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What to Expect from Technology Modernization Funding Round Two

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Federal technology leaders are on edge as Congress weighs whether to reauthorize $150 million in government technology enhancements in fiscal 2019.

The Technology Modernization Fund, or TMF, is a governmentwide revolving capital fund established in December 2017 to help agencies invest in IT projects they couldn’t otherwise afford. The TMF represents a key pillar in federal chief information officer Suzette Kent’s IT modernization strategy. In June, Kent announced the TMF’s first three awards, a total of $45 million issued to the departments of Agriculture, Energy, and Housing and Urban Development.

A month later, the House approved $150 million in 2019 funding as part of the Interior, Environment, Financial Services, and General Government Appropriations Act (H.R. 6147). The Senate subsequently rejected that funding in its version of the bill. This leaves lawmakers with only two weeks to decide on the TMF’s fate in conference committee before leaving Washington for the midterm recess.

Members of the TMF Board, tasked with overseeing the fund, have publicly denied that budget uncertainty will affect their strategy.

“We have not had a single discussion at the board meeting about, ‘Hey, what about the next tranche of money?’” Alan Thomas, commissioner of the Federal Acquisition Service and TMF board member, told attendees at a Sept. 13 conference.

Nevertheless, the TMF board, led by Kent and a half-dozen agency CIOs and CTOs, now finds itself in a bit of a dilemma: It could choose to invest the remaining funds now in the hopes of receiving more in a fiscal 2019 appropriations bill, or it could withhold some or all of that funding in acknowledgement that it might be needed to fund a third or even fourth round of proposals without additional money from Congress.

SPEND NOW OR SPEND LATER?

As early as July 30, there were reports that the board was reviewing a second round of as many as 20 proposals competing for the remaining $55 million in 2018 funding.

Although the board isn’t legally obligated to disburse its remaining funding before the end of the fiscal year, it might be feeling pressure to do so, according to Mike Hettinger, a lobbyist and former staffer with the House Oversight and Government Reform Committee.

“I can understand why the Appropriations Committee might be hesitant to give TMF another $150 million when more than half of the original funding has yet to be spent,” he said.

On the other hand, reserving some funding for a possible third round could lead to higher-quality projects. According to Small Business Administration CIO and TMF board member Maria Roat, agencies tended to submit better second-round proposals with improved business cases after learning what the board is looking for. A third round could offer technology leaders another opportunity to hone their proposals while allowing new group of entrants to compete.

GREATER RISK, GREATER REWARD

If and when the TMF board does announce the second round of awards, there’s good reason to believe they won’t much resemble the previous ones. In round two, expect more awards with smaller dollar values and more transformational aspirations.

The first round arguably suffered from a catch-22 inherent in the TMF: The board was directed to fund ambitious IT modernization projects that could serve as “testbeds” for future investments across multiple agencies. The challenge is that these types of projects typically entail higher risks of failure and require close coordination between agencies — otherwise they would have been funded through the traditional appropriations process. But at the same time, board members repeatedly and publicly stressed the requirement that agencies must repay their awards within five years, thereby discouraging the submission of high-risk, high-reward proposals.

The result is that the board funded three deserving, though hardly transformational, IT projects. Given the level of scrutiny from Congress, a conservative first round was perhaps a prudent approach.

In the months since the first awards were announced, multiple TMF board members have stated that they wanted to see more “flagship” or “lighthouse” projects that could be emulated by other agencies. With one round of funding under its belt, the board wants to see submissions with solid business plans, but also ones that take greater risks in pursuit of innovation.

But despite the excitement about round-two awards, the inability to secure 2019 TMF funding would undoubtedly be seen as a setback, says Hettinger.

“If the TMF doesn’t get funded it’s going to be a massive disappointment. Everyone wants to see it succeed.”

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