Finishing a planned digital records management system could cost the National Archives and Records Administration up to $1 billion, or 76 percent more than planned, the Government Accountability Office says in a new report.

In a report dated Jan. 13 but not released publically until Feb. 4, the GAO says that NARA's Electronic Record Archive system has suffered from a lack of accurate monthly cost and performance reports under a tracking methodology known as earned value management. NARA awarded Lockheed Martin (NYSE: LMT) a $317 million cost plus award fee (a "fee" is what the government calls profit) contract in 2005 to develop the ERA system.

Since then, the program has come under repeated scrutiny for lateness and cost overruns; in July 2010, the Office of Management and Budget directed NARA to halt developmental activities by Oct. 1, 2011. NARA is examining which requirements it can drop but also considering the start of a second developmental phase, the report says.

One reason the system has run into difficulties is unreliable EVM data, the report says. Some work shown as fully completed in one month's EVM report would show up in subsequent reports as still outstanding. For example, developmental work for the system's third increment showed up as complete in July 2009, but two months later was classified as just 10 percent finished.

When queried by GAO auditors, NARA and Lockheed Martin officials provided justifications for such anomalies including the fact that reconciliation of estimated to actual costs depended on an invoice submission process that often lagged behind EVM reporting. "These justifications were not always valid," the report states, adding that NARA should improve its ability to assess contractor data.

The report also says that the program's performance baseline--the measures against which system completion and cost is to be measured against--was frequently shifted due to NARA's acquisition strategy, which called for a new baseline every time it exercised an option on Lockheed Martin's contract.

Putting into production all of the system's planned functionality would likely cost in total between $762 million and $1 billion, the GAO estimates, or 34 to 76 percent more than the $567 million that GAO says NARA says development of the entire system would cost.

In its official response to the report, Archivist David Ferriero takes issue with the GAO's cost estimates, stating that NARA's total cost estimate for a fully completed project isn't $567 million at all, but only $282 million. The GAO says it stands by its estimates, since NARA excluded from its estimate costs such as project management, research and development, concept exploration, planning activity and current operations.

"True system development cost include the costs for all program activities," the report states.

For more:
- download the report, GAO-11-86 (.pdf)

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