Exclusive

An inside look at how the IT budget stew gets made

The Office of Management and Budget’s desire for agencies to break out their spending on IT in more depth for the fiscal 2019 budget process hit a bit of a speed bump.

Chief information officers from large and small agencies alike expressed support for the program, but also doubt that they could get it done over the next five months.

At a CIO Council meeting last week, several CIOs said they had a “productive” and “honest” discussion with OMB about what’s possible, but in the end strongly encouraged OMB to lower their expectations.

“The level of granularity that OMB was asking for was just too much right now,” said one CIO, who requested anonymity in order to talk about pre-decisional discussions. “With all the things going into the reorganization and reviewing of mission areas, the capital planning and investment control (CPIC) changes were coming at the worst possible time.”

As I wrote about in last week’s notebook, the changes to CPIC have been in the works for the better part of two years and could be the key to IT modernization efforts. But several CIOs said their agency needs more time to prepare for the level of detail OMB is asking for in such a short amount of time.

OMB was planning on asking agencies to break down commodity IT spending in more specific terms than ever before, with separate business cases for seven different commodity spending areas:

  • IT management
  • IT security and compliance
  • Data centers
  • Compute capabilities
  • Storage capabilities
  • Networks
  • User support

The approach follows the Technology Business Management (TBM) approach to help make clear the value of IT investments.

But as OMB detailed initial expectations for 2019, several agencies’ CIOs expressed serious reservations about the timing of the effort, and the administration listened.

Editor Jason Miller discusses this story on Federal Drive with Tom Temin

“We always get the guidance out early, and when we are trying to pivot like we are now, there is a lot of discussion that is ongoing,” said an administration official who requested anonymity. “We had a very open discussion at the CIO Council. I think we arrived at a reasonable middle ground that allows people who weren’t quite ready to have more time. We could work with them in a FITARA-like fashion, where they put together plans so we hit that two-year timeframe we are aiming for. How far you are in this first cycle depends on where you are starting from. Each agency is starting from a different place, and the concern was about the ability to hit the mark.”

The official added the CIO Council is holding another conference call on May 8 to check the temperature and make sure the approach OMB is setting forward has addressed all immediate concerns. The official said the new approach seems to be well received.

In an email to agency CIOs obtained by Federal News Radio, acting federal CIO Margie Graves detailed the latest thinking about what the CPIC approach will look like for 2019 budget formulation.

Graves wrote in the email that agencies will be expected to use TBM starting incrementally in the 2019 budget and continue to expand the taxonomy’s use into 2020 and beyond.

“It is the intent of OMB to follow an incremental process in rolling out these changes. There will not be a big-bang approach in which the lights are turned off on the legacy process and turned on the next day with a new TBM-based process,” OMB stated in the draft guidance sent to agencies, which Federal News Radio also obtained. “Instead, beginning with last year’s CPIC Budget Guidance, elements are being included in small but meaningful amounts. Consistent with the implementation of [the] Federal IT Acquisition Reform Act (M-15-14), there is a recognition by OMB that each agency has a different level of maturity and capability to absorb these changes and produce the right data. This is why OMB is emphasizing the long-term strategy and approach in implementing changes to the CPIC process. The intent is that by sharing the longer-term vision, agencies can understand the proposed changes, internalize them and establish a program to advance IT budgeting into the 21st century.”

OMB is asking agencies to begin reporting these optional fields using TBM in 2019.

“OMB understands that agencies are at varying degrees of ability to report cost and budget data in this way. Gathering and organizing this data is meant to provide value to CIOs and their management teams towards enhancing their ability to conduct oversight rather than create burdensome, compliance-centric requirements,” Graves wrote in the email.

Graves wrote that OMB expects to issue the “95 percent solution” for CPIC by May 12. The instructions, however, are not final until OMB releases the Circular A-11 guidance later this year.

The administration official added agencies should prepare for two timelines to meet the new CPIC requirements. “One is for the higher level categories that you normally see in how Gartner describes IT spending. The second piece is a more granular break out of elements into labor, hardware, software and things like that.”

No matter when the CPIC changes are fully implemented, the new approach will not be as simple as changing the data collected.

Lisa Schlosser, the former deputy federal CIO who retired in November, said the biggest challenge agencies face is with data discovery and rationalization.

“Data today is in disparate systems, and there is no standard taxonomy for comparing data and applying business intelligence tools to analyze the data,” Schlosser said by email to Federal News Radio. “Additionally, the CIO-CFO have not linked their investment/budget processes, so it is difficult to get consistent transparency and accountability for IT spend, particularly across large enterprises. The other challenge is that this process of true investment and budgeting accountability is not automated.”

Schlosser said initiatives such as the DATA Act and financial system modernization efforts should help better establish the link between CFOs and CIOs.

This CIO-CFO relationship and the lack of automation to collect data also is why OMB is introducing a new concept for 2019 called “cost pools.”

In the draft guidance, OMB says cost pools “relate to the budget sub-object classes and represent a tool by which the budget identified by the CIO can be reconciled with the budget submitted by the CFO.”

“The inclusion of cost pools is critical to rationalizing the IT budgeting process across CIO and CFO organizations,” the OMB guidance stated. “CFO organizations deal in budget object classes and sub-object classes. CIO organizations typically deal with investments and contracts. Historically these two groups have lacked the Rosetta Stone that reconciles the two methods for budgeting and accounting for the work they are performing.”

OMB says the inclusion of cost pools is optional for 2019, as not every agency is prepared to collect and analyze this data.

“Agencies that lack the maturity, capabilities or resources to deliver the Cost Pool data should consider what changes are necessary to achieve it, and develop a plan that bridges the gap. OMB will review these plans prior to the issuance of next year’s budget guidance and will decide whether the cost pools remain optional then,” OMB stated. “While the cost pools are an optional capability, agencies electing to submit that data should prioritize the data concerning external labor, internal labor, external services and internal services as these fields help to tell a more complete picture of agency operations, especially as they relate to [the reorganization implementation guidance].”

One CIO said agencies may end up starting small with a few small-scale efforts to act as a proof of concept and then expand as they get more experience.

Another CIO added that larger, more decentralized agencies would have a harder time meeting the mandate, especially within current staffing and funding levels.

The CIO said the decision by OMB to listen to the agency CIO’s concerns and decide to incrementally bring require TBM was a welcome change.

CIOs talked to for this article were in agreement about the value of TBM, but all said they needed more time to prepare for the data collection requirements.

Return to the Reporter’s Notebook

Related Stories

Comments