OMB to agencies: Justify that IT spending

'Much of the $60 billion is misspent, and much of it is spent in an uncoordinated way,' OMB Director Mitchell E. Daniels Jr. says.

J. Adam Fenster

As the White House detailed each agency's share of the $59.3 billion earmarked for IT in the president's fiscal 2004 budget request, one thing became clear:
The administration will increase its pressure on agencies to justify their IT investments.

Senior Office of Management and Budget officials used the proposal, which President Bush sent to Congress last week, to make it known that scrutiny of the business cases agencies submit would continue to increase in coming budget cycles. What's more, OMB will not let agencies spend funds requested for next year if it decides that agencies failed to provide the necessary information when asked for revised justifications.

'Much of the $60 billion is misspent, and much of it is spent in an uncoordinated way,' OMB director Mitchell E. Daniels Jr. said. 'We have used the authority Congress gave us to stop a variety of programs until they prove they, first of all, have a sound business case and will return greater productivity in their investments, and secondly, they will enhance integration and coordinate inside the federal government and not make bad problems worse.'

Agencies should expect OMB to tighten the screws on oversight during the next 12 months, with a continued emphasis on improving cybersecurity, seeking business cases that are more closely aligned with federal enterprise architecture plans and specifying metrics to gauge performance.

Of the administration's IT request, $37 billion would be for mission projects and $21 billion for office automation and infrastructure initiatives. The overall request represents more than a 14 percent increase over the original $52.6 billion request for this year.

Most agencies saw modest increases in their IT budgets. But the increases were generally less than 1 percent, and some agencies should expect decreases. Mark Forman, OMB's associate director for e-government and IT, attributes about $1.6 billion of the overall increase to improved business case reporting.

Down to details

'We are much further along as an enterprise in the sophisticated IT management practices,' Forman said. 'The more qualitative and quantitative we made the business case process, the more we focused on getting agencies to lay out explicitly why they are making the IT investment and what will be the results.'

Officials assessed more than 1,400 IT business cases representing $35 billion. They labeled 771 representing about $20.9 billion as at-risk for not meeting at least two of three criteria: adequate security, sufficient project management or detail about how an IT project meshes with an agency's mission. Forman said about 280 business cases worth about $8 billion were done correctly. The other 349 cases were so poor that OMB asked agencies to resubmit them by March 1, he said.

'If they are not at least up to the level of the at-risk list, we still will put them in the budget, but we will give them a lot of help and they will not receive funding until they are off the at-risk list,' Forman said.

Projects that are still on the at-risk by July will not receive funding and likely will be moved to the 2005 budget cycle, Forman said.

Agencies also did not submit business cases for about 400 IT projects worth more than $5 million each. Forman said agencies will be expected to develop business cases for 2005.

OMB found while preparing the budget request that the greatest problem for agencies is identifying how systems perform when compared against cost, schedule and mission improvement goals. A sample comparison of 2003 and 2004 budget requests found cost and schedule overruns ranged from 10 percent to 225 percent.

These findings led OMB to demand that at least three agencies'the Education and Energy departments and the General Services Administration'file reports quarterly about the status of their business cases. Additionally, OMB found problems with the way nearly every agency put together its business cases.

Forman attributed at least some of the problems to the lack of qualified project managers. He said agencies need to hire 700 project managers and systems architects to help improve the management of IT initiatives.

Agencies by Sept. 30 also must start using an earned-value management system, a standard method that industry uses to track cost and schedule components. Departments will have to file reports comparing their 2004 business cases with those they will submit for 2005.

To get better business cases and eliminate project duplication, OMB said, agencies also will need to submit more joint-project cases with their 2005 budget requests. The budget proposal noted that almost 20 percent of IT requests could have been made as joint submissions.

Besides the business case scrutiny, the administration will use the President's Management Agenda scorecard to promote IT management. OMB is using the red, yellow and green rating system to determine how agencies are progressing on meeting goals for personnel, competitive sourcing, financial performance, budget and performance integration, and e-government.

OMB handed out the fourth set of grades with the budget submission.

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