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With 2018 budget request, OMB wants to prove IT modernization approach

President Donald Trump’s fiscal 2018 budget request will put a finer point on how the IT modernization effort is going to work over the next year.

The President will ask Congress for $228 million for the central fund, known as the IT Modernization Fund (ITMF), to act as sort of a first-year pilot or proof of concept for how agencies would submit business cases and the ITMF board would decide which projects to award funding.

“It is a smaller amount than the previous administration was talking about, but we think it’s a good opportunity to pilot this innovative way of funding the modernization of the federal government’s IT portfolio,” said an senior OMB official, who requested anonymity in order to talk about the proposal. “It will allow us to identify high priority projects from across the government and see if this model works well. We understand that $228 million is obviously small in proportion to the $90 billion we spend each year on technology, but given the central board will have a bird’s eye view on agency needs, it will fund the highest priorities. Assuming a five-year repayment, we believe the fund will help address about $800 million in modernization projects over 10 years. So while it’s a proof of concept, it should have large impact on the government.”

Trump is expected to send his 2018 budget request to Congress on May 22.

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The official said the board will look for specific types of projects.

“Things like the Next-Gen program at the FAA are not a fit for this fund, or other really large scale projects that cost in the billions and that are mission specific,” the official said. “Given it’s a finite amount of money, we are looking for things that aren’t super mission specific and agency specific. We are looking for things that could be common platforms, that multiple agencies have similar needs and things that are not putting all the eggs in one basket when it comes to the fund.”

The official said programs that cost in the $3 million-to-$5 million range such as migrating email to the cloud or help desk consolidation would provide enough samples for the fund to impact agency missions, and for the administration to understand how the business case process works.

The Trump administration’s proposal adheres closely to Rep. Will Hurd’s (R-Texas) Modernizing Government Technology (MGT) Act.

While the MGT Act authorizes $250 million and the administration is requesting $228 million, the approach to deciding on where the funds go is similar. It also resembles the draft policy the Office of Management and Budget issued in October.

OMB and the General Services Administration will oversee the fund.

The OMB director will appoint an interagency cross-functional board of experts to review the agency business cases. The board will look for projects that address high risk areas in the government and have a high return on investment, as well as those that focus on common platforms or cloud services.

A second requirement in the proposal is agencies will have to repay the central fund in five years.

“This creates a strong incentive for agencies to come up with modernization proposals that have a high return on investment and that are flushed out, which links the incentive for CIOs and CFOs alike,” the official said. “Because agencies are competing with each other, this is a way to create a strong incentive for agencies to put forward the most refined and projects with highest ROI and benefits for the government.”

The third requirement is for each of the funded projects to have an expert from GSA help out. The official said GSA will provide its expertise to the funded programs in several different areas including digital services and acquisition.

“The degree of expertise and oversight over funded projects should be greater than what you do normally,” the official said. “And to prevent sunk costs, all projects receive funding incrementally. We are baking incremental development into the fund. Each project will receive a small amount up front, build out what works and come back to the board to demonstrate what works to get the next increment of money.”

The official said by taking a proof-of-concept approach and asking for a relatively small amount of money, they hope to convince the Senate appropriators that the ITMF is a worthwhile and low risk.

Lawmakers on the Senate Appropriations Committee are concerned about the creation of working capital funds in each agency and worried that the central fund could turn into a “slush” fund of sorts.

“We would certainly not disagree we are spending a lot of money on IT and agencies have a mixed track record of success there, but this $228 million isn’t an increase in the top line to create a new fund,” the official said. “It is a way to bring a degree of management and oversight over a portion of the IT spend, and hopefully achieve better results than agencies have in the past. We think it’s worth exploring.”

The official added the hope is the success of the proof of concept will convince Congress to invest a higher amount of money in future years.

The official said OMB has been working with Hurd and others on Capitol Hill to improve the MGT Act and make sure it’s aligned with the administration’s policies. The official said OMB is pleased the bill has moved through the House.

“This is something that a lot of people have worked on for some time, and we feel very positive about it,” the official said. “This takes a major step forward from what largely was operation and maintenance type of funding to a more appropriate way to start thinking about modernization.”