FEDERAL SECTOR REPORT

IN THIS ISSUE

OMB Has a Strong Hand in Federal Information Technology

The Office of Management and Budget (OMB) has an increasingly powerful role in the Executive Branch, and its requirements are changing the way the entire federal sector-agencies, contractors, and grantees-conducts business. This is particularly striking in the area of Information Technology (IT) where OMB is making a major impact on IT budgets, security, and information resource management. During the summer of 2002, we have provided consulting support for Fiscal Year 2004 budget documents for information technology and have had an opportunity to observe the trends in detail. In this issue of the newsletter, we will highlight the trends, review the problems, and provide suggestions about how to succeed in OMB's emerging management framework. However, before we explore the changes, let's take a moment to review the history and statutory functions of OMB.

Quick Summary of History and Functions

Years ago, the predecessor to OMB was known as the Bureau of the Budget. As its name implied, BoB primarily focused on the budget of the United States-assisting the President in budget formulation, presentation, and review. Today the Office of Management and Budget has broadened responsibilities-particularly in terms of procurement policy, accountability for management results, information security, and shaping management priorities of the Executive Branch. OMB is an agency within the Executive Office of the President, and it has added the Management dimension with a capital M.

Trends in OMB

Both Congress and OMB have seen IT spending as a "hook" for connecting broad management reform initiatives to federal agencies. For example, federal IT seeks to promote more efficient government organization and management, business process reengineering, performance improvement (results), and overall accountability for spending. Federal IT managers must address all of these issues when developing IT plans and reporting outcomes.

As part of the Executive Office of the President, OMB has gained a dominant role in directing agencies to pursue White House priorities. A key theme is support for the President's Management Agenda, and the Bush Administration's government-wide priorities are:

1. Strategic Management of Human Capital
2. Competitive Sourcing
3. Improved Financial Performance
4. Expanded Electronic Government
5. Budget and Performance Integration

Federal IT has a cornerstone role to play in all five of these government-wide priorities, and it is also affected directly by such emphases as competitive sourcing. The full text is available at
http://www.whitehouse.gov/omb/budget/fy2002/mgmt.pdf. 

In seeking to gain leverage and accountability through federal IT, OMB is requiring government IT managers to establish a complex administrative superstructure that involves detailed processes for planning, budgeting, acquisition, SDLC management, information security, compatibility with government-wide initiatives, and movement to a target enterprise architecture. The paperwork for planning, management, and reporting-to comply with OMB requirements-is massive, and most agencies are struggling with how to implement these mandates efficiently in the context of system development, management, and operations. One of our future newsletters will provide suggestions about opportunities to streamline and integrate these burgeoning requirements.

Presidential Priority Initiatives

The Executive Office of the President seeks government-wide solutions in many key IT areas related to E-Government, and OMB plays a key role in guiding and funding their implementation. These are known as Presidential Priority Initiatives (PPIs), and additional information about the E-Government Strategy is available at  http://www.whitehouse.gov/omb/inforeg/egovstrategy.pdf. Brief highlights of the 24 PPIs are below.

Government to Citizen

1.  Recreation One-Stop - builds upon "Recreation.gov" and provide a one-stop, searchable database of recreation areas nationwide.

2.  Gov Benefits - a common Internet portal for citizens to identify government benefit programs from which they may be eligible to receive assistance.

3.  Online Access for Loans  -  helping citizens and businesses to find the loan programs that meet their needs.

4.  USA Services  - a Customer Relationship Management approach for citizens to quickly obtain government service online while improving consistency across government agencies. 

5.  EZ Tax Filing  -  seeking to improve online tax filings.

Government to Business

6.  Online Rulemaking Management  -  improving access to the rulemaking process.

7.  Expanding Electronic Tax Products for Businesses  - decreasing the number of tax-related forms that an employer must file and increasing the availability of electronic tax filing.

8.  Federal Asset Sales  -  a single portal for the sale of government assets, regardless of the agency that holds these assets.

9.  International Trade Process Streamlining  -  helping new or existing exporters through the entire export process. 

10.  One-Stop Business Compliance Information  -  providing information on laws and regulations that can help users understand compliance information. 

11.  Consolidated Health Informatics  -  a simplified and unified system for sharing and reusing medical record information among government agencies and their private healthcare providers and insurers. 

Government to Government

12.  Geospatial Information One-Stop  -- providing access to the federal government's spatial data assets in a single location and help make state and local spatial data assets more accessible. 

13.  E-Grants  -  creating an electronic grants portal for grant recipients and the grant-making agencies.

14.  Disaster Assistance and Crisis Response  -  a public, one-stop portal containing information from applicable public and private organizations involved in disaster preparedness and crisis response.

15.  Wireless Public Safety Interoperable Communications/Project (SAFECOM)  -  seeking to improve interoperability and eliminate redundant wireless communications infrastructures among public safety networks.

16.  E-Vital  -  expanding the existing vital records online data exchange efforts between federal agencies and state governments.

Internal Efficiency and Effectiveness

17.  E-Training  -  promoting the President's Human Capital initiatives and serving as a repository of government-owned courseware to be made available to all governments.

18.  Recruitment One-Stop  -  improving the federal hiring process by improving the functionality of the federal automated employment information system. 

19.  Integrated Human Resources and E-Clearance  -  eliminating the need for paper employee records and supporting decisions regarding the use of human capital and financial resources.

20.  E-Payroll/HR (Payroll Processing Consolidation)  -  simplifying and unifying the elements of the Payroll/HR process across government.

21.  E-Travel  -  establishing a common travel management system throughout the federal government. 

22.  Integrated Acquisition Environment  - interagency sharing of common data elements to enable more informed procurement, logistical, payment and performance assessment decisions. 

23.  Electronic Records Management  -  providing tools for agency management of records in electronic form, including compliance with National Archives and Records Administration requirements.

24.  E-Authentication  -  enabling the mutual trust needed to support widespread use of electronic interactions between the public and government and across governments. 

The OMB Exhibit 300 Process

Federal IT spending is now subject to a rigorous capital investment planning process. This requirement has been around for some time and articulated in OMB's Circular A-11 (See http://cio.doe.gov/implan/Calls/Exhibit53/2004.htm). However, OMB is beginning to put real teeth into the provisions-including the requirement that large numbers of existing and new IT projects be submitted in the Exhibit 300 format. In addition to budget information, the Exhibit 300 addresses many, many of the issues that are priorities with OMB. We'll take a brief tour below.

Justification of the Alternative: Costs, Benefits, and Risk

OMB expects agencies to conduct an alternatives analysis prior to making a budget request for IT spending. This is becoming more than a pro forma requirement: In addition to the proposed solution and "doing nothing," agencies should look at a variety of technology alternatives. In addition, the alternatives must consider many other factors such as security, the agency's enterprise architecture, E-Government, and PPIs. In addition, a cost-benefits analysis is now expected, per OMB Circular A-94, and the Exhibit 300 uses a Net Present Value (NPV) format for weighing costs and benefits. For legacy systems, it is difficult to do more than a cosmetic response, but for new and planned systems, agencies must begin delivering much more justification in terms of the business case for the proposed solution.

In addition to costs and benefits, OMB expects a risk analysis-in terms of the alternative, per se, as well as acquisition and implementation risk. Security risks, also considered separately, must also be considered.

Acquisition

Several decades ago, a friend at EOP lamented, "Only the government is dumb enough to pay full price for computer systems." Well, that has changed, and OMB is looking for a business-like approach to acquisition. Competition is in. Fixed price is in. Performance contracting is A+.  But cost-plus contracts, sole source, and forever deals are viewed dimly.

In addition to pricing and procurement method, OMB has a growing interest in acquisition risk: Agencies must make sure that contractors can deliver. The contractor's past performance and ability to mitigate risk is extremely important. In the future, OMB may ask rude questions of agencies that maintain contracts with disappointing performers or non-performers.

The President's Management Agenda

The IT budget justification should explain how the expenditure fits in with the President's priorities. Sure some of this is pro forma, like justifying an agency's General Support Systems (networks), but investments for Major Applications (software solutions) should generally fit into the agenda.

Government-Wide Initiatives

OMB would like to end the "Islands of IT" within the Executive Branch and establish a truly enterprise-wide strategy. OMB is asking agencies to align their investments with a government-wide strategy. The greatest challenge for agencies is that many of the government-wide initiatives are evolving over time, and it is often hard to get a clear picture of how or where to align.

Security and Privacy

OMB has generally made information security and privacy a high priority. Over the past several years, OMB has expected agencies to make far-reaching changes-as reflected in guidance for Agency Computer Security Plans, Plans of Action & Milestones (POA&Ms), Self Assessment frameworks and reports, and the Government Information Security Reform Act (GISRA) reports. When an agency prepares an Exhibit 300 to ask for IT funding, they are accountable for compliance with information security requirements. Moreover, funding should be earmarked to fix security problems identified, and security safeguards must be budgeted as part of the funding request.

EnterpriseArchitecture

Agencies must establish a comprehensive blueprint for their IT infrastructure and information resources-an Enterprise Architecture (EA). While this requirement has been on the books since passage of the Clinger-Cohen Act, OMB now is getting tough about EA when agencies request funding.

An Enterprise Architecture is very comprehensive-encompassing business, data, applications, and technology layers. For information about the business layer, for example, go to OMB at http://www.whitehouse.gov/omb/pubpress/2002-50.pdf/

Government Paperwork Elimination

In the Government Paperwork Elimination Act (GPEA), Congress mandated that citizens would have an electronic alternative to paperwork by October 2003, whenever "practicable."  An Exhibit 300 request for funding requires IT projects to address whether it is part of the effort to provide online access to government (and whether the project has been identified in the agency's GPEA Plan).

Accountability and Results

OMB wants results, and the IT projects requesting funding must state the specific results expected. Hypothetical examples would be that the project:

• Saves the public 500,000 hours when filing forms to comply with government regulations
• Improves agency productivity by $3 million
• Increases uptime for a mission critical system from 93% to 99%

Agencies should beware of over-promising or offering a performance factor that is expensive to measure: OMB will likely ask for an accounting in the future.

Problems:  the Dream and the Reality

Just about everyone we know in the Federal Sector - federal personnel, contractors, and grantees - wants good government.  Over the long-term, this should and must happen.

Over the short-term, however, complying with the OMB requirements can be difficult medicine - a little like taking Cod Liver Oil when "it's good for you." Agencies are becoming swamped in paperwork, and the development time for new systems and applications is becoming lengthy (and in some cases expensive).

Suggestions

The basic problem is that the workflow for the federal IT management process must be realigned to encompass the new processes for planning, budgeting, SDLC management, security, and accountability. In addition, agencies need to (1) train personnel and (2) develop streamlined document templates that cut down on the IT paperwork time.  We'll be writing about our suggestions in a future issue of our newsletter.

LINK OF THE MONTH

The D.C. chapter of the Institute of Management Consultants is completing a major overhaul of its website. For a preview, go to http://www.imcdc.org. 

The Institute of Management Consultants is the non-profit, national professional organization and certifying body for management consultants. Members of IMC's Washington, DC area chapter (IMCDC) are committed to improving the effectiveness of organizations and their management teams. More than 100 IMC-DC members, including 40 Certified Management Consultants (CMC), provide the highest level of professional services in diverse areas of management and operations.

CONSULTING SERVICES

We provide enterprise-level management consulting services for federal agencies and the contractors who support them. Our areas of specialization are Capital Planning and Investment Control, Enterprise Architecture, strategic planning, performance evaluation, and acquisition support including work statements. Our consulting specialty includes experience in many related areas such as CIO program support, earned value management, risk management, the C&A process for security, and customer satisfaction surveys.

NEWSLETTER ARCHIVE