How the Federal Government Controls IT Spending

Posted 05-08-2013

How the Federal Government Controls IT Spending

By Eric Thomas

Do you remember 1996? Of course you do. President Clinton was re-elected, Atlanta hosted the Olympics, and the Clinger-Cohen Act (CCA) was passed into law. The CCA, otherwise known as the Information Technology Management Reform Act of 1996, was a seminal moment in federal IT management. Before the CCA, the General Services Administration (GSA) had the exclusive authority to buy IT goods and services for every federal agency. This often made the IT acquisition process costly, inefficient and ineffective. Before the CCA, there wasn’t a CIO for each agency. Without a CIO, IT decisions were the purview of the agency director or the CFO.

At the heart of the CCA and, in turn, Capital Planning and Investment Control (CPIC) program, is federal agency’s submission of Exhibit 53 and Exhibit 300. Exhibit 53 is a laundry list of all of an agency’s IT investments, both major and minor, and Exhibit 300 is a more detailed business case for an agency’s major IT investments. Exhibit 300 provides an overview of the mission need for the investment, measures of success, expected outcomes and the long-term projected costs. Both exhibits are submitted to the Office of Management and Budget (OMB) for review. 

The Good, the Bad

Not surprisingly, there have been problems with the implementation of the Clinger-Cohen Act. Several congressional reports have highlighted a lack of oversight; there has been too much turnover with agency CIOs; contracting and acquisition practices can be inadequate; performance measurements in Exhibit 300s have been missing, and there has been non-compliance with investment-management best practices. Users have also complained that efforts to comply with guidance from OMB are more of a compliance exercise. One program manager explained that she maintains one set of books to meet the detailed instructions from OMB and another set to meet the needs of the agency.

Despite the challenges, we have seen definitive progress since the passing of the CCA. On the positive side, a Federal CIO Council was established, and it codified into law the requirement to share best practices and to make recommendations on better information management policies. Administrations have consistently supported the need to make technology business cases better align with agency objectives through initiatives such as the President’s Management Agenda and the emphasis on the Federal Enterprise Architecture. The Obama administration has championed greater transparency through implementation of the IT Dashboard, an online snapshot of each agency’s Exhibit 53 and Exhibit 300.  Recently, we have also seen a push to create greater agency accountability through the use of OMB reviews of project and portfolio management decisions via TechStat and PortfolioStat, respectively.

How the Federal Government Controls IT Spending

A Look Into the Future

Despite mixed reviews, CCA continues to be a much-needed policy to support and control federal IT spending. Seventeen years after its implementation, we continue to expand upon the initial concepts in an effort to transform IT spending into an integral part of efficient business processes. Forward-looking CIOs should expect the following:

1.     Change. Each year OMB issues new guidance. Each administration wants to put its stamp on information technology by emphasizing new elements of the CCA. These changes can be small, minor additional data requests on Exhibit 53 and Exhibit 300, or the changes can be significant, such as making investment business cases available to the public on the Internet. Hence, each agency should focus on the fundamentals. Janelle B. Moore, director, Federal CPIC Forum, says, “When CIOs ensure the rigors of compliant project management principles are applied throughout their portfolios, they have the easiest time reporting to cost, schedule, risk and performance criteria. Regardless of who's in office or how the administration changes, CIOs are best prepared to report to OMB as these are the core themes of justifying investments.”

2.     Benchmarks. When you consider that the federal government spends approximately $80 billion on information technology each year, more than the annual revenues for both Google and Amazon, you can expect agency expenditures will continue to come under scrutiny. This scrutiny will require agencies to prove they are spending taxpayer money wisely. Federal CIOs should begin the process of understanding the per-unit cost of the services they are providing. For example, agencies should be able to answer how much it costs to run their service desk per user and how that compares to industry standards. But the benchmarking does not stop there. Each budget-related benchmark needs to be coupled with an effectiveness benchmark. Continuing with the service desk example, CIOs should also know how many service desk tickets are resolved within certain units of time or how many users report a positive interaction with the service desk.

3.     Chargebacks.  IT is not a just a cost center. IT is a business enabler, a raw material in the delivery of federal services. And each agency needs to start thinking in terms of the “Business of IT.” If you think of yourself like a business, you would charge for the services you provide. Federal CIOs should begin to develop more robust mechanisms to fairly and equitably allocate IT costs to the consumers of IT services. These efforts will help the agency better understand the true value of the services provided. The costs of these services were previously understated because invariably there was insufficient understanding of incurred IT costs.

It is impossible to know exactly where the future of CPIC lies, but we can be fairly certain that the demands to provide more transparency into IT will only increase. Hence, taking measures to adapt to change, incorporate benchmarks, and identify potential chargeback costs to the business are all important elements of an effective IT management approach.

About the Author

Eric Thomas is the founder and the managing partner at Vergys LLC, which provides strategic management consulting services to federal, public and private sector organizations. He has trained and consulted on the business of IT for nearly 14 years on topics including portfolio management, capital planning, project management and strategic planning.