Fuzzy Math on Data Centers Could Sink Further Savings, GAO Warns

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The Pentagon, alone, changed cost savings estimates three times.

The federal government hasn’t struggled to close or consolidate the growing number of energy-guzzling data centers, but a new Government Accountability Office report suggests agencies and overseers need to improve how they tally up cost savings or the feds could miss out on billions in further savings.

The new audit reveals agencies have saved a total of $1.1 billion through data center consolidation and collectively plan to save a total of $3.3 billion by the end of fiscal 2015. That’s $300 million more than a goal set out by the Office of Management and Budget in 2010 that also included a benchmark of closing 40 percent of the government’s data centers.  

At first blush, the latest figures are encouraging. But there are stark differences between what agencies report in actual and planned savings to OMB versus the savings the government watchdog says are possible with improved reporting.

The Saga of DOD's Shifting Cost Estimates

The most prominent example the report highlights are the shifting estimates provided by the Defense Department, the largest data center owner in government.

According to the report’s comments section, DOD first withdrew its initial $4.7 billion savings estimate, covering fiscal 2012-2017.

Then, Pentagon planners submitted “revised figures using a new methodology” that didn’t anticipate any cost savings estimates beyond 2014.

Finally, DOD provided new documentation of planned savings specifically between fiscal 2014-2017, which had the effect of changing its initial estimated cost savings between fiscal 2012-2017, yet again, to approximately $2.6 billion – about $2 billion less than DOD’s initial estimate in mid-2014 when GAO began investigating.

GAO ended up amending its report, although it found DOD “had not fully reported its fiscal years 2012 through 2014 cost savings to OMB,” leading auditors to recommend that DOD “report all data center consolidation cost savings and avoidances to OMB in accordance with established guidance.” DOD’s acting Deputy Chief Information Officer David DeVries signed off on those recommendations.

DOD Agrees Updated Estimates 'Too Conservative'

Dave Powner, GAO’s director of IT management issues and the author of the report, told Nextgov the mini-saga of savings estimates illustrates how reporting issues can thwart potential savings in a major way.

And a difference of $2 billion isn’t couch change, even for a federal government that spends about $80 billion on information technology each year.

“DOD’s estimated savings were high at one point, then they lowered it, then they raised it up again – given the back and forth, I’m confident that savings are likely higher than what they are committing to,” Powner said.

When reached by Nextgov, the Pentagon's acting chief information officer, Terry Halvorsen agreed, stating the department was being “too conservative” in its $2.6 billion estimate.

“I believe we need to be more rigorous in our approach to data center consolidation cost savings,” Halvorsen said. “We are being too conservative with current estimates. We will aim for the $4.7 billion figure and work hard to get there."

Powner said maximum savings won’t be realized through data center consolidation without that kind of top-down commitment from CIOs and solid oversight from OMB.

GAO calls for the latter specifically in its report recommendations, requesting OMB “assist agencies in reporting cost savings” and develop a metric to measure the government’s problematic server utilization. OMB agreed with GAO’s recommendations, according to emails to the watchdog agency.

“It’s really important that OMB and agency CIOs are working together with agencies to make sure we get as much savings as possible,” Powner said.

Other Agencies Struggle with Savings Estimates

Reporting issues in GAO’s report are by no means limited to DOD. The audit is littered with nuggets that could make any government watchdog – or budget-hawk, for that matter – squirm.

For example, six agencies reported closing as many as 71 data centers and reported “little or no savings, in part because they encountered difficulties, such as calculating baseline data center costs.”

Meanwhile, 11 of the 21 agencies examined by GAO are “underreporting” planned cost savings for the years between fiscal 2012 and 2015 by about $2.2 billion, according to the report.

“While several agencies noted communication issues as the reason for this, others did not provide a reason,” the report stated. “Until OMB assists agencies in reporting savings and agencies fully report their savings, the $5.3 billion in total savings will be understated.”

Another interesting factoid: The Treasury Department, alone, has closed more than 100 data centers and saved an estimated $577 million – or about half the government’s total $1.1 billion in savings to date. Treasury reported to GAO it expected to save $1.4 billion through fiscal 2015, yet it has only reported a paltry $12 million in savings to OMB through OMB’s integrated data collection process.

Such gargantuan differences in expected savings through data center consolidation and what is actually reported illustrate how a less haphazard approach to the effort could push estimated savings much higher.

One Capitol Hill staffer told Nextgov savings of “$7 or $8 billion or more” through data center consolidation are “probably possible.”  

But the report makes clear that numbers like that won’t be reached unless reporting and oversight issues are resolved.  

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