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FEDERAL SECTOR REPORT

August 2004

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IN THIS ISSUE

The High Cost of Federal Information Technology

Links of the Month: Alberta's CIP Format

Consulting Services

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(c) 2004 by the P2C2 Group, Inc.

THE HIGH COST OF FEDERAL INFORMATION TECHNOLOGY
 
Hornet's Nest?
 In writing this month about why federal IT costs so much, I wondered if I was following in the tradition of Flash, my indefinite breed dog, who stuck his nose into a hornet's nest this past week. To say the least, there were exciting consequences for the two of us.
 
I would appreciate feedback about the federal cost issues--regardless of whether you concur or disagree with my comments.  Pretty much every one I work with--federal executives and techies, contractors, and colleagues in various professions--all want the system to work … and to work better. We're usually so swamped with busy schedules that it's difficult to take time for the big picture. But take a moment to think about it; and write me.
 
Reporter's Question: Why does federal information technology cost so much? That's what a reporter from Investor's Business Daily phoned and asked me the other day, and it triggered my thinking about big-picture issues that we seldom have time to consider in everyday Washington. The reporter had been looking at reports from the Government Accountability Office, and he was astounded by the magnitude of the costs and the frequency of budget overruns.
 
I've continued to think about the global issues involved in federal IT costs, and the overall list of issues is daunting. In this issue of the newsletter, I will point out some of these. Most are well known but often shrugged off with sighs of frustration, like "well, that's the federal way." Frankly I don't think it has to be that way; we can do better if we work together.
  
Here's the starter list of why Federal IT costs so much:
  
Congress: Our lawmakers put lots of interesting ideas into legislation, often with ambitious mandates that have a costly impact on information systems. For example, Congress enacts a new or modified program,  and the responsible agency shall implement it within maybe 120 days. Yet, how many major information systems can comply with such mandate for instant additions and changes? And at what cost? Someone needs to do a technology impact assessment before laws are passed. Except for national emergencies, even the best intentioned legislation needs to be phased in according to a realistic and cost efficient schedule.
 
Regulatory Uncertainty: Some agencies develop two and three versions of application systems because they don't know how, whether, or when a key regulation affecting their program mission or business processes will be changed. Again, when a regulation is changed, there is usually some unrealistic mandate--that the new regulation must be implemented within a short time frame. Ability to change regulations is important, but hot-wired schedules are expensive.
 
The Burden on Government IT: Federal IT is one of the most highly regulated activities in the United States. As people in private industry point out, loudly, government regulation is expensive; yet most private industries contend with only a fraction of the regulations with which federal IT managers must contend: budget requirements, acquisition, information security, technical standards, management requirements, federal records management policies, performance reviews, paperwork reduction and elimination rules, personnel security, privacy, and much more. Top that off with ad hoc data calls from federal oversight agencies, along with a few IT performance audits by GAO and the IG. Each of the regulations and accountability reviews is well intended, but the collective weight is enough to sink a battleship.
 
Capital Investment Planning: The federal process for IT Capital Planning and Investment Control is flawed. The private sector and many state/local governments prepare 5- and 10-year capital investment plans (and budgets) that seek to define the long-term investment strategy for an entire enterprise or major operating division. Annual spending, while adjusted and updated, supports long-term business strategies and vision. In contrast, the federal IT capital investment process tends to be an annual fire drill that seeks to justify individual IT investments. There is little consistency from year to year, the piecemeal approach does not add up to an enterprise-level investment plan, and the piles of paperwork for annual budget justifications do not lead to an integrated long-term capital investment strategy. Despite strategic plans and Enterprise Architecture documents, most agencies don't have stable, long-term capital investment plans for IT.
1000, 5000, 10000 dollar bills (no longer in circulation) 
Enterprise Architecture: 
Federal EA documents tend to provide limited guidance for long-term capital investment plans. The Government Accountability Office in a recent report (GAO-04-798T) questioned whether the Federal Enterprise Architecture is indeed an EA, stating that it believed "the FEA is more akin to a point-in-time framework or classification scheme for federal government operations."  We agree. The cataloging of federal IT investments provided by www.feapmo.gov  is useful, per se, and it may promote cooperation and collaboration, but it is only an initial step in moving toward a "to be" architecture for the future.  While many agencies have EA documents, most agency-level enterprise architectures are currently not linked to long-term capital investment planning. Without such a linkage, IT investments cannot be well targeted.
 
Sustained Modernization: While federal budgets are planned a year at a time, nearly a decade may be required to modernize the overall technology within an enterprise. Agencies need time--years--and the policy stability to pursue a rational target architecture.
 
Inadequate Planning: The annual budget process for IT--with money appropriated as late as month #4 or month #5 of the fiscal year--results in hasty planning for major IT investments, and this approach tends to increase the risk of poorly defined requirements, defective work scopes, and flawed acquisition plans. The result is an unnecessarily high incidence of troubled development and implementation--often with many costly amendments to the original budgets and contracts.  The solution is to make IT planning a long-term process--reflecting a 5- or 10-year capital investment plan.
 
Compliance by Paperwork:  The Clinger Cohen Act and other laws that seek better IT performance and accountability tend to become bogged down in the quagmire of compliance by paperwork. Instead of focusing on real changes and improvements in IT investments, millions of dollars are being spent to generate paperwork that presents the appearance of compliance without emphasis on substance. The laws are sound ideas, but there is limited real-world accountability for the actual results of IT investments, their cost efficiency, or their effectiveness in supporting business needs. When IT investments are evaluated, it is usually on a piecemeal basis--not on whether the IT investments for an entire federal organizational entity make sense or propel it toward long-term strategic results. As long as funding for IT investments is based primarily on paperwork that simply echoes federal guidelines, IT capital planning will be a paper tiger.
 
Need for Organizational Change: The big cost savings of IT are often derived from restructuring non-IT lines of business. Look at how state governments are modernizing Motor Vehicle Administration services for example--making many services available online and cutting down on the size of the workforce. In many cases, IT saves money only if an enterprise totally redefines how it does business. Simply putting a computer on the desks of a million government workers or installing new software doesn't necessarily save money or modernize the enterprise.
 
IT Project Management:  The Office of Management and Budget has been focusing on the qualifications of project managers for major IT investments, and we believe this is a good thing. Large IT projects, particularly those in development or modernization phases, have exceedingly complex issues, and quite a few GAO reports indicate that poor financial performance of IT investments can be traced to weak, disjointed, or inexperienced management.
 
Federal Personnel Policy: Qualified people who are highly motivated and well managed produce good IT results. This truism is well known already in government circles. Efforts to address the problem are commendable but inadequate. Uncle Sam needs to retain and add the same kinds of bright, skilled, driven performers that Microsoft and Google can attract. Anything less ultimately costs more.


Emergencies: The overall theme of this article is that investments must be managed strategically over the long term. This includes maintaining workable contingency plans for national emergencies whenever possible.
 

Where Do We Go From Here?
 
The first step is to admit that there is a big problem.

Then we need to convince people at the highest levels of government, in the Executive Branch and Congress, that federal IT has to be driven by long-term roadmaps.
Core IT capital investments need at least five-year commitments from Congress and the Executive Branch
 
In the meantime, agency IT executives need to organize the current bits and pieces of federal IT regulation into their own pathway for a long-term capital investment strategy--recognizing that this is a risky approach but the best that is possible under current conditions.

LINK OF THE MONTH: EXAMPLE OF A CAPITAL INVESTMENT PLAN
 
This month, we're reaching beyond information technology in our search for strategic capital investment planning. Many sectors have capital planning methodology that is far more advanced than is usual for IT. One such area is transportation, and this month we travel to the Ministry of Transportation, Government of Alberta, Canada.
 
Our web link is to Alberta's capital planning document for transportation: http://www.trans.gov.ab.ca/Content/doctype52/production/CPI%20FINAL%20REPORT%202000-01.pdf.
Alberta's plan is short on rhetoric and pseudo-academic blah blah. It is long on high-level details. Before dismissing it as yet another boring government document, look at its structure: It includes all enterprise-wide capital investment priorities. It is long term. It includes performance measures. It references Enterprise Architecture. It summarizes performance results. You can take a broader tour of the agency's website is at http://www.trans.gov.ab.ca/home/index.asp.
 
The overall structure of Alberta's plan provides good ideas for IT capital planning documents, as applied to the U.S. government.
CONSULTING SERVICES
 
One of the advantages of retaining our firm, the P2C2 Group, is that we are a small independent consulting practice and intend to remain that way. That enables us to minimize conflict of interest issues.  We know our role and the responsibilities for ethics and professionalism in sensitive areas like IT planning, capital investment, acquisition, performance evaluation, and management strategy.  We work hard at earning and retaining the trust of our clients. Excellence and value in our work is our central goal.
 
HOME PAGE
 
I seem to have one of the larger collections of yellow Lance Armstrong t-shirts in the Washington area. They're all gifts from my son, John, a bicycling enthusiast, who has also been selling the yellow wristbands. Proceeds from these items go to support advocacy and education for people living with cancer. The logo to the right will take you to the foundation.
 
Best wishes,

Jim Kendrick
4101 Denfeld Avenue
Kensington, MD 20895
301-942-7985

NEWSLETTER ARCHIVE

 
The P2C2 Group, Inc.
4101 Denfeld Avenue | Kensington, MD 20895
Point of Contact: Jim Kendrick, President
e-mail: kendrick@p2c2group.com
phone: 301-942-7985 | fax: 301-942-7986