This is the third in a series of three articles about how to improve agency performance in managing the OMB Exhibit 300 Business Case process for major information technology investments. 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 second article outlined how to develop OMB Exhibit 300s for new IT Projects.

The Exhibit 300 process for justifying capital investments in information technology consumes a lot of time, effort, cost, and paperwork. Many government organizations would like to make the process more efficient, and this month's article seeks to help by providing thought-starters.

Larger federal organizations must prepare and update dozens and dozens of Exhibit 300s for their investments in information technology (IT). These documents must be submitted to the Office of Management and Budget (OMB) as part of the statutory requirements for Capital Planning and Investment Control (CPIC). Useful background reading is the vintage 1997 OMB Capital Programming Guide:
http://www.whitehouse.gov/omb/circulars/a11/cpgtoc.html. The OMB Guide provides procedural and analytic guidance. While agencies have leeway in how they implement the guidelines, they must comply with the underlying statutes including the Government Performance and Results Act, the Clinger-Cohen Act, and the Federal Acquisition Streamlining Act.

The Problem with Exhibit 300s

Only a few years ago, Business Cases for information technology projects tended to be a freelance entrepreneurial activity. Agencies, sub-agencies, and branches with an IT need or an ambitious idea would prepare a short Business Case and take it to market as a proposed federal budget expenditure. This open-market approach tended to be somewhat chaotic: The most urgent priorities were not always the budget winners, and those projects that did win often failed to support a rational enterprise-wide strategy.

The process has changed dramatically in the past several years, however, as the intent of the Clinger-Cohen Act is morphing from pious statutory language into reality. OMB has evolved a rigorous Capital Planning and Investment Control process for which the Exhibit 300 Business Case is a summary document. Moreover, the burgeoning emphasis on an enterprise-wide focus and indeed Federal Enterprise Architecture, is demanding that major IT projects fit together strategically into Department-wide and government-wide investment plans.

The problem is that the business process for preparing Exhibit 300 Business Cases is out of date in most agencies. Today you will still often find people in Federal organizations who are struggling with one or more of the following:

• Attempting to re-invent the wheel because the Federal knowledge base of what works (Best Practices and what we'll call Promising Practices) is incredibly fragmented
• Developing solutions at the sub-agency or bureau level that could be addressed more efficiently at the enterprise level
• Getting lost in poorly prepared or non-existent templates for Business Case Documents
• Receiving inadequate guidance on matters like Risk Management, Alternatives Analysis, Enterprise Architecture, and Cost Benefits Analysis
• Facing a disconnect between IT planning and overall agency organizational performance improvement, which generally requires changes that are more far-reaching that technology
• Having access to inadequate training and technical assistance about the CPIC process.

The CPIC process also tends to overlap with requirements for System Development and Life Cycle Management and planning/documentation required for information security Certification and Documentation. In some cases, there is duplicative paperwork that has not been integrated into a coherent process.

Real-world results in Federal technology are driven by excellence in management, rather than paperwork. And perhaps the most damning problem is that the focus has historically been on paperwork products rather than actual management competency or performance. OMB and the Federal CIO Council is addressing this problem in part by emphasizing human resource development in IT--and particularly an effort to assure the qualifications of Federal IT project managers.

The bottom line is that CPIC procedures and agency management of Exhibit 300 portfolios are ripe for substantial business process improvement. We will outline our suggestions below.

Exhibit 300s in the Enterprise Context

Enterprise Architecture (EA) has become the starting point for IT capital investments. Driven by agency mission and strategic plan, the EA seeks to align agency business requirements, information and knowledge, technology infrastructure, and major applications into a coherent force for achieving customer-centered program results. IT capital investments represented in Exhibit 300s must enable the agency to move effectively from the not-so-perfect "as is" architecture to the envisioned "to be" architecture.

Setting Priorities

The best way to reduce guesswork about which Exhibit 300s to add or change in an agency portfolio is to follow a Long-Term Capital Investment Plan (CIP) which documents spending required to implement the EA "to be" architecture. This is an area where many agencies need further work: In a January 2004 report titled agency Implementation of Capital Planning Principles Is Mixed, the General Accounting Office (GAO) reported that, of four agencies reviewed, "none of them prepares an agencywide long-term capital investment plan," even though some had capital planning documents that could serve as a framework for preparing a comprehensive investment plan.

The CIP should be updated annually based on:

• An inventory and assessment of existing IT assets
• Urgent needs and business changes that may have arisen
• An evaluation of the results of CPIC performance reviews that assess investments in existing IT projects

Keeping agency managers and IT executives informed about the CIP provides powerful guidance on where and how to implement new Exhibit 300s and adapt existing 300s. There is less guessing and fewer efforts spent on 300s that do not fit into the big picture. Linking the CIP with the EA will also help the agency to remain focused on investing in assets that are complimentary and leverage other investments.

Resources to Support Capital Investment Planning

Developing new Exhibit 300s has evolved into a relatively complex process, as described in our February 2004 newsletter. We believe that the best way to improve Exhibit 300 portfolios is to establish a Program Management Office (PMO) at the enterprise (department or agency) level. Ideally, the PMO will take a consolidated approach to overseeing the requirements for CPIC, the System Development and Life Cycle Management process, and information security Certification & Accreditation.

There are various approaches to PMOs. We recommend a balance between centralized responsibilities and assistance/support to sub-agencies and IT executives. Our rationale for a balanced approach is that (1) PMOs that are totally decentralized tend to take OMB regulations and simply delegate them without providing much value-added assistance and (2) PMOs that are totally centralized are at risk of being out of touch with sub-agency program and organizational requirements.
Functions of an enterprise-wide PMO will encompass:

• Guidance that supports agency IT policy, CIO leadership, the CIP, and the EA
• A clear methodology (in writing) for developing Exhibit 300s and managing the overall CPIC process
• Inter-Departmental cooperation--to extend alternatives and resources beyond the department or agency
• A structured approach and schedule for the planning and document preparation processes
• A knowledge base of exemplary documents (300s, Requirements Documents, Acquisition Plans, Project Plans, model Earned Value data, project-level EA plans, performance metrics, Cost Benefits Analysis, Risk Management Plans, Privacy Impact Assessments, etc.)
• Information about Best Practices and Promising Practices
• Templates for required documents
• Templates or specialized software for risk analysis, risk adjusted costs, cost estimating, cost-benefits analysis, return on investment, etc.
• Direct assistance with some of the more complex issues (such as information security and cost of risk)
• Just-In-Time (JIT) Training for specific CPIC skills
• Online collaboration
• Technical support to answer questions
• Early review, Quality Assurance (QA), and feedback to project managers responsible for new and ongoing Exhibit 300 projects.

Process Improvement

When developing a new 300 or revising it, there is a great deal of inefficiency in collecting information, and some of this effort is waste. It doesn't make sense for every 300 developer to be collecting the same or similar information. A PMO can help streamline this process. In addition to the assistance of a PMO, other process improvements would be:

• Providing model solutions to avoid re-inventing the wheel for generic topics like agency approach to Section 508 compliance, Privacy Act compliance, Federal records management, agency acquisition practices, etc.
• Encouraging cooperation among project managers who are developing 300s, so that they can make suggestions and improve each others' documents
• Integrating the CPIC, SDLC, and information security process

More Ideas

Here are some other suggestions for streamlining the overall Exhibit 300 process:

• Schedule Exhibit 300 development throughout the year (possible with a CIP), rather than suffering from a three-month avalanche of hit-or-miss effort
• Consolidate General Support System investments into a single 300 (e.g., a single GSS project for all networks, etc.)
• Establish a single Web Applications Cluster that encompasses all of the enterprise's smaller-but-necessary Commercial-Off-the-Shelf (COTS) solutions--and manage them as a single toolkit with a common approach to security and investment control
• Move 300 projects from a sub-agency to an enterprise wide level (reducing the number of 300s)
• Deploy a small "roving team" of CPIC specialists who know how to knock out the paperwork fast: Send them round-robin throughout the year to all of the managers who need help in developing or overhauling Exhibit 300s

Evaluate and Improve

Like any other process, long-term improvements to your Exhibit 300 portfolio and overall CPIC methodology will be a matter of improve - evaluate - improve - evaluate. The process improvement cycle is continuous.

Enterprise Implementation Plan

Enterprise management of the Exhibit 300 process requires a detailed strategy that must be implemented with significant preparation. Many of the methods and priorities described in this newsletter must be tailored to each department or agency. The implementation plan and its execution must::

• Link to the mission, performance objectives, and enterprise architecture of the organization
• Integrate with E-Government, financial performance requirements, human resource utilization, and security
• Establish an auditable procedure for documenting and evaluating the enterprise Exhibit 300/CPIC process
• Provide guidelines for managers and users of the Exhibit 300 process--that supports consistent and replicable results
• Establish a structured schedule for year-around management of the Enterprise process for Exhibit 300s and CPIC
• Assure training and user support to managers and technical personnel who participate in the enterprise-wide capital investment process
• Establish a means for reporting results
• Assure continuous improvement of the CPIC process.

LINKS OF THE MONTH: GAO REPORTS

General Accounting Office issues reports pertinent to Capital Planning and Investment Control, including some that are IT specific and others that address all types of capital investments (including facilities, ships, specialty equipment, etc.). Following are three recent GAO publications, using excerpts of GAO's own descriptions of the reports, beginning with the one cited above in our article.

Agency Implementation of Capital Planning Principles Is Mixed. January 2004. www.gao.gov/cgi-bin/getrpt?GAO-04-138. In fiscal year 2002, the federal government spent nearly $100 billion on capital investments intended to yield long-term benefits for its own operations. The Congress, the Office of Management and Budget (OMB), and GAO all have identified the need for effective capital planning. In addition, budgetary pressures and demands to improve performance in all areas put pressure on agencies to make sound capital acquisition choices. In the overall capital programming process, planning is the first phase--and arguably the most important--since it drives the remaining phases of budgeting, procurement, and management.

Improvements Needed in the Reliability of Defense Budget Submissions. December 2003. www.gao.gov/cgi-bin/getrpt?GAO-04-115. DOD's fiscal year 2004 IT budget submission includes inconsistencies, inaccuracies, and omissions that limit its reliability. For example, the Capital Investment Reports, which provide detailed information on each major IT initiative, are inconsistent with DOD's IT budget summary report. In particular, 15 major initiatives that appear in the budget summary report do not appear in the Capital Investment Reports, and discrepancies exist between the amounts that the two types of reports included for 73 major initiatives. These discrepancies total about $1.6 billion.

Departmental Leadership Crucial to Success of Investment Reforms at Interior. September 2003. www.gao.gov/cgi-bin/getrpt?GAO-03-1028. The Department of the Interior has limited capacity to effectively manage its planned and ongoing IT investments. Over the past few years, Interior has undertaken several initiatives to better understand its current capabilities and to implement the organizational processes required for the department to exercise its responsibility to select, control, and evaluate IT investments.

CONSULTING SERVICES

The P2C2 Group wants to be your partner in improving the OMB Exhibit 300 Capital Planning and Investment Control Process. Our consulting services are readily available through established contract vehicles. Just e-mail us for more information or to schedule an appointment.

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