The Department of Homeland Security has “largely defined but has not adequately implemented” controls over a “virtual fence” along the U.S.-Mexico border promised for completion in 2009 and, as a result, the multibillion-dollar project is behind schedule and over budget, a government report says.

The Government Accountability Office (GAO), in a 63-page report released Thursday, said the department had failed to effectively manage the project, known as the Secure Border Initiative Network (SBInet), or give sufficient oversight to its prime contractor — resulting in costly rework and contributing to SBInet’s “well-chronicled history of not delivering promised capabilities and benefits on time and within budget.”

The report said that in an effort to deliver SBInet on target and on schedule, Homeland Security officials had relied heavily on the Boeing Co., the prime contractor, from whom they regularly received “incomplete and anomalous” cost information.

As a result, the report said, the department not been able to gain “meaningful and proactive insight into potential cost and schedule performance shortfalls, and thus take corrective actions to avoid shortfalls in the future.” The data submitted by Boeing, according to the report, made the SBInet appear better that it actually was.

The report noted that during a 21-month period ending in February, Earned Value Management (EVM) reports submitted by Boeing to U.S. Customs and Border Protection (CBP) were not reliable because they contained misleading information, including the use of estimated rather than actual costs for subcontractor work. The report said that without reliable performance data, the true status of the SBInet program was unclear, limiting the department’s ability to identify potential cost and schedule shortfalls.

EVM is a common management technique aimed at measuring project progress by combining measurements of scope, schedule and cost in a single integrated system. When properly used, it serves as an early warning of performance problems. The GAO report said it can alert decision makers to potential program problems sooner than is possible by using actual versus planned expenditures alone.

SBInet was planned as a virtual fence along the 2,000-mile Southwest Border to protect the U.S. from terrorists, violent drug smugglers and a flood of illegal immigrants. It uses surveillance systems to provide U.S. Border Patrol command centers with the imagery, related tools and information needed to detect breaches and make agent deployment decisions.

Since February 2007, the GAO has been telling Congress and Homeland Security that SBInet needed better oversight and accountability, and that it lacked realistic measures of cost, timing and benefits. Early on, the watchdog agency said Boeing had failed to show how the system would meet the objectives of the Secure Border Initiative (SBI), a comprehensive, multi-year, $4 billion Homeland Security proposal to secure the U.S.-Mexico border.

In September 2009, GAO reported to Congress that the virtual fence scheduled for completion in 2009 would not be ready until at least 2016 — if it went forward at all.

In a statement, Matthew Chandler, a spokesman for Homeland Security, said CBP had taken steps to improve “the previous administration’s SBInet program management structure, capabilities, procedures and processes,” and that a department-wide reassessment of the project was ordered in January by Homeland Security Secretary Janet Napolitano.

Mr. Chandler said the reassessment will determine if there are alternatives that may “more efficiently, effectively and economically meet our nation’s border security needs.” He said the reassessment is expected to be completed shortly and when ready, Congress would be briefed on its findings.

Boeing, in a statement, said it has worked closely with Homeland Security “to overcome past performance and management challenges on the SBInet program.” The company said “significant progress” has been made to improve its application of EVM “to assure our customers that we rigorously and effectively use the process to manage program performance for our diverse and often very complex program requirements.”

In its report, the GAO noted that to its credit, Homeland Security had defined a number of key policies and procedures for verifying and accepting contract deliverables and conducting technical reviews, such as the criteria that need to be met before commencing and concluding a critical design review.

Moreover, it said, the department had implemented some of these defined practices, such as those associated with training key contractor management and oversight officials.

But, it said, Homeland Security had not effectively implemented other controls, including adequately documenting its review of contract deliverables and communicating to the prime contractor the basis for rejecting some of them. The report also said Homeland Security had not effectively monitored Boeing’s progress in meeting cost and schedule expectations.

“This inability has contributed to the program’s failure to live up to expectations and to it costing more and taking longer than was necessary,” the report said.

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