Taking Charge

IT spending emphasizes homeland security, e-gov, management reform<@VM>Boost is big, not super size<@VM>Ongoing changes<@VM>Changing approach<@VM>Federal IT spending 2001-2003<@VM>H-1B money would be diverted<@VM>Industry friendly tax credit included in budget<@VM>For more information

The 2003 budget proposed by President George W. Bush includes $52 billion for IT spending ? $7 billion more then he asked for in 2002 ? much of which will go to homeland security and defense projects.

E-government remains a top priority in the Bush administration's new budget, despite the emphasis given to homeland security and information assurance. The proposed budget also provides clear evidence the administration will use information technology to further management reforms while pushing an overall technology strategy for government agencies.

Overall IT spending will hit $52 billion under Bush's budget proposal for fiscal 2003, $7 billion more than the $45 billion he initially requested for 2002. Most of the additional money goes to projects meant to boost homeland security and defense. Not surprisingly, the Department of Defense is the biggest winner in the Bush budget, with a $2.6 billion increase in IT funds.

Under the budget proposal, $722 million will be spent on homeland security projects designed to increase information sharing among federal agencies and with state and local governments. Information security spending will get a $1.5 billion boost, growing to $4.2 billion from $2.7 billion.

The budget indicates that information assurance and homeland security, while top priorities, didn't eclipse the move toward e-government, said Renato DiPentima, president of consulting and systems integration at SRA International Inc. in Fairfax, Va.

The Bush plan includes $45 million for an e-government fund. Bush had asked for $20 million for the fund in the 2002 budget, but received $5 million. Now that the administration has an e-gov team on board and has identified 24 high-priority projects that use IT to improve government efficiency and citizen services, it's more likely Congress will approve the full request, IT executives said.

The administration has made a good business case for its "realistic and well-placed" IT spending and has indicated strong support for e-government, said Rep. Tom Davis, R-Va.

"As long as agencies can effectively demonstrate to Congress that they are working to facilitate the administration's management goals and can demonstrate that sufficient planning has gone into their IT requests, the reception on the Hill will be warm," said Davis, chairman of the House Government Reform subcommittee on technology and procurement policy.

But if agencies don't make the grade, their funds will be cut, he said.The healthy boost in technology spending was not unexpected.

"I think everyone was expecting an increase" after Sept. 11, particularly for improvements to military command and control systems and government information sharing, said Steve Carrier, vice president of business development and strategic planning for Northrop Grumman Information Technology in Herndon, Va.

"I think you're going to see a tremendous effort in the FBI, [Immigration and Naturalization Service] and Customs ? all of those are our current customers," he said. "My gut tells me that the greater Northrop Grumman and Northrop Grumman IT are going to be in pretty good shape across the board."

Steve Perkins, senior vice president of Oracle Corp.'s public-sector practice, said he sees many business opportunities. For example, the Redwood Shores, Calif., company is integrating Chicago's criminal justice systems to track 7 million records, and now there is interest in linking that information with the FBI, he said.

Big industry winners will be defense contractors, information security solutions vendors and companies that support cross-agency information sharing, including telecommunications, networking, security and systems integration firms, said Payton Smith, an analyst with market research firm Input Inc. of Chantilly, Va.

But while the 15 percent increase looks like a dramatic boost, appearances can be deceiving, Smith said.

"It's big, but I don't think it's as big as everyone seems to think," Smith said. Emergency appropriations approved by Congress in response to the Sept. 11 terrorist attacks boosted federal IT spending to $48 billion for fiscal 2002, so the increase over 2002 is really an 8 percent jump, he said.

That increase is in line with Input's most recent analysis, conducted before Sept. 11, which predicted a 9.1 percent compound annual growth rate for 2001 to 2006, and $50.4 billion in spending for 2003, Smith said.

"We've been expecting federal spending to increase the way it has over the last 10 years," he said. "Eight percent growth over the last 10 years is fairly significant. It speaks to the strength of the IT market within the federal government."While the budget indicates new priorities, it also highlights changes already under way in how the federal government buys IT products and services.

It focuses spending on projects that simplify and unify business processes, use IT to improve performance, ensure the security of information systems, cut redundant or unproductive IT investments and use electronic business practices to improve administrative functions, especially in procurement and human resources.

To accomplish these goals, the administration is emphasizing the Clinger-Cohen Act of 1996, which mandates consideration of information security in buying technology and requires that IT investments result in performance improvements tied to agency missions.

The budget highlights the government's move away from buying technology for technology's sake and toward buying IT solutions tailored to the government's needs, according to Mark Forman, associate director for information technology and e-government in the Office of Management and Budget.

Rather than describing the business problem and the IT products and services to fix it, agencies will describe their problems and desired performance improvements and look to industry for solutions, Forman said. He said $30 billion of the $52 billion would go toward 2,900 projects that solve business problems and help agencies fulfill their missions.

Speaking to industry executives at a Feb. 5 budget briefing, Forman called on the private sector to help agencies flesh out their business cases for major IT investments and establish new strategic alliances to create start-to-finish IT solutions.

"I'm going to ask you to focus on developing a business case not that saves us money, but gets the job done," Forman said. "We want to know how much an agency is going to improve its mission performance as a result of that IT investment. Is it integrated with their enterprise architecture? Do they have security built in? You all have best practices in how to do business cases, how to do program management plans, and I'd ask you to be forthright in bringing them [to the government]."

IT executives said they're happy to help agencies with their plans, even if doing so doesn't result in a contract.

"It's part of our business acumen," said Bernie DiTullio, a public-sector program manager for Hewlett-Packard Co. in Fairfax, Va. The Palo Alto, Calif., company "has gone though large 'grand designs' and has learned a better approach in a lot of cases," and brings those practices to government, he said.

"As long as agencies can effectively demonstrate to Congress that they are working to facilitate the administration's management goals and can demonstrate that sufficient planning has gone into their IT requests, the reception on the Hill will be warm." | Rep. Tom Davis, R-Va.

While the government has been moving toward solutions purchasing for several years, the concept hasn't always trickled down from management to procurement, IT executives said, but they are hopeful that the top-down push will get results.

"So many agencies have a predisposition to the types of [software] suites they want to use. I think it will change if it is directed from the top down," said Roger Mody, president and chief executive officer of Signal Corp. in Fairfax, Va.

As agency IT buying changes, industry will have to change how it sells to government, said Ray Bjorklund, an analyst at market research firm Federal Sources Inc. in McLean, Va.

"It's one thing to be a large defense contractor who has a large intelligence systems solution and sells that to Justice. You can do that, but if you don't cast that system in a larger-scale solution, you may be missing the mark," he said.

The administration's emphasis on eliminating redundant IT systems also will keep government IT contractors on their toes. Forman said he expects vendors will see increased competition as a result. Industry executives agreed.

"Eliminating redundant systems is going to put the fear of God into a lot of contractors, I would think. What [Forman] is saying is that the one system that is going to survive is the most efficient and effective," said Paul Brubaker, president of e-government solutions for Commerce One Inc., Pleasanton, Calif. As Forman suggested, Commerce One may find itself pursuing new alliances, Brubaker said.

"You are going to see a lot of companies begin to talk to other folks," he said. "We may find ourselves talking to Oracle or Microsoft on the database side, Verisign or Entrust on the security side and EDS or CSC on the infrastructure side, where we really haven't worked with those companies."

Staff Writer Gail Repsher Emery can be reached at gemery@postnewsweektech.com.

Federal IT spending 2001-2003

These 10 federal agencies will spend more than 80 percent of the $52 billion in IT funding the Bush administration has requested for fiscal 2003.

Figures are in millions

AgencyTotal FY01Total FY02Total FY03
Department of the Army$5,150.9$4,814.1$5,147.9
Department of the Air Force$5,835.4$5,640.4$6,345.0
Defense agencies$7,661.3$8,353.9$9,226.5
Department of Justice$1,872.8$2,093.3$2,050.6
Department of Transportation$2,448.1$2,513.8$2,660.9
Department of Health and Human Services$3,920.6$4,237.0$4,481.4
National Aeronautics and Space Administration$2,327.0$2,558.0$2,511.0
Department of the Navy$4,110.0$4,588.0$5,311.7
Department of Treasury$2,876.0$3,098.2$3,241.2
Department of Agriculture$1,318.5$1,491.5$1,692.0
Total IT investments for all federal agencies$45,741.6$48,216.1$52,090.3

Source: Report on Information Technology Spending for the Federal Government, Exhibit 53, Budget of the United States Government, Fiscal 2003Under the Bush budget proposal, the $1,000 fees that employers pay for H-1B visas would be diverted from a technology-training fund. The money would be used instead to process permanent alien visas. H-1B visas bring up to 195,000 foreign IT workers and others with in-demand skills to the United States each year.

The budget justification says the fund is used to train workers for entry-level tech jobs, for which there is no shortage of U.S. workers. The proposal will raise some eyebrows, said Harris Miller, president of Information Technology Association of America in Arlington, Va.

"There's certainly a flaw in the H-1B training program, but I'm a little afraid of throwing out the baby with the bath water," he said. "The business community agreed to pay those high fees because they wanted to have people trained in IT."

"I would maybe divert some of the money on a one-time basis to help with backlogs, but I would work to fix the program a bit. Only the most pessimistic person on the economy would argue we're not going to need more people with IT skills going forward," Miller said. Hope of an economic stimulus bill becoming law died in the Senate earlier this month, but a stimulus provision championed by industry lives on in President Bush's budget proposal. The provision would allow for accelerated depreciation of IT assets, which proponents say would free up money they could spend on economy-boosting activities, such as computer security, physical security and work-force development. Several budget documents offer insight into the administration's approach to information technology. All are available on the Office of Management and Budget's Web site at www.omb.gov/budget.

"Analytical Perspectives" chapter 22, "Program Performance Benefits from Major Information Technology Investments," provides agency summaries of performance in five key areas: capital planning, enterprise architecture, business plans, e-government and process improvement.

Exhibit 53 is a line-by-line accounting of government IT projects included in the budget request, including spending figures for 2001 and 2002 and proposed spending for 2003.

"Performance Information for Major IT Investments" links each agency's major IT projects to its strategic goals and outlines the performance goals and measurements for each project.

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