IT projects take a hit

War, other priorities draw funds away from technology

Office of Personnel Management officials were stunned when funding for the agency's Retirement Systems Modernization project went missing from the House Appropriations Bill sent to the Senate last month.

OPM Director Linda Springer quickly wrote to the House Appropriations Committee after the subcommittee on Transportation, Treasury and Housing and Urban Development, the Judiciary and the District of Columbia passed its fiscal 2007 bill of the same name, H.R. 5576, without the requested $26.7 million requested for the agency's RSM project.

Springer was vexed that Congress would consider omitting funding for a system that could revolutionize how her agency furnishes retirement and benefits support for government workers.

The cut is badly timed; OPM recently awarded two contracts for the 10-year, more than $300 million project to Accenture Ltd. and Hewitt Associates LLC of Lincolnshire, Ill.

"This commitment to technology, as well as to federal employees, will be halted without adequate funding in fiscal 2007 ? a critical measure of support for the modernization project, which is scheduled to be completed in fiscal 2009," Springer wrote.

But her assertion did not sway the full committee or the House.

Nowhere to hide

Most Hill observers expect the Senate to restore the funding when it takes up the bill this summer. But Congress' willingness to consider gutting a program considered essential for government employees has some industry and government officials wondering if lawmakers are targeting civilian IT projects for cuts because of the ongoing effort to fund the war on terror.

Other agencies, including the Army and the Agriculture and Homeland Security departments, have seen funding scaled back for IT programs perceived as nonessential, industry observers said.

"From inside some of the agencies, I am hearing that the directions they are receiving during the budget development process [are], 'No new projects, no additional funds,' " said Alan Webber, senior analyst at Forrester Research Inc. of Cambridge, Mass. "Some projects are either being scaled back significantly or being put on hold all together."

Tightened budgets during a war are nothing new. Many government initiatives lose steam as war efforts consume more funds.

The war on terror is no different, some industry officials said, and IT projects, in particular, are feeling the pinch.

"To a certain extent, this is typical," said Stan Collender, managing director for Qorvis Communications LLC of Washington and a federal budget expert. When appropriators are looking for something to cut, "IT is always in play," he said.

Lawmakers have a hard time touting success stories about IT projects when they head home to their congressional districts, Collender said.

"The problem with IT is that constituents can't see it" he said. "You only notice it when it's a problem."

A longtime federal IT market consultant who requested anonymity said that one of his clients had an IT contract with the Army to provide commercially available software, and that contract was cut this year.

"They ran out of money," the consultant said. The client was told that "the war effort is draining out the funds."

Blurry future

Whether lawmakers are specifically looking to cut IT programs remains unclear.
House Appropriations Committee spokesman John Scofield did not comment directly on the question, nor did he say why the RSM project was not funded. He said that budget cuts for the war are being felt everywhere, not by any single program.

As war spending goes up, spending elsewhere goes down, other officials said. And IT programs, like anything else, are fair game.

"There's going to have to be a loser somewhere," said James Krouse, director of market analysis at market research firm Input Inc. of Reston, Va. "It looks as though if it's not a core and immediate need for a mission-specific task, it is probably at risk of being held up."

Add to that the money being spent on Hurricane Katrina recovery efforts, and lawmakers are looking for any programs to cut, government and industry observers said.

The budget cuts "have been going on everywhere," a senior Capitol Hill official said. "This is not new."

Even before the 2007 budget made its way to Congress earlier this year, the White House capped spending not only because of the war, but also because of the hurricane recovery, the Hill official said.

DHS' U.S. Visitor and Immigrant Status Indicator Technology program is one casualty, receiving less funding than the president had requested, the source said. The White House "did this by saying they need to move money to fight the deficit, but Iraq is the reason for the deficit," the source said. "Plus, there was an internal redirection of funds inside DHS for Katrina. Some of those systems ? were very much affected."

Some IT programs, such as the IRS' Business Systems Modernization, received a boost in funding, said David Powner, director of IT management issues at the Government Accountability Office. This demonstrates that IT projects are not being singled out, he said.

"IT gets the same type of scrutiny" as anything else in the budget, he said.
Further, an administration source, speaking specifically on OPM, said the RSM project wasn't cut because of the war, but because the agency failed to tell appropriators why there was a request for $26.7 million in the budget that wasn't there last year.

"Appropriators look at last year's budget and this year's to see what's different," said the source, who spoke on condition of anonymity. "If there's no explanation, it'll get cut."

This is certainly true in a tight budget year, but "even in a fat budget year, if something mysteriously appears on the budget," it gets cut, the source said.

Far from being singled out for cuts, IT projects should make out quite well in this year's appropriations process, because they are intertwined with nearly all government operations, said Larry Allen, executive vice president of industry association Coalition for Government Procurement in Washington.

"IT generally is in more demand and is more essential than furniture," Allen said, whose organization represents contractors that do business with the government. "You're better off being an IT company in this environment rather than a furniture [supplier]."

Whatever the program or department, no one denies that with war spending and the deficit growing, budgets will be even tighter.

The squeeze is being felt across government, said Andrew Malay, vice president of SAP Public Services Inc. of Washington.

"We have been told by virtually every agency that we work with that funding is extremely tight, and there will be very limited opportunities to find available funding as we near the end of the fiscal year," he said.

Rob Thormeyer is a staff writer with Government Computer News. He can be reached at rthormeyer@postnewsweektech.com. GCN senior writer Wilson P. Dizard III contributed to this story. He can be reached at wdizard@postnewsweektech.com.

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