Why agencies don't know what they spend on IT

With the Federal IT COST Commission, CIOs are looking to private sector for help on cost management.

Shared financial management

The Federal IT Acquisition Reform Act puts agency CIOs in charge of their organizations' IT spending, but there's a catch: Most agencies have no clue how much IT is being purchased or at what cost.

Transportation Department CIO Richard McKinney has been especially candid about the challenge.

When asked during a December panel discussion how he would know when FITARA was working, McKinney replied: "I'll define success when I can look my leadership in the eye...and say I understand my costs." Although years of experience in both the public and private sectors have given him a "seat-of-the-pants sense" that FITARA-mandated changes will save money, he said, it's impossible to point to numbers that can prove it. "I want to have real data."

Thanks to an industry/government collaboration that's been underway since last spring, real data is now a real possibility.

McKinney, Interior Department CIO Sylvia Burns, Agriculture Department Deputy CIO Joyce Hunter and others have been working with the TBM Council -- a Bellevue, Wash.-based industry group devoted to better technology business management -- to hammer out a standard taxonomy for categorizing federal IT costs. The council has a taxonomy and toolkit tailored to Fortune 500 companies, and a small working group has been meeting monthly since June 2015 to adapt those resources for federal agency use.

The effort has been dubbed the Federal Commission on IT Cost, Opportunity, Strategy and Transparency -- or the Federal IT COST Commission.

McKinney said the TBM Council reached out to the Office of Management and Budget and offered to share its work.  While on the west coast in May, several federal IT executives sat in on a TBM Council board meeting  and were sold on the taxonomy's potential.

"The private-sector CIOs just kept saying to me, 'Richard, you've got to get to where you can understand your costs,'" McKinney said. "'Until you understand your costs, you just can't have good conversations with the business units. You're not going to be able to prove your point.'"

He added that all the industry CIOs had stories of how they'd identified cost discrepancies and opportunities for significant savings -- and were suddenly viewed by their CEOs as strategic business partners rather than "cost anchors."

Chartol, who is the TBM Council's director for the Federal IT COST Commission, told FCW that the group is focusing on four workstreams:

A central taxonomy. This will help agencies group "IT costs for apples-to-apples comparisons," Chartol said. There are towers and sub-towers for the categories of IT, as well as cost pools and sub-pools. "As you go up each layer, you're rebundling and reclassifying the costs so you can do accurate benchmarking," she said.

Investment workstreams. They will help agencies track IT assets over time, Chartol said, and determine "five years later, is it doing what you thought it was doing?" Those investments are then mapped back to the taxonomy.

Key performance indicators. The goal is to identify benchmarks that should be adopted governmentwide. It's a phased approach, Chartol said, and the group is working with a General Services Administration team that does benchmarking for metrics much broader than just IT. But she said finding good key performance indicators for governmentwide IT could be "the toughest nut to crack."

Reports and data requirements. Agencies are already saddled with countless reporting requirements, and multiple CIOs at FCW's Dec. 3 roundtable discussion on FITARA implementation complained that OMB, the Government Accountability Office and agency inspectors general all have their own metrics for agency IT. OMB has asked the working group to make recommendations for possible improvements on that front, Chartol said, but "one of our biggest hurdles is federal government participation -- helping to surface all those requirements."

It's not just CIOs who are participating, however. GSA has employees working on each of the four workstreams, Chartol said, and a small team from OMB is participating as well. Overall, she said, more than 30 federal employees from a wide range of agencies are participating -- including several from outside IT. "We have a couple finance folks engaged," she said, "and would love to have a couple more. It's important to understand cost-to-value." And the group has been actively recruiting to get acquisition experts engaged, "particularly around the taxonomy."

On the industry side, executives from Apptio, Cask, Cisco, Deloitte, Capgemini Government Solutions, First American, HP, Information Services Group, Tanium and a number of other IT firms are taking part.

McKinney told FCW that he recently previewed the group's work to date for the CIO Council and "got a lot of positive feedback" from the group. "Everyone is very anxious to see this succeed," he said.

The group will meet again this month and aims to have the government IT taxonomy ready by March. Then comes the challenge of gathering and cleaning the necessary data, McKinney and Chartol said.

It's a big project, McKinney said, but one worth tackling. "If we really want to have meaningful comparisons, we need to have ways of measuring our costs that are real," he added. "That's where I want to take FITARA."

Note: This article was updated on Jan. 5 to correct the TBM Council's location and add additional industry participants.

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