FCW's DotGov Thursday column helps Webmasters understand the federal government's investment lingo
A key concern of Webmasters is how to go obtain funding, which is vital to agencies' ability to constantly improve and expand the offerings on federal World Wide Web sites.
To compete in the budget process, Web managers should develop an understanding of the federal government's investment lingo. This column provides an overall definition of capital planning and lists several references for researching more on the capital planning process. Without getting into technical financial language, I'll attempt to summarize the concept of investing as it is defined in the federal government.
Capital planning is the federal government equivalent of capital budgeting in the private sector. Capital planning defines the concepts and processes for making choices among competing investments for limited resources (dollars). This activity is called investment decision-making.
Most people have the perception that profit in the private sector is real. Not so. Money, profit and stock value are all conceptual matters just as the federal equivalents of budgets, benefits and political goodwill are conceptual matters.
Money is a concept. People seek money because of what we perceive it can buy. Similarly, as agency workers, we seek budgets because of how they can help us achieve our missions.
Profit is also a concept. It is not money, but it is denominated in dollars. Many profitable businesses go bankrupt every year. How can that happen? For instance, assume all the cash in a business has been used to build products and that the products have been sold on credit. If the customers haven't paid yet, the business would not have cash to pay salaries. If there is no cash to pay salaries, even though the company is "profitable," the business has to declare bankruptcy.
Profit is only a trend indicator as to whether the business will earn enough "extra" cash in the future so that the owners can take some cash out of the business bank accounts and place the excess into their personal bank accounts.
Benefits and profit are similar in nature. They help define whether a desirable future can be achieved. Both require applying conceptual principles to defining whether the business or project will achieve a future that is profitable or, in the federal context, will deliver certain benefits.
Benefits are often intangible, but so is profit. Stock value is also a concept. The public's perceived value of an Internet stock seems to depart often from the "technical" value of a stock. A stock is worth what people think it is worth based on decision-making that often has both emotional and technical components. That sounds like citizen goodwill to me. A project's perception of value by the public or Congress is similar to the perceived value of a stock: It is what people think it is worth. Perceived public goodwill has a mix of emotional and technical components.
What does this mean? Capital planning in the federal sector and capital budgeting in the private sector are both attempts to project an uncertain future.
Capital planning (like capital budgeting) involves making educated guesses at costs and future benefits, denominating the costs and future benefits in dollars, and then comparing all projects simultaneously to define the best mix of projects that provides the most "perceived value."
With this background in mind, you are ready to wade through the process of capital planning. Unfortunately, financial issues are always a dense subject. I suggest the following documents in the following order:
Kellett is founder of the Federal Web Business Council, co-chairman of the Federal WebMasters Forum and is director of GSA's Emerging IT Policies Division.
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