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Proposed funding for IT initiatives cut 9% in ’14

Apr. 28, 2013 - 01:09PM   |  
By NICOLE BLAKE JOHNSON   |   Comments
Federal CIO Steven VanRoekel
Federal CIO Steven VanRoekel (Gannett Government Media Corp)

The Obama administration is proposing a significant budget cut next year for information technology modernization and new initiatives, which include cloud computing and mobile technology programs.

Despite considerable rhetorical support from senior Obama administration officials for more IT modernization, funding for such projects would drop about 9 percent from $19.6 billion in fiscal 2012 to $17.9 billion in fiscal 2014, according to data on the IT Dashboard, a public website that tracks agencies’ IT projects. These projects are designated as development, modernization and enhancement investments, which include IT projects to meet legislative and regulatory requirements.

DME funding makes up less than a quarter of the government’s proposed $82 billion information technology budget for 2014. Most IT funds go to maintaining legacy IT operations. Funding to maintain IT operations at current performance levels would increase 4 percent to $58.6 billion in fiscal 2014, up from $56.1 billion in 2012. These spending figures do not include costs for DoD’s classified IT projects.

The Obama administration has pressed agencies to cut duplicative operations and maintenance costs for data centers and administrative systems and reinvest that money into data analytics, improving energy efficiency of IT facilities and equipment, cloud computing and other priority projects.

The White House’s proposed 2014 budget would increase overall IT spending by $2 billion to $82 billion in fiscal 2014.

“The reason you don’t see that line … going down is because we’ve actually convinced people and won the hearts and minds that when the going gets tough, it’s time to spend on technology,” federal Chief Information Officer Steven VanRoekel said during a federal budget presentation to industry this month. “Now is the time to spend on IT.”

VanRoekel said IT should be viewed as a strategic asset, as opposed to helpdesk support and funding to upgrade aging computers. Today, companies use technology to connect with customers, manage relationships and track inventory and sales. “We’re starting to see the change” in government, he said.

Fifteen agencies, including the Department of Homeland Security and the Veterans Affairs Department, would get $2 billion in additional funding in 2014 versus 2012. VA and DHS would also see cuts to their DME budgets while their budgets for operations and maintenance would increase, under the White House’s budget plan.

An OMB spokeswoman provided little explanation for the spending figures but said operations and maintenance “can include work, such as shifting to cloud computing, which may be labeled as O&M because it represents a new steady-state or infrastructure direction.”

The challenge for agencies such as VA is balancing operational costs with innovation.

More than half of VA’s IT budget would go toward operating and maintaining legacy IT systems and infrastructure. VA is requesting $2.2 billion for operations and maintenance, most of which will cover mandatory costs such as telecommunications, software licenses, hardware maintenance and cybersecurity solutions to protect patient data.

At the Health and Human Services Department, 86 percent of its IT budget last year paid for operations and maintenance. By 2014, that number would grow to 89 percent, under the president’s budget.

An October Government Accountability Office report found that agencies spend billions of dollars on legacy IT systems without understanding if those systems are meeting their needs.

GAO’s review of 75 major IT systems, totaling $4.6 billion in annual operations and maintenance costs, found that agencies had not properly examined the effectiveness of more than half of those legacy investments in terms of cost, schedule and performance goals, as required by the Office of Management and Budget.

“Until agencies more completely address their policy and performance shortcomings, there is increased risk that existing multibillion-dollar investments will continue to be funded although it is not fully known whether they meet their intended objectives,” the GAO report said.

With three-quarters of the federal IT budget tied up in maintaining existing IT systems, that could mean fewer dollars to reinvest in other initiatives — such as those pushed by OMB — that are expected to save agencies billions of dollars.

Speaking at the federal budget presentation this month, chief information officers from the Health and Human Services, Homeland Security and Agriculture departments expressed concern over their growing operations and maintenance budgets.

“When you talk about the reinvest, that’s where we have to get that money from,” Robert Foster, deputy CIO at HHS, said of the agency’s operations and maintenance funding.

Part of the challenge, he added, is breaking down costs and understanding what IT contracts are in place and what assets can be consolidated.

At HHS, roughly 10 percent, or $811 million, of its proposed 2014 IT budget is dedicated for modernization and new initiatives. According to the IT Dashboard, that will go in part toward data analytic tools to minimize data inconsistency and redundancy at the Center for Medicare and Medicaid Services. HHS also plans to invest in a new system to collect health care quality data.

Giovanni Leusch-Carnaroli, a former associate CIO at the Transportation Department, said today’s budget pressures will challenge federal CIOs.

“It’s easier to justify a status-quo investment than to justify a new one,” said Leusch-Carnaroli, a consultant at Grant Thornton. “CIOs should work more closely with the [chief financial officers] and the business unit leadership to articulate how modernization can actually save money in the long run.”

With budgets for new investments on the decline, agencies may feel forced to find needed money from their operations and maintenance accounts if they can, he said.

“It’s not completely black and white,” Leusch-Carnaroli said. Some agencies may use operations and maintenance dollars to fund new and existing projects, or they may use most of their development and modernization funding for mission critical systems.

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