FEDERAL SECTOR REPORT

February 2004

Jim Kendrick, Certified Management Consultant

A Newsletter for Federal Agencies, Contractors, and Grantees

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IN THIS ISSUE

Steps for Developing OMB Exhibit 300s for New IT Projects

Link of the Month: An Introduction to Enterprise Architecture

Consulting Services

Home Page

(c) 2004 by the P2C2 Group, Inc.

STEPS FOR DEVELOPING OMB EXHIBIT 300s FOR NEW IT PROJECTS

This is the second of a series of three articles about how to improve your agency's performance in management of the Exhibit 300 Business Case process for major information technology (IT) initiatives. The first article focused on the obvious but frequently ignored fact that your Business Case must be prepared thoroughly with an intense focus on scoring well, based on OMB's criteria. The third article will present suggestions about how to streamline the enterprise management process for business cases so you don't get buried in paperwork.

NEW FEDERAL IT INITIATIVES REQUIRE DETAILED JUSTIFICATION

New initiatives for federal investments in IT face a rigorous process of planning and justification to obtain approval by the Office of Management and Budget (OMB). This article outlines basic steps for developing a major new IT initiative, and it is based on our experience in preparing over 15 Exhibit 300 Business Cases that agencies have submitted to OMB.

Our focus this month is on how to develop new initiatives that are currently at the conceptual stage or "ground zero." The needs of new projects are different from legacy systems or recent projects that are already in system development or implementation phases.

#1. Start with the Agency's Most Urgent Performance Goals. Your IT project needs to solve a BIG agency problem or achieve dramatic program results. There are many worthwhile initiatives, and they may support a wide range of performance goals. The following are hypothetical examples, and a new initiative might address one or more of these ... or other goals of similar significance:

• Cut the time in half for processing citizen applications for public services and benefits
• Reduce paperwork burden on the public by 3 million hours annually
• Improve government effectiveness in monitoring and responding to threats (communicable diseases, weather-induced disasters, safety, defense, power grid disruptions, international economic crises, etc.)
• Use teleconferencing to eliminate $5 million of yearly travel costs
• Reduce error rates for billion-dollar federal grants-in-aid programs administered by State governments
• Reduce the number of personnel needed for "back office" financial and human resource functions through e-solutions and workflow simplification
• Consolidate 100 toll-free hotlines into a single outsourced National Call Center that improves information quality and reduces costs
• Consolidate 12 agency-level networks and e-mail systems into one Department-wide system

#2. Define Your Strategy for Business Case Development. Typically, the business case for a new project will require between three and eight months of preparation. Your strategy for developing the Exhibit 300 and supporting business case documents should address all of the steps suggested in this article and respond to the requirements of Circular A-11, Section 300. The sidebar in the right column provides a road map for topics that should be addressed in your strategy.

#3. Identify and Involve Stakeholders. A major new initiative generally requires broad support and a change management strategy. Not everyone will be happy about proposed changes, because the status quo is either comfortable or endurable. Some general suggestions are to:

• Involve line managers whenever appropriate--agency heads and program managers--because an IT solution must support improvements to the overall business results of the agency
• Identify other stakeholders and determine a way to keep them informed and/or involved
• Keep briefings well structured (PowerPoint briefings, brief issues papers)
• Establish credibility by conducting professional-quality background research and planning

#4. Document Your Baseline. You will need to document your current business requirements, workflow, problems, risks, costs, and performance metrics. Such a baseline will be used to estimate how much of an improvement your proposed initiative is likely to achieve. Note: the baseline should usually not be considered as one of the alternatives proposed in the business case.

#5. Identify Project Results and Requirements. The purpose of this step is to define what the new project will accomplish for the agency (see Step #1) and Stakeholders (see Step #3). A high-level Requirements document should specify general business and IT capabilities necessary to meet agency and Stakeholder needs. However, the specifications should not be so narrow that they rule out potentially attractive alternatives.

#6. Explore Outside-the-Box Solutions. The best option for a new investment may be to redefine your project or to outsource the solution to another agency or to a commercial source. By no means should you simply think only about "updating" your legacy solution to a new version of the same solution. Our recent article about Alternatives Analysis provides suggestions about how to improve the effectiveness of your search for the best options.

#7. Start Early on Security & Privacy Issues. The business case for a new project must address many security and privacy issues. Moreover, in the Exhibit 300, you want to be able to state specific dates for your:

• Privacy Impact Assessment
• Project Risk Management Plan
• System Security Plan

You will also need to assess information security requirements in sufficient detail to estimate costs for security--in terms of technical and other controls, the Certification & Accreditation process, and ongoing security management. The Exhibit 300 asks you to state who is paying for information security--and how much money for security is included in the Budget Year pricing.

#8. Consider OMB's Scoring System. When you prepare an OMB Exhibit 300 for a new IT capital investment, you must fully address ten criteria, and OMB will score your project on each of these. Our article about how to Improve Scores on Your OMB Exhibit 300s will serve as a good introduction. Follow this up by reading the basic guidance in OMB Circular A-11, Section 300.

Road Map for a New

Exhibit 300

Your strategy for developing a new OMB Exhibit 300 must identify how you will:

• Identify your internal review processes: Investment Review Board, Chief Financial Officer, Chief Information Officer, Procurement Executive, Agency Head(s)
• Define the purpose and objectives of the project
• Align the project with E-government and the President's Management Agenda
• Seek cross-organizational cooperation: inter-departmental, state/local, public/private
• Identify performance goals and metrics
• Select and involve your Integrated Project Team
• Review market research and best practices to explore potential alternatives
• Define alternatives
• Identify costs for each alternative
• Enumerate, quantify, and develop cost estimates for benefits
• Prepare a risk assessment for major alternatives and estimate risk costs
• Conduct a cost benefits analysis
• Recommend a solution
• Define the Enterprise Architecture including e-Government and the Government Paperwork Elimination Act Plan
• Start early on your information security assessments, plans, and Privacy Impact Assessment
• Develop a high-level Acquisition Plan
• Develop a Detailed Project Management Plan with schedule, milestones, and costs
• Prepare detailed documentation: Requirements/Scope, Risk Management and Mitigation, Business Case including Alternatives, Costs, and Benefits; and Information Security
• Review, Score, Refine and Finalize

#9. Use the New Project to Advance Your Enterprise Architecture (EA). Integrating IT capital planning with enterprise architecture and program performance management will be central to your long-term success. In addition, each new major investment should strengthen your EA and its alignment with the Federal Enterprise Architecture.

Enterprise Architecture is a complex concept that extends far beyond technology. It also encompasses business, information, and solution architectures. Some key EA questions to ask when planning a major IT investment:

• How should your agency's business (mission) function drive the other EA layers (information, technology, solutions)?
• How can IT improve the measurable performance results of agency mission and programs?
• Can you align the project with a federal-wide EA strategy (that supports a common solution on a cross-organizational or inter-Departmental basis)?
• How does the project fit into the architecture and strategy of e-Government?
• How can the project contribute to a modernized and less costly technology layer?
• How can the project improve data-sharing between business processes?
• Can the project support integration of multiple business functions and processes to simplify workflow and reduce the cycle time?
• How will the project link to the EA framework for performance metrics and results?

General information about the Federal Enterprise Architecture is available at http://www.feapmo.gov. We also intend to address EA in a future article.

#10. Consider Risks. Some of the newest Exhibit 300s include risk-adjusted costs, and a new project should give full consideration to risks, cost of risk, and realistic means for mitigating risks. A general introduction to the topic is available in our previous article on Risk Management.

#11. Develop Early Prototypes of Solutions and Documentation. One of our favorite strategies is to develop "trial balloon" documents early in the planning process. This may include:

• Early PowerPoint briefings about objectives and requirements--as a means of beginning to define the scope of the project
• An early questionnaire to stakeholders to determine basic facts about their needs and how they might use the system
• A high-level Requirements document to see if stakeholders are generally in agreement about what the project needs to accomplish
• A "straw man" Exhibit 300 to test where we must strengthen the business case to score well at OMB

#12. Develop a Quantitative Model. One of our most useful tools is a spreadsheet model that occupies approximately 18 tabs in Excel. The entire model is integrated to encompass:

• Cost analysis of the current (baseline) business processes
• Risk assessment that yields risk-adjusted costs
• Detailed pricing and analysis for each alternative over the multi-year lifecycle
• Comparative analysis by alternative, phase, and fiscal year
• Break-out of costs for each alternative for Section 1.E of Exhibit 300
• Estimate for full-time equivalents (FTEs) with financial loads
• Financial benefits
• Cost benefits analysis
• Return on investment
• Exhibit 300's 1.H.2 Cost and Schedule break-out by fiscal year
• A detailed budget in the format required by the Exhibit 300 (Planning, Acquisition, .Maintenance, FTEs) by fiscal year

The advantage of having all of the above as an integrated model is that it is possible to change assumptions about costs, benefits, FTEs, and risks ... and to recalculate the financial impact quickly and comprehensively.

#13. Investigate Your Alternatives in Detail. Ideally this encompasses fact-finding for all alternatives. It will include discussions with other agencies that have implemented similar solutions: lessons learned, best practices, and assessment of vendors/contractors. It should also extend to market research--possibly even including a published Request for Information.

#14. Fully Develop Your Alternatives. We recommend that you fully develop your final three alternatives, because occasionally you will discover that you will implement an unexpected alternative. Technology can change. Your EA may be evolving. Security issues may emerge. For whatever reason, it is very useful to have viable alternatives to implement if your first choice doesn't work out.

#15. Recommend and Gain Approval for a Solution. After you develop and evaluate your alternatives, you will recommend an alternative which may (or may not) be the lowest cost option. Generally, you will need to gain the support of your stakeholders, Integrated Project Team, budget officer, agency head, CIO, and other decision makers.

#16. Finalize Your Documentation and Business Case. The next step is to fully prepare your detailed documentation for the business case. Generally the Exhibit 300 will be 20 - 60 pages in length (or fewer pages in the small font for OMB's XML format). However, the supporting documentation for the overall business case will often be 300 to 800 pages for a large IT investment. We are writing few words here, but the step takes considerable blood, sweat, tears, and time.

#17. Polish, Polish, Polish. Once you have a draft, you will need to polish it. Get people who know how OMB scores to review the document. You want them to find all of the weaknesses so you can strengthen your Exhibit 300 before it goes to OMB.

#18. Oh yes: After your Exhibit 300 goes to OMB, you will probably need to work on your business case during the "pass back" season, usually in December. OMB will typically score and provide brief comments about your project, and you will need to make final improvements for re-submission in January.

 

LINK OF THE MONTH: ENTERPRISE ARCHITECTURE

We believe that some of the private-sector explanations of enterprise strategy provide a better introduction to EA than federal documents, which are overloaded with Washington catch phrases and regulatory language. One brief and lucid explanation was provided by Dr. Yogesh Malhotra in a paper published in 1996. It's available at:

http://www.brint.com/papers/enterarch.htm

One of the interesting aspects of Dr. Malhotra's work is that he links EA closely to Knowledge Management, which is becoming a crucial resource for organizational effectiveness.

CONSULTING SERVICES

This is a great time to explore quality options for consulting services. E-mail or call to schedule a discussion with the P2C2 Group. Tell us more about your needs, and we can recommend a solution ... complete with a project plan, a team, and a cost estimate.

CPIC BRIEFING

We have prepared a briefing for federal agencies about the CPIC process and our services. Interested? Call us to schedule an appointment for our one-hour mini-workshop.

HOME PAGE

I have been completing an annual review of my 401(k) retirement plan, and I've been struck by how much the investment issues parallel those for IT capital planning. First of all there is the matter of risk, and the economists making forecasts all identify a variety of variables that will impact investment results. For example, currency fluctuations make the U.S. equities and bond markets less or more attractive to investors from other countries, and that ultimately will have an effect on Wall Street prices.

Probably one of the biggest problems for retail investors is the tendency to chase past performance. However, just because an investment has been flying high for the past three years doesn't guarantee that it will do so next year. That makes me think we should be judicious when chasing "best practices" in IT: some impressive solutions of recent years may not always make sense in the future.

While walking the dogs in (brrrr) 10-degree weather this morning, I did some reflecting on economic analysis and the world of federal IT. If we are well-informed and persistent investors, maybe we can all contribute to a long-term productivity growth in the public sector ... one that systematically grows the public's return on investment. Those thoughts and a cup of hot Jasmine tea warmed my spirits.

Best wishes,

Jim Kendrick

Technology Management Consultant

P2C2 Group, Inc.

4101 Denfeld Avenue

Kensington, MD 20895

kendrick@p2c2group.com

301-942-7985

Jim Kendrick with walking associates: Flash and Cinnamon