IT budget facing 10 percent cut, would shrink to 8-year low

WFED's Jason Miller on Federal Drive

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Agencies should target six types of technology projects to account for the 10 percent cut to their budget the White House is calling for in fiscal 2014. These reductions would bring total spending on technology to the lowest levels in eight years.

The Office of Management and Budget instructed agencies that IT infrastructure, commodity systems and business systems should make up a bulk of those reductions. The White House also wants agencies to consider cutting under-performing projects or lower-priority investments.

“Agencies should propose reductions in IT that represent 10 percent of their overall spending, and propose a reinvestment of at least 5 percent, and up to 10 percent, of these savings, in priority IT investments for OMB consideration,” OMB wrote in its 2014 guidance detailing how agencies should fill out IT business cases released Aug. 3, but posted just this week. “To do this, agencies are required to report the specific investments in which they propose cuts and the specific investments in which they propose to reinvest funds.”

The data OMB is requesting includes:

  • Specific IT investments and OMB accounts impacted
  • Related category of the cut or reinvestment and explanation
  • Priority level and a description of the return on investment for reinvestments only
  • Agencies should include a summary of all the information provided in Exhibit 53D, and the general approach the agency took to achieve its reductions and reinvestments
  • Reductions and reinvestments apply departmentwide and should not solely target investments from agency-level IT or administrative accounts

Agencies sent to OMB in May details of what a 10 percent IT cut would look like for 2014 as compared to 2013.

For instance, the Defense Department would cut $3.5 billion from its $32.7 billion IT budget. If the Pentagon reinvested 5 percent back, the cut would only be $1.7 billion. At the Homeland Security Department, the 10 percent cut would amount to $587 million, and the Veterans Affairs Department would reduce its IT budget by $316 million.

Overall, the government would see its IT budget drop $7.7 billion to $66.4 billion in 2014 — the lowest IT budget since 2006 when agencies received $63.5 billion in IT funding, according to OMB documents. Even if agencies reinvest 5 percent of those cuts, total IT spending would total $69 billion, the lowest since 2007 when it was $68 billion.

In addition, OMB wants to know where the departments would reinvest the money.

“Agencies should propose 10 percent cuts in IT and then propose a list of priority reinvestments to OMB up to the 10 percent,” the guidance stated. “If the agency does not propose to reinvest at least 5 percent of these savings into IT, the agency is required to provide a justification explaining as to why it is unable to propose these reinvestments. Agencies should only propose reinvestments which demonstrate a favorable return on investment (quantitative or qualitative) to the agency within 18 months from the enactment of FY 2014 appropriations (excluding CRs).”

OMB said agencies should focus reinvestments on:

  • Improvements to citizen services or administrative efficiencies
  • Adoption of shared services
  • Consolidation of commodity IT, including optimizing data centers
  • Improvements to the agency’s cybersecurity
  • Improvements to the energy efficiency of IT facilities and equipment
  • Innovative investments, such as cloud computing, modular development, reduction of improper payments and digital government
  • Data analytics or data management

In addition to the budget cutting exercise, OMB wants agencies to explain how they will invest in cloud computing. The document wants spending for the last year, the current year and the next year by deployment model — public, private community or hybrid cloud — and by service model — software-, platform-, infrastructure-as-a-service.

Agencies also must provide spending plans for 14 areas around cybersecurity, including security tools, such as anti-virus software, Web filtering software and data leakage protection applications, and the costs for network penetration testing.

The OMB IT guidance details how much agencies’ IT budgets would shrink.


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