Resolution Trust Corporation: Automation Efforts Need Management Attention

Published by the Government Accountability Office on 1990-10-16.

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

                     United States General Accounting     OflIce    /


  For Release        Resolution    Trust   Corporation:            Automation     Efforts
  on Delivery
  Expected at        Need Management Attention
  1O:OO a.m. EDT
  Oct. 16, 1990

                     Statement of
                     Howard G. Rhile,  Director,
                     General Government Information   Systems
                     Information  Management and Technology Division
                     Before the
                     Resolution Trust Corporation   Task Force
                     Committee on Banking, Finance,   and Urban Affairs
                     House of Representatives


                                                                         GAO Form 160 (12/27)

    Chairman       Vento          and members of the Task Force:

    We are pleased                to be here today                to provide           information               on the
    Resolution           Trust       Corporation's              management of its                      information
    resources,            including         its     current        effort      to acquire                an automated
    system to manage, track,                        and dispose             of real          estate       assets.           This
    system,       called          the Real Estate               Owned Asset            Management System,                    is
    one of the           Corporation's              most important             automation                efforts.

    As a new agency with                    a daunting           m ission,         the Resolution                   Trust
    Corporation            is     faced     with      extraordinary            challenges.                  One of these
    is obtaining               timely,      accurate,           and complete                financial           and
    operational            information             on failed        thrifts         and related                 assets      to
    make decisions               on resolving            our nation's              thrift        crisis.              The
    Resolution           Trust      Corporation           believes          and we agree                 that     automation
    will   play     a crucial             role      in obtaining            this      critical            information.
    We fully       appreciate             the Corporation's                 pressing            need to better
    automate       its         system for          managing       real      estate           assets.

    For its      automation              efforts       to be successful,                    though,        the
    Corporation           will      have to apply               sound information                  resources
    management           (IRM ) principles.                    These principles                 include:            (1) an
    effective       IRM framework,                  including         strong        leadership             to direct             the
    Corporation's               automation          efforts,       a strategic                IRM plan           that
    translates           its     business          needs into         information              assets           and
    resources,           and a technology               plan      to ensure           that       all      the     individual
    systems will               work together           effectively:            and (2)           sound practices


    governing           the development                of each individual                  system.          Such
    practices           include        clearly         articulated             systems      requirements                that
    describe       exactly           what the          system        is supposed           to do,      an analysis               of
    the     alternatives             to meet these              requirements,              and the        steps         to be
    followed       in monitoring                 each system's            development              and operation.

    In summary Mr. Chairman,                       our overall            concern         with      the     Corporation's
    approach       to the Real Estate                     Owned Asset             Management System is that
    we do not           see that         these     principles            are firmly          in place.                 The
    Corporation           is preparing             to award the contract                     for     this        system--
    which      has far-reaching                  implications            for      the    future--before
    completing           its      IRM framework               and taking          the necessary             steps        to
    define,      track,           and review           this     system's         development.               As a result,
    we are concerned                 that      the Corporation                 risks     selecting          an
    inappropriate               hardware         and software            configuration              to build            future
    systems      and developing                 an expensive             system that             does not meet its
    current      and future              information            needs.          In discussing             our concerns
    with      the Corporation's                 top managers,             however,          the Corporation                    has
    agreed      to complete              the needed IRM framework                        and establish             needed
    systems      development                policies          and practices             before     the contract's
    estimated       award date               in December 1990.                   We believe          that        the
    Corporationls               recent       actions          to develop         its     IRM framework             are steps
    in the      right          direction.


I would       now like           to highlight             some of the recent                     steps     the
Corporation              has taken        to establish             an IRM framework                 and to
elaborate          on our views             of the Corporation's                     efforts        to acquire               the
Real Estate              Owned Asset            Management System.


In July       1990,         we reported           that     the Corporation                needed strong
leadership           to adequately               plan     for     its     information             needs,     a
strategic          IRM plan        that         translates         its     mission        and business
strategy          into      information           processing             requirements,             and a well-
conceived          systems        architecture             that         defines      how information                  will
flow      and how individual                    systems         and components            will      fit     together
to best       meet its           mission         needs.1          Such a framework                 is crucial            to
the     successful           use of information                   technology.             We also          reported
that      the Corporationts                Oversight             Board needed to review                     key
decisions          on the Corporation's                    automation             activities.

Since      this     report,        the Corporation                 has taken          actions        to build            the
framework          for     meeting        its     information             needs through             automation.
Specifically,              the Corporation               hired          a senior      IRM official               on

       solution          Trust    Corporation. . Strong r Inform t ion Technolocrv
                                  (GAO/IMTEC-90-76,    J:ly 23, Z90).

September         4, 1990,         to strengthen            the    leadership           over    the agency's
information           resources       management activities.                      This     official            has
been tasked           with      developing       the Corporation's                strategic            IRM plan
and systems           architecture.           The Oversight              Board has also                committed
to begin         overseeing         the Corporation's                plans     in these         areas.          We are
pleased       with     these       recent    steps.          However,         we believe         that
substantial           progress       needs to be made in these                     areas        before         the
Corporation           begins       to acquire        systems         such as the Real Estate                      Owned
Asset     Management System.

         IONS ON T-L                  ESTATE OWNEDASSET
CCHING                                                            IMPLICATIONS

The Real Estate              Owned Asset         Management System is                    intended        to
record     all       operational        and financial              information          on the
Corporation's            real     estate     assets.          This     system,       for       which     offers
are currently            being      evaluated,        has broad          implications            for     the
Corporation           as a whole.           Along with            providing       the Real Estate                Owned
Asset     Management System and related                           software,       the contractor                will
be required           to provide        a mainframe           computer         and an analysis                of the
Corporation's           overall       telecommunications                network         needs.          Also,        an
option     clause        in the contract             solicitation             permits      the Corporation
to award further                work to this         contractor         to provide             corporate-wide
integration           of all      systems     that     provide         information             on the


Corporation@s              assets.           What this            means, Mr. Chairman,                     is that         the
broad      scope of the             contract          could         prematurely             establish          the
foundation           for    all     the Corporation's                   systems            and that        worries         us
for      two fundamental              reasons.

First,      this      potentially             broad         contract             could     result      in the
Corporation           locking         into     a technology                 solution          for    its    real      estate
and other          systems         applications              before         it     completes         its    strategic
IRM planning            and formulates                its     systems'             architecture            to guide         its
automation           efforts.          As a result,                 the Corporation                 runs    a higher
than      necessary         risk      of spending             millions             of dollars         acquiring
systems       that      do not meet its                mission          needs,            are not cost          effective,
and will       not be compatible                  with        its      future            systems.

Second,       we have specific                 concerns             about         the     system development
policies       and procedures                the Corporation                      is applying         in the
acquisition           of the Real Estate                     Owned Asset                Management System.
Although       the     Corporation             does         not have to follow                     standards         for
federal       procedures            in developing                 systems,          we expected            to see
evidence       of these            generally       accepted            practices             for     good systems
development           in the procurement                    of the       system.             However,        this
procurement           was initiated             without:


--   Sufficient           information       --called         systems         requirements--identifying
     the      CorporationIs         information             problems         and automated            functions
     needed to address              them.        For example,               the Corporation            did     not
     describe        what functions             the system           is to provide            to help         track,
     manage,        and report        information            on the         sale   of real      estate

--   An analysis           of the alternatives                    to meet the Corporation's
     system       requirements,          with     associated           costs       and benefits.               In
     this       regard,     we were unable             to find        evidence        that     the
     Corporation          considered         other      options        to the proposed                system,
     such as comparable              systems         used by other              federal       agencies         or
     thrift       institutions,          to decide           on the most cost-effective
     approach        to meet the Corporation's                       needs.

--   The establishment              of a project             management process                to keep track
     of the contractor's                progress        and make management decisions                           at
     critical        points.        A project          management process                 would,       for
     example,        establish       provisions             for    management's           review       and
     approval        of contractor           deliverables.                  In this    respect,         the
     Corporation          did     not have provisions                 for     management to be
     involved        in the       system's      development            process        until     the     system
     was completed.



     The Real Estate                   Owned Asset          Management System is being                            developed
     without          these      generally            accepted           development           practices          because
     Corporation              officials          believe          they     have an urgent                need to improve
     their      collection              and dissemination                  of thrift           asset      information.
     However,          the     absence          of adequate            management planning                      and controls
     raises          questions          as to the         likelihood              that      the system will                be
     properly          developed.               In our experience,                   such an approach                invites
     cost     overruns,              schedule         delays,       and delivery               of systems          that         do not
    meet mission               needs.

    During       our discussions                  of these          issues,         top      officials           of the
    Corporation               told     us that,         before         awarding           the Real Estate                Owned
    Asset      Management System contract,                               the Corporation                 would:      (1)
    develop          a strategic           IRM plan          and systems                 architecture            to meet the
    Corporation's                information            needs;         (2) ensure            that   the         system
    requirements               and technical             approach           for     automating            its     real     estate
    asset      information               and other         information              needs are in accordance
    with      this      plan         and architecture:                 and (3) establish                  a project
    management process                    for    tracking          the contractor's                 progress,
    providing           direction          to the contractor's                      efforts,        and formally
    accepting           the     system.

    In conclusion,               we recognize              that        the CorporatWiin             has urgent
    information              needs that          it    must expeditiously                    meet in order               to make

good decisions            on resolving           our nation's       thrift      crisis.         However,
this       urgency     should     not preclude         the use of sound management
principles           dedicated     to minimizing             the risk     of incurring
unnecessary           costs,     long    delays,      and elusive         benefits.         We are
pleased       at the commitments                made by the Corporation's                 top
management to establish                  a Corporate-wide           IRM framework           and provide
systems       development         controls        to better      manage their         automation
efforts,       and encourage            their     continued      dedication        to this       approach.

This       concludes      my prepared           statement.       I will      be happy to respond
to any questions               you or other        members of the Task Force may have.