OMB puts brakes on financial systems modernization

Effort is intended to increase success

The Obama administration announced today that it will overhaul the federal financial management system and prohibit agencies from placing task orders or contracts for modernization efforts.

“Financial system modernizations projects in the federal government have become too large and complex,” Office of Management and Budget Director Peter Orszag blogged this morning. “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 federal government has roughly 30 financial systems projects that will be affected by this policy, according to Orszag. The total cost expended on these projects is anticipated to be $20 billion over the life of the projects, with an addition $3 billion spent annually to maintain them. Jeffrey Zients, deputy director for management and federal chief performance officer, said these changes—which may include ending some projects—will decrease that annual spending.

The underlying issue is getting the government to spend its money wisely. Zients said the overall effort should set the course for higher returns for the roughly $80 billion the government spends on information technology.

Related stories

Orszag: Closing IT gap leads to responsible government

Transcript of OMB director's remarks to the Center for American Progress

Senate aims to tighten reins on government IT spending

“This effort is about dramatically increasing our success rate and achieving a much higher return on our taxpayer dollars,” Orszag said. Overall, the administration wants to reduce costs, especially regarding over-spending the planned budget, while getting more from each dollar spent, he added.

Financial systems that are not undergoing modernization won’t be affected by the new directive; OMB instead wants to review any modernization projects to financial systems. As a result, officials decided to halt any projects pending OMB’s approval. Those projects are an area of persistent problems for the government, according to a memo Orszag issued today.

Along with the financial management systems reviews, Vivek Kundra, federal chief information officer, will review high-risk IT projects throughout the agencies. Officials will have to develop plans for improving the projects or risk potential changes to the fiscal 2012 budget proposal, according to a memo Orszag issued today. Kundra will issue guidance on the review process in late July.

Administration officials will attempt to root out the core problems plaguing IT projects. Kundra said the administration will strengthen existing policies and get rid of outdated or cumbersome rules. Officials also want to apply best practices to IT projects and consider other options for improving them. For instance, officials will raise the bar for project managers and employees, as well as institute additional ways to hold managers accountable for results with more rigorous reviews of their projects, according to officials and to Orszag’s memo.

One of the main issues facing government IT is the productivity gap between the private sector and the government, according to Zients, who came to the administration from the private sector. The private sector has improved its productivity by applying new technologies to their operations, but the government hasn’t gotten those gains.

“A root-cause reason for that is IT,” he said. IT has been at the center of those productivity gains but too often the government doesn’t get high enough returns on its IT investments, he said.

“There are too many situations where our IT budgets run over-budget, behind schedule, and, oftentimes, fail to deliver their promised results,” Zients said.


About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Reader Comments

Mon, Sep 13, 2010

Good money as been wasted! FOR YEARS! Do you remember this failed effort for 2004-2007... Here is one story not forgotten..... DHS originally awarded a blanket purchase agreement worth up to $229 million to BearingPoint Inc. in September 2004 to acquire and implement the eMerge2 system that would combine all its disparate financial systems into one departmentwide financial management system. By the time it stopped the project, DHS had spent $18.3 million, including $9.4 million for eMerge2's initial phase and $8.9 million under a task order that originally was worth $20 million.

On March 29, a joint hearing of subcommittees from the House Government Reform and Homeland Security Committees examined possible reasons that eMerge2 failed and discussed the steps DHS would take to consolidate its financial systems.

DHS has about $48.4 million available for the program this fiscal year. DHS officials have asked for another $18 million in the fiscal 2007 budget to use for their substitute plan, if it receives internal approval.

Wed, Jul 7, 2010 ICareAboutTheVA Austin, TX

I've seen first hand how the government has been wasting tax payers money on IT projects. However, the wastingful spending isn't intentional. Here are several alternative to resolving the wasteful spending, 1). Spend the money to hire seasonal professional who are really IT not a friend who can learn it. 2).Relying on the seasonal professional and use their guidance after all, this is why you are paying them. 3)Standardize Financial Systems processes, of course this would mean to standardize all Government Financial Accounting Business Processes. If the same system is used by several agencies the government can request a significant discount.4) Continuous training for all IT staff, this should be mandatory. This should not include self pace courses but real instructional training, the payoff is endless. 5) Agile development is a must with continous contractor monitoring by somewhat who knows what the contractor knows and how it should be done. These are just a few of my solution but can identify another 20 - 40.

Fri, Jul 2, 2010 Ken Powell Maryland

As a community, public and private sectors need to work together more closely, and they need to set their sights on more realistic modernization plans. Until this approach changes, I fear that we will continue to see failed modernization projects that make government headlines, which isn’t beneficial to either party involved. Historically, when faced with a legacy system upgrade, many agencies have tackled these projects with an all-or-nothing approach: rewriting legacy systems, ripping them out and replacing them entirely, or (due to the risks involved) continuing to maintain existing systems – despite their cost or technical inefficiencies. All of these options are costly, and some are down-right risky. The fact remains that many of government’s “legacy systems” are still functional, and only require a tune-up of a few critical applications. Rather than erasing decades of business logic and starting from scratch, many agencies could greatly benefit from analyzing their existing environments and re-using (where appropriate) proven IT resources through incremental modernization. OMB’s recent announcement recognizes that this approach is possible, and even desirable from the cost-savings perspective.

As a provider of incremental, “as-needed” modernization solutions for government, we’ve helped numerous agencies modernize their most critical applications, without the risks, time-demands or costs that come with large-scale modernization projects. With the proper upfront analysis and testing, agencies can literally pick and choose applications that they want to modernize, allowing them to work with newer platforms and technologies, including cloud computing.

Ken Powell, President, Micro Focus North America

Wed, Jun 30, 2010 Leroy Washington DC

Excellent Move! I would like to help. I have over 20 years of IT experience and some of the current Government WIDE IT practices are appalling. The following three suggestions will go a very long way towards solving the problem; 1) Getting the right people on the bus is key, 2) Stop the cozy contracting and mindless spending, 3) Properly employ the science of the available technology.

Tue, Jun 29, 2010 Stan Doore Silver Spring MD

Commercial industry has bar codes and readers for virtually all products. The government should use these to help streamine product acquisition.

Show All Comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

What is your e-mail address?

My e-mail address is:

Do you have a password?

Forgot your password? Click here


contracts DB

Washington Technology Daily

Sign up for our newsletter.

Terms and Privacy Policy consent

I agree to this site's Privacy Policy.