How MGT changes the game for federal CIOs

Shutterstock images (honglouwawa & 0beron): Bitcoin image overlay replaced with a dollar sign on a hardware circuit. 

The Modernizing Government Technology Act passed the Senate on Sept 18 as part of the annual defense bill, and is expected to become law before the end of the year, once the language is hammered out. 

What does this mean for Federal CIOs and chief acquisitions officers?

For the first time in modern history, IT leaders in the federal government will be able to make strategic technology investments with the same level of flexibility as their counterparts in the private sector. CIOs at agencies and government departments will have the opportunity to build robust IT solutions, with secure and scalable architecture, and take advantage of consumption-based IT.

The MGT Act is a catalyst to fuel modernization initiatives in the government, and to end the "use it or lose it" approach to spending that stifle game-changing innovation in Federal IT investments. It can save the American taxpayers $20 billion a year and produce better outcomes.

The MGT Act establishes a central IT modernization fund, managed by an expert panel led by GSA Administrator Emily Murphy (once she is confirmed). The Senate-passed version provides funding of $500 million over two years, and will be reconciled with the House version. The White House had requested $236 million in modernization funds during the first year. Agencies may apply to borrow from the fund, which would be repaid over a five-year period using expected savings from modernization initiatives.

An even bigger opportunity is the creation of IT Working Capital Funds within each of the individual 24 CFO Act Agencies. This transformation has the potential to unleash hundreds of millions of dollars in potential savings from money that is currently being drained on "use it or lose it" spending that goes to legacy technologies and related maintenance.

Agencies can self-fund their IT Working Capital Funds by identifying savings from existing programs, and parking those savings in the fund for up to three years, before they allocate these funds to modernization, the cloud, cyber security and digital transformation initiatives.

This flexibility is a game-changer, but only if agency CIOs, CAOs, chief financial officers and program executives change their own game plan by proactively aligning agency resources and developing the needed skills to identify and capture available savings. 

In other words, technology modernization requires an equally modernized approach to acquisitions in the federal government.

What should IT deal makers be doing now?

  1. CFOS and CIOs need to collaborate to take advantage of long-term procurement
  2. They must work to achieve alignment across their business/functional groups, IT organizations and CIO/CFO teams
  3. They should immediately start taking inventory of their current assets, and prioritize IT modernization initiatives

 Agency executives need to inspect their IT portfolios for value and savings opportunities, as there are many, many ways to reduce costs and optimize investments with digital transformation and cloud solutions. Leaders need to position themselves proactively with their key IT suppliers, and curtail short-term, iterative IT investments and thinking that no longer make sense. Federal IT executives need to learn from private sector what innovations and best practices can be used to optimize their spending.

Carpe diem: government deal makers must seize the day. They need a roadmap to take full advantage of these working capital funds on behalf of their agencies and the American taxpayer. If Federal leaders start preparing today, they will have the runway to harness these funds as soon as 2018, capture measurable value with this new way of technology spending, and transform their respective agencies when the MGT bill becomes law.

The impact of this bill cannot be overstated: it presents an unprecedented opportunity for U.S. Government agencies "to improve operational efficiency and decrease operational cost," according to Rep. Will Hurd (R-Texas), Chair of the House Information Technology Subcommittee, who introduced the MGT Act.

CIOs and IT deal-makers are advised to take the lead and examine their technology investments immediately to capture savings and re-deploy funds at innovation. For the first time, they have the means to do it. They can transform the way they do business; there is no place for "business as usual" on the Hill.

About the Author

Jeremy Wilcox is managing director of the Federal Public Sector Practice at ClearEdge Partners.


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