OMB freeze chills industry

Review of IT spending targets homeland security agencies <@VM>Under a microscope

An aviation survival technician jumps from an HH-60 Jayhawk helicopter from Air Station Elizabeth City during a rescue demonstration for Coast Guard Missions Day at Reserve Training Center Yorktown. OMB's action puts on hold about $1.1 billion in planned IT spending, including a major new project by the Coast Guard.

PA2 Jacquelyn Zettles/USCG photo

Industry and government officials are responding with mixed feelings to the July 19 freeze on selected information technology infrastructure and modernization projects imposed by Office of Management and Budget Director Mitch Daniels Jr.

The plan to eliminate redundant IT projects and consolidate systems among agencies slated for inclusion in the proposed Department of Homeland Security has many industry officials worried that projects they are pursuing will be targeted for cutbacks or cancellation.

OMB's action does not halt any ongoing work, but puts on hold about $1.1 billion in planned IT spending in fiscal 2002 and 2003, pending a high-level review, including major new projects by the Coast Guard and Transportation Security Administration.

Daniels estimated that consolidation could save $100 million to $200 million over the next two years.

"I was disappointed," said Duane Andrews, corporate executive vice president with Science Applications International Corp., San Diego, regarding OMB's action. "I've been around Washington one way or another for 30 years. The game that's always played is, we can always find a better way to integrate it or find a better solution."

Andrews said the initial list of projects put on hold are unlikely to generate a lot of savings.

"We're dealing with OMB here. The first reaction of OMB is always, 'Everybody is wasting money.' [But] everybody isn't buying a personnel system or an e-mail system," he said. "These aren't administrative systems they're fixing, they're business systems" that address agencies' core missions. "You don't have to have the broad information system design as long as you're using open standards," he said.

The Government Electronics & Information Technology Association, an industry group, had a lukewarm reaction to the freeze.

"We understand the need for avoiding redundancy, avoiding duplication, [but] it's hard to see that you can take a thoroughgoing look [at these projects] in just a couple of weeks," said Dan Heinemeier, president of the association, which represents systems integrators, hardware and software manufacturers and contractors.

One of the agencies that could be most affected by OMB's directive is the Transportation Security Administration, Heinemeier said. One of the review group's first tasks will be to evaluate all task orders under TSA's Information Technology Managed Services Contract, which has a value of up to $1 billion and was to be awarded July 25. TSA is just eight months old and still trying to get up and running, he said.

Companies vying for the agencies' business are adversely affected, too. "Any time you've got any sort of systemic delay, it impacts companies' ability to keep people in place. It affects bid and proposal costs. ... The $64,000 question is, how quickly can this review occur?" he said.

Olga Grkavac of the Information Technology Association of America said the industry was not surprised by the action ? OMB officials had indicated something along these lines would be announced ? but companies want the government to review the projects quickly.

"Everyone is concerned that it's expedient to know which projects are affected and which ones aren't," Grkavac said. "It's more the uncertainty which is the issue ... which programs will go forward and which ones will be rewritten. Not everyone is going to be happy, but at least everyone will know where things are."

The action is seen as positive by two key lawmakers. Leslie Phillips, spokeswoman for the Senate Governmental Affairs Committee, chaired by Sen. Joseph Lieberman, D-Conn., said the memo is in line with his e-gov bill, S. 803, recently passed by the Senate. "Efforts to eliminate redundancy is a goal Sen. Lieberman supports very strongly," she said.

On the House side, Rep. Tom Davis, R-Va., chairman of the House Government Reform subcommittee on technology and procurement policy, also supported the decision.

"This is the right move at the right time from OMB," Davis said. "When it comes to protecting homeland security, we need to make sure we're not simply spending more money; we need to spend money on what works."

Davis said he plans to hold an oversight hearing in early September to examine IT planning and consolidation within the new department.

OMB imposed the moratorium on projects costing more than $500,000 being planned by agencies targeted for inclusion in the proposed Department of Homeland Security, including the Coast Guard, Immigration and Naturalization Service, Customs Service and Federal Emergency Management Agency.

The seven agencies slated to be moved into the new department must review their IT infrastructures by Aug. 15 and deliver their assessments to a new Homeland Security IT Investment Review Group in OMB, according to Daniel's memo. The group will conduct an expedited review to eliminate redundant IT investments and consolidate systems where possible for the new department.

Mark Forman, OMB's associate director for information technology and e-government, said the hold on IT infrastructure projects applies to procurements about to be issued and new task orders for ongoing projects.

"Things that are under way are [what] we want to leverage," he said, stressing that the OMB action does not mean all work would cease completely.

Ray Bjorklund, vice president of consulting services with market research firm Federal Sources Inc., McLean, Va., said the action is consistent with his company's forecast of slight downward pressure on federal IT spending.

The OMB controls make sense "because all of the component parts of the potential homeland security department have been doing their separate programs with slightly divergent architectures," Bjorklund said. "While those divergent architectures might have been compliant with their own agency architectures, if you're going to make a department from scratch, you can do it right."

Some industry observers dismissed OMB's action as infighting between the agencies' bureaucracies and the homeland security office. One executive characterized it as "high-level White House politics," saying the creation of a Homeland Security Department has made a power void that OMB is rushing to fill.

Given that Congress has not yet passed legislation creating the new department ? let alone agreed on which agencies would be included ? Bjorklund characterized OMB's action as pre-emptive.

"OMB is putting a stake in the ground and saying, 'Look guys, we've got to do this intelligently,' " he said. "It's also a way for the administration to communicate that they mean business, [that] they intend to get this new Homeland Security Department to work in a cost-effective way.

Congress, through the Congressional Budget Office, has already said ... this is not going to be a no-cost change."

The review group will be led by OMB and the Office of Homeland Security, and will include the chief information officers from TSA, Coast Guard, INS, Customs, FEMA and the departments of Treasury, State and Justice.

The seven agencies targeted on the list collectively would have spent $365 million on IT infrastructure by the end of fiscal 2002, and the amount would grow to about $783 million in fiscal 2003, according to OMB.OMB will review IT infrastructure spending by the seven agencies that will make up the proposed Department of Homeland Security. These agencies will spend about $365 million in fiscal 2002 and $783 million in 2003.

Projects affected by the OMB review include:

Coast Guard National Distress and Response System Modernization: Worth between $475 million and $580 million; Lockheed Martin, General Dynamics and SAIC are competing for the contract. Planned spending includes $42 million in fiscal 2002 and $91.4 million in fiscal 2003. The Coast Guard is modernizing the National Distress System to provide distress alerting, coordination and command and control in coastal areas and navigable waterways where commercial or recreational traffic exists, including two-way voice and data communications between shore units, vessels, aircraft and vehicles.

Customs Service Commercial Recovery Facility:A company, unnamed for national security reasons, is providing two separate facilities known jointly as a Commercial Recovery Facility that meets Customs Service Level III Security requirements. The contract includes maintenance support, network and telecommunication services, planning and analysis and IT security. The five-year contract was awarded in June 2001. Planned spending includes $18.3 million in 2002 and $17.2 million in 2003.

Immigration and Naturalization Service ATLAS Program:ATLAS, an IT infrastructure modernization program, is in the planning stage. Potentially worth several hundred million dollars, it will consist of seven projects: common computing environment, connectivity, electronic access and e-government, enterprise information, information assurance, infrastructure engineering and operations and transformation planning. Planned spending includes $157.5 million in 2003.

Transportation Security Administration Nationwide Information Technology Infrastructure: This new agency's infrastructure, to include data centers, seat management and telecommunications, is expected to cost as much as $1 billion. An award under a governmentwide acquisition contract had been expected July 25. Planned spending includes $201 million in 2003.

Sources: OMB, Federal Sources, Input

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