The GAO found that: (1) Commerce did not adequately oversee the program during the planning stage and spent millions of dollars with little assurance that it was implementing the best alternative for operational improvements or that the benefits were exceeding the costs; (2) since the PTO has not completed the required space management study, the final system configuration remains uncertain and the PTO cannot reliably estimate the cost, schedule, and ultimate system capabilities; (3) Commerce awarded a cost-plus-fixed-fee contract for the system design, development, implementation and maintenance, which was inappropriate and inconsistent with federal regulations because it contained few contractor cost-control incentives; (4) since the PTO altered the implementation plans without making corresponding changes in the prime contract, it did not have an accurate basis to judge contractor performance; and (5) Commerce and the PTO decided not to establish needed agency oversight at the contractor's facility to monitor the contract, despite recent reports of accounting system problems, contract costs escalating from $159 million to $448 million, and actual schedule slippage. The GAO believes that the method the PTO is using to automate patent activities has serious weaknesses that increase the risk of acquiring a system that will not efficiently achieve automation goals.
The GAO recommended that the Secretary of Commerce reassess the direction and scope of the automated patent system to ensure that the best alternative for meeting program objectives is being pursued, automation benefits will exceed costs, and the planned system can be effectively and efficiently installed in PTO facilities to achieve maximum benefits. Furthermore, the Secretary should not allocate additional funds to the automated patent system contract until the reassessment is completed and the Secretary has determined the best approach to follow and appropriately reported the reassessment results and planned actions to Congress.
In reassessing this program, the Secretary of Commerce should follow applicable federal guidance, including the Federal Information Resources Management Regulation and, at a minimum, should: (1) establish management controls and quantifiable measures to gauge program effectiveness; (2) identify and develop alternatives for meeting PTO program objectives with a comparative analysis that can be used to select the most cost-effective alternative; (3) thoroughly support and document all appropriate costs and benefits associated with each alternative, as indicated by FIPS 64 (now withdrawn); and (4) ensure that an appropriate space management analysis is adequately and expeditiously implemented. To help ensure that the reassessment is appropriately conducted, the Secretary of Commerce should assign responsibility for the reassessment to the Assistant Secretary for Administration, the designated senior department official for information resources management.
Furthermore, this official should use the National Bureau of Standards and obtain other independent reviews as necessary to ensure that: (1) the reassessment is properly conducted and that the system includes only components with acceptable risk of cost-effective implementation; and (2) other critical issues, such as a thorough test of all critical components, are appropriately addressed. Following the reassessment, the [Secretary of Commerce]] should determine the most appropriate acquisition strategy to mitigate the government's risk. As part of this determination, the Secretary must ensure that contractual arrangements reduce the risk currently imposed on the government, particularly for implementation and [maintenance]] activities. In addition, ail future acquisitions should involve competitive procurements with fixed-price contracts to the maximum extent possible.
Because of Congress' initial mandate for an automation plan and the magnitude of the planned expenditures, the Secretary should report on the results of the reassessment and on planned actions to the House Committee on Government Operations, the Senate Committee on Governmental Affairs, and the House and Senate Committees on the Judiciary and Appropriations before he acts on the reassessment.