
                   Automation Program To Succeed (GAO/AIMD-96-57, May 9, 1996).

                   Page 1                                                                     GAO/T-AIMD-97-96
                   undergoing a separate but related project, called Customs Distributed
                   Computing 2000 (CDC-2000), to select an information systems “architecture.”
                   This architecture is essentially a blueprint or framework for guiding the
                   development and evolution of all Customs’ automated information
                   systems, including ACE and, as I will highlight in my testimony today, is a
                   key component in successfully developing automated systems.

                   The framework for GAO’s 1996 review of Customs’ automation was
Follow-Up on GAO   research we previously conducted across a variety of public and private
Recommendations    sector organizations to identify “best practices” that help these
                   organizations consistently apply information technology to improve
                   mission performance. The Paperwork Reduction Act and the
                   Clinger-Cohen Act, which establish responsibilities for effective
                   information technology management, embrace these practices. These
                   important legislative requirements include implementation of an
                   information technology architecture, establishment of a disciplined
                   process to evaluate information technology investments, and
                   measurement of how well information technology supports agency

                   In our May 1996 report to this Subcommittee, we stated that Customs was
                   ill-prepared to develop ACE because the agency was not effectively
                   applying critical management practices that help organizations mitigate
                   the risks associated with modernizing automated systems and better
                   position themselves to achieve success. Specifically, we found that
                   Customs (1) lacked clear accountability for ensuring successful
                   implementation of NCAP requirements, (2) selected an information systems
                   architecture without first analyzing its business requirements, (3) lacked
                   policies and procedures to manage ACE and other systems as investments,
                   and (4) did not ensure that systems under development adhere to
                   Customs’ own systems development policies. Consequently, efforts to
                   successfully develop ACE were vulnerable to failure. The following is a
                   brief summary of our May 1996 recommendations, each of which Customs
                   agreed with, and the actions the agency has taken in response.

                   Assigning clear accountability and responsibility for information
                   management decisions and results is an important practice identified by
                   successful organizations. Because we found that clear accountability for
                   meeting NCAP requirements was lacking, we recommended that Customs
                   assign such responsibility. In response, Customs acted quickly by
                   assigning overall, policy-level responsibility for implementing NCAP to the

                   Page 2                                                       GAO/T-AIMD-97-96
Trade Compliance Board of Directors, which is headed by the Assistant
Commissioner, Office of Strategic Trade. Day-to-day responsibility for
implementing NCAP is assigned to the Assistant Commissioner, Office of
Information and Technology, who is also the Chief Information Officer.

The remaining three recommendations each required that Customs take
substantive action to develop and implement improved information
technology management practices over a long term. Because these
recommendations call for significant changes in long-standing
management practices, they will require sustained commitment and focus
on the part of Customs’ leadership. While Customs has initiated a variety
of actions and made progress toward addressing each situation, it is too
early to determine whether Customs will successfully implement each

First, we recommended that Customs identify and analyze how it will
conduct its business in the future before selecting the information systems
architecture for the whole of Customs and on which ACE will run. Failure
to base selection of the architecture on such business requirements could
result in the development of systems that do not function well or cannot
be readily integrated with other systems. In response, in October 1996
Customs reconsidered its approach to selecting the architecture. Customs
changed the CDC-2000 project—which had entailed acquiring hardware,
software, and telecommunications for ACE—to emphasize conducting
analyses of business requirements prior to selecting an architecture. As
part of the refocused CDC-2000 project, Customs hired a contractor in
January 1997 that is expected to conduct these analyses and recommend a
process for selecting an architecture in June 1997. As of early May 1997,
Customs officials stated that the contractor is on schedule to complete its
work in mid-June 1997.

Second, we recommended that Customs manage information technology
systems as investments. Doing so involves senior management applying a
disciplined process for selecting, controlling, and evaluating major
information technology projects. As a result, the Customs investment
review board (IRB) was designated in February 1996. The Deputy
Commissioner is chair of the IRB. Other high-level Customs officials and
representatives from other Customs offices and the Department of the
Treasury constitute the membership. The IRB meets monthly and has
primarily discussed issues related to the purpose, organization, operation,
and scope of the board. Customs has not yet established policies and
procedures or implemented an investment review process that the IRB will

Page 3                                                      GAO/T-AIMD-97-96
                    implement. In November 1996, Customs hired a contractor to develop a
                    plan to help bring the agency into compliance with the Clinger-Cohen Act.
                    In April 1997, Customs specifically tasked the contractor to assist with the
                    development, implementation, and institutionalization of a complete
                    information technology investment management process. As of early
                    May 1997, Customs officials told us that the contractor’s work will be
                    complete and the investment process will be in place in July 1997.

                    Third, we recommended that Customs ensure that the agency adhere to its
                    own policies for developing information systems. Customs has such
                    policies to provide a standard approach to developing systems and to help
                    ensure the delivery of accurate, effective, and efficient information
                    systems. In October 1996, Customs updated these policies to include new
                    provisions on software project planning and project management. The
                    policy specifies that extensive project planning, including estimating the
                    size of software products and estimating resource needs, should occur in
                    initiating a project of the magnitude of ACE. Also, the policy requires that
                    project plans include top-level management reviews and decisions at
                    various stages and between various phases of development. Such reviews
                    are important because they provide higher management with a basis for
                    deciding whether the expenditure of resources for the next phase is

                    As of early May 1997, Customs had revised the ACE project plan and
                    Customs officials told us that the revised project plan complies with their
                    system development policies. Also, in January 1997, the Assistant
                    Commissioner, Office of Information and Technology, assigned
                    responsibility for system development policy enforcement to his
                    information resources management division. This division established a
                    schedule for compliance reviews, with ACE scheduled for review in
                    October 1997. These reviews are intended to promote compliance with the
                    software development process and provide management visibility into the
                    development process.

                    The management practices described above, if successfully implemented
ACE Project Poses   by Customs, will help reduce the risk inherent in a major information
Many Challenges     system project such as ACE. However, Customs also faces a number of
                    challenges in planning and implementing the ACE project itself that will
                    require additional effort to resolve. These challenges relate to the cost and
                    schedule for ACE and include, for example:

                    Page 4                                                       GAO/T-AIMD-97-96
           •   Customs cannot say how much ACE will cost. While Customs estimates ACE
               will cost $150 million to develop over a 10-year period, the agency does
               not have an estimate for the total cost of ACE that includes system
               operation and maintenance. Customs did not base this estimate for
               development on the projected size of the system or level of effort expected
               for development. Instead, it is based on the level of funding Customs has
               historically obtained for ACE.
           •   Customs has not determined when ACE will be completed. Assessing
               Customs’ progress in developing ACE is difficult because the agency lacks
               an overall schedule for the project. Customs does, however, have a
               schedule for the first phase of ACE—the NCAP prototype—although the
               agency has had difficulty adhering to this schedule. Specifically,
               implementation of the NCAP prototype has slipped from January 1997 to
               August 1997 and again to a series of four releases beginning in October
               1997 with the fourth stage starting in June 1998.

               We have discussed these issues with Customs’ Assistant Commissioner,
               Office of Information and Technology, and the Assistant Commissioner,
               Office of Strategic Trade, and they are receptive to the need to better
               identify the ACE cost and schedule. Currently, Customs’ plan is to produce
               a comprehensive project plan that includes cost and schedule information
               in February 1998.

               In conclusion, Customs faces some very significant challenges as it
               develops ACE and attempts to address broader information technology
               management issues. To ensure that the initial steps succeed in
               implementing effective information technology management, Customs will
               have to sustain its commitment and attention through the more difficult
               phases of the modernization effort which are yet to come. We plan to
               continue monitoring implementation of our May 1996 recommendations as
               well as the additional issues I have highlighted today. In this regard, we
               will review the revised ACE project plan and the results of the contractors
               that are helping Customs determine its information system architecture
               and establish an investment review process. Additionally, we have an
               ongoing review that is designed to help Customs answer basic questions
               about ACE with regard to cost, schedule, and performance.

               Mr. Chairman, this concludes my statement. I would be pleased to address
               any questions you or the other members may have.

(511107)       Page 5                                                     GAO/T-AIMD-97-96
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