White House Pauses $3 Billion In IT Spending

The Office of Management and Budget is conducting a detailed review of high-risk IT projects and placing a temporary pause on billions allocated annually to financial systems.
The White House on Monday instituted steps aimed at improving federal IT performance, including a temporary pause in more than $3 billion in annual spending on financial systems, detailed reviews of the "highest-risk" federal IT projects, and a policy review likely to result in new federal IT acquisition and management rules.

The three-pronged effort, laid out in two separate memos, one on the overall effort and another on financial systems modernization, comes as administration officials have continued the drumbeat of criticism of perceived gaps in technology and productivity between the private and public sector and wasteful spending on IT that often results in failed projects.

"Too often, we don't get a high-enough return on our IT investments," federal chief performance officer Jeff Zients said in a conference call with reporters. "There are pockets of strong performance, but in too many situations, our IT projects run over budget, behind schedule, or fail to deliver on promises. This is about dramatically increasing our success rate and getting a dramatically higher return on taxpayer dollars."

The most immediate and concrete of the reforms, laid out in a memo unto itself, is a directive to agencies to stop issuing new task orders and procurements for financial system modernizations with $20 million or more in planned spending government-wide. That means halting spending on about 30 projects that collectively add up to $3 billion in annual spending.

Agencies will have to re-scope these projects with shorter time frames, and review plans with the Office of Management and Budget. No new task orders or contracts may be awarded until OMB analysts determine that the agency plans can move forward efficiently and effectively.

"Financial system modernizations projects in the federal government have become too large and complex," Obama administration budget director Peter Orszag wrote in a blog post. "By setting the scope of projects too broadly rather than focusing on essential business needs, federal agencies are incurring substantial cost overruns and lengthy delays in planned deployments."

The expectation is that by controlling the scope of financial systems efforts and more closely monitoring them for success or failure, the government will see a "significant reduction" in the amount spent on big financial systems modernizations, according to the memo.

OMB reviews of financial system modernization projects will begin almost immediately. The first reviews, with the Departments of Homeland Security, Energy, and Veterans Affairs, will take place next Friday.

In addition to getting a better grip on spending and performance, one byproduct of the financial systems reforms might be increased competition, David Lucas, chief strategy officer for financial systems company GCE Federal, said in an interview. "You start chopping projects into smaller, simpler projects and no longer will it just be the same few usual suspects that are the only companies that bid on this stuff," he said.

Second, federal CIO Vivek Kundra will soon begin to carry out detailed reviews of "the highest-risk" federal IT projects. In the call with reporters, Kundra pointed out that $27 billion in federal IT spending is on projects that are "significantly" over budget or behind schedule.

Agencies undergoing these project reviews will have to present improvement plans to Kundra. If OMB finds serious problems that can't be fixed, it will take further action, possibly including adjustments to agency budgets. Kundra will issue guidance by late July on how he plans to carry out this review process.

Finally, federal chief performance officer and OMB deputy director for management Jeff Zients will be tasked with developing recommendations for improving federal IT acquisition and management practices, including strengthening or elimination of policies and rules that are currently in place.

The recommendations will come after a 120-day review of core structural policies and requirements around IT personnel, procurement, project management and deployments. As part of the review, OMB will engage the private sector, including software companies, IT contractors, academia, CIOs and more.

Among the changes coming -- though it's unclear in what form -- are "higher standards for project management practices and personnel, additional mechanisms for holding managers accountable for project results, and more rigorous review practices," according to the memo.