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9/16/2010
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White House Financial System Review Saves Millions

Three federal agencies will save an estimated $327 million by scrapping or cutting back planned financial system modernization efforts, White House says.

The White House on Wednesday announced changes to financial system modernization contracts at three major federal agencies, continuing a line of reform that begun in July, when the Office of Management and Budget announced a series of reviews of high-risk financial system projects.

As a result of the cutbacks and changes, the Environmental Protection Agency, Department of Housing and Urban Development and Small Business Administration will save a combined $327 million. That's on top of $300 million the Department of Veterans Affairs saved in July when it scrapped a troubled multi-year financial system upgrade.

"This effort is about ultimately improving the success rate of the financial system modernization projects and improving taxpayer return on IT investment," acting OMB director Jeff Zients said in a conference call with reporters. The financial systems modernization reform effort is part of a wider three-pronged approach to IT project management reform in government that also includes reviews of high-risk IT projects and forthcoming more fundamental changes to overall IT procurement and management practices.

In a separate blog post, Zients said he expects the financial systems project changes to inform wider IT reform efforts. "Agencies are taking the lessons learned from the financial systems reform effort and applying them across their portfolio of IT projects, and we are using the best practices to inform our work on fundamental reform of IT procurement and management practices across all agencies," he said.

VA, EPA, HUD and SBA represent just the first round of financial system reviews. By the time the reviews are complete, OMB controller Werfel said on the conference call, the White House hopes to have saved about $1 billion in annual spending.

"The issue we've seen over the years is that these projects have often taken on more than is necessary to meet our mission critical needs," Werfel said. "In the past, we’ve tried to change everything at once, standardize and streamline the entire operation, but that takes longer and drives up risk. Our focus right now is, can we refocus this challenge in segments and choose the most important things to do right now, and hold ourselves and the vendor accountable before moving on to the next segment."

For example, EPA determined that it could reduce risks to its financial management upgrade if the project was segmented and sequenced differently to focus on more mission critical problems up front and deferring other, more substantial upgrades, until later, and was thus able to decrease the budget of its financial system modernization by $180 million. "The budget reductions reflect the fact that they're no longer pursuing these more transformative technology upgrades because the determination was made that the technology they had today was effective," Werfel said.

Meanwhile, the SBA decided to cancel its financial system upgrade, saving it more than $100 million, simply because it wasn’t necessary. "As part of this review, we're not just asking if the project is being managed effectively, it's, what are your technology needs today, and if you look at the agency as a whole, are there other places where there are other emergent needs," Werfel said.

Finally, HUD decided to focus its effort more narrowly on a single core financial system rather than on doing three separate upgrades, saving as much as $44 million as a result. The agency plans to assess the possibility of doing the other two upgrades later, but will also split any future project into shorter segments with clearer deliverables, the agency said in a press release.

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