Forman: A fiscal perfect storm

As agencies struggle through the lack-of-budget days, there are ways to deal with IT spending

We’ve all seen this movie before: agency budgets get hijacked as funds are diverted to address the national priority du jour. Uncertainty envelops agencies and their information technology projects. Worries grow about meeting payroll obligations and keeping the lights on, so IT needs are placed on the back-burner. Chief information officers and procurement offices put off the hard work of project planning and carefully defining contract requirements because of funding uncertainty. After all, who knows whether their IT project will get any funding that year?

Then, suddenly, the budget clouds clear. Agencies learn they do have money to spend, and the rush is on to spend every dollar by the end of the fiscal year. Procurement requests are flowing like water from a fire hose instead of a household faucet.

Sound familiar? It should, because it’s happening right now.

Agencies this fiscal year were hit by a perfect storm of budgetary uncertainty. The war on terrorism caused funds to be diverted to national security. In addition, Congress’ stopgap continuing resolution had the effect of cutting agency budgets.

This year’s unique set of circumstances, if not properly addressed, could have implications for years to come. What is the potential fallout? At best, this year’s hurried process means some needed IT projects simply won’t get through the procurement process in time, potentially weakening an agency’s ability to do its job.

At worst, that movie we’ve all seen before becomes a horror blockbuster. Projects get approved, and IT contracts are awarded that lack rigor and have poorly-defined metrics, inadequately funded requirements, no thorough cost-benefit analysis and limited flexibility to adapt to changing technology. Correcting the problems that ensue could take years of contract modifications and renegotiations.

However, there are some ways to avoid this nightmare in the future. First, Congress should enable current appropriations authorization to extend into the next fiscal year under a simple, well thought-out set of criteria. That way, important IT projects aren’t rushed and agencies avoid awarding contracts that aren’t given proper thought and review. With the extra time, agencies could prioritize projects to make sure worthwhile ones are adequately funded.

Second, CIOs and procurement officials should get together after the budget dust settles — in November and December — and do some serious risk assessment. Before Congress comes back in January wielding its oversight hammer, they need to review the IT contracts that were awarded — and those that weren’t — and ask some hard questions: Are performance metrics in place? Did we underestimate the cost of the project? Were the requirements clearly defined? How could the agency be hurt because of contracts that couldn’t get funded in time?

Then CIOs need to put a plan in place to address critical risks. In short, they must handle any potential problems before Congress passes judgment.

It’s probably not fair to blame all IT project failures on the end-of-fiscal-year crush. We can, however, trace most of the problems to poorly defined requirements, funding instability or ineffective risk management. Regardless of how your agency fares at the end of the fiscal year, assess your risks and have a plan.

Forman is a partner at KPMG and former Office of Management and Budget administrator for e-government.

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