April 21, 2005
Good morning, Mr. Chairman and Members of the Committee. Thank you for inviting me to speak about OMBs Management Watch List and the $65 billion Reasons to Ensure the Federal Government is Effectively Managing Information Technology (IT) Investments. My remarks will focus on the Administrations strategy and progress to date in planning, managing, and measuring the results of the Federal governments IT investments.
You asked me to specifically address OMBs use of the tool we refer to as the management watch list and I will do so, but first I will discuss the overall context within which this list and our many other oversight tools are used.
Managing the Government-wide Information Technology Portfolio
As the title of this hearing suggests, this year, the President is proposing to spend roughly $65 billion for information technology (IT) and associated support services to support the multiple and wide-ranging missions of the Federal government. These IT investments help improve the ability of the governments programs and operations to more effectively deliver services, products, and information to state, local, and tribal governments, industry, non-profit organizations, and the American people.
A key component of OMBs mission is to assist the President in overseeing the preparation of the Federal budget, supervise budget administration in Executive branch agencies, and promote orderly agency management. Within this overall mission, we provide guidance for and oversee the planning, implementation, and management of investments pursuant to existing law and policy such as, the Clinger-Cohen Act of 1996. At its highest level, the Clinger-Cohen Act requires OMB to:
The Clinger-Cohen Act assigns agencies the responsibility for implementing OMB policies through effective capital planning and performance- and results-based management.
OMB executes its responsibilities using various methods such as reviewing agencies annual budget submissions, remaining engaged with agencies throughout the year, and issuing policies and guidance as well as the Presidents Management Agenda.
OMB Circular A-11 and the Budget Process
Each year, OMB updates and issues Circular A-11, Preparation, Submission, and Execution of the Budget to provide guidance to agencies on preparing their budget submission as well as instructions on budget execution. Agency submissions must reflect the policies of the President, including implementation of the Presidents Management Agenda initiatives.
Of the more than 40 sections within A-11, just two provide specific additional guidance about IT funding requests, i.e., section 53, Information Technology and EGovernment and section 300, Planning, Budgeting, Acquisition, and Management of Capital Assets. These sections provide guidance for agency planning, budgeting, acquisition, and management of Federal capital assets. They instruct agencies on:
Please note business cases are primarily planning documents and not a fulsome measurement of agency execution or management of a major IT project. This is an important distinction. OMB reviews and evaluates business cases as part of its overall evaluation of the entire agency budget submission. Euphemistically, we have referred to this business case evaluation process as scoring. Circular A-11 specifies the evaluation criteria for each of the following ten areas:
In addition to OMBs evaluations, for FY2006 IT funding requests, we requested agencies to first self-evaluate their business cases against the criteria for each of the areas listed above and provide the results of their review as part of their budget submission.
This was intended to enable an agency to demonstrate to its own management and then to OMB the agency has the proper processes and procedures in place to develop a strong business case for each investment involving the appropriate management review and approval. If, based upon OMBs evaluation, a business case does not successfully meet the criteria it is placed on the management watch list.
The Management Watch List in FY2005 and FY2006
As I have said, the information included in each business case helps OMB and the agencies ensure correctly planned IT investments. The Presidents Budget for FY2005 included approximately 1200 major IT projects, totaling about $60 billion. Of this number, OMB reported slightly over half621 projects, representing about $22 billion as being on a management watch list. In my March 3, 2004 testimony about the Federal IT portfolio, I described this list as consisting of mission-critical projects needing improved overall justification, performance measures, project management, or IT security. Agencies were required to correct identified project weaknesses and business case deficiencies. Those failing to do so were subject to additional oversight and requirements prior to spending. We did place conditions on agency spending in five instances last year.
This year we continue to use the management watch list as one of many tools to oversee agencies planning for IT investments and drive improved portfolio management. The FY2006 Presidents budget proposes approximately $65 billion for IT and associated support services. A total of 1,087 business cases were submitted this year and less than one third (342), valued at approximately $15 billion, did not meet the criteria for success.
In November 2004, the 342 investments were placed on this years management watch list. As they did last year, agencies have until the end of the fiscal year to correct all deficiencies or risk limits on their spending. Last week, we concluded our 2nd quarter PMA scorecard reviews and I am pleased to report this years list has been reduced to 248 projects.
It is important to note, OMB is but one of the intended audiences for the business case --the primary audiences are agency officials and their investment review boards. These managers must use the business cases to effectively manage their own IT portfolios and submit to OMB only those investment requests meeting criteria specified in OMB policies and supporting the priorities of the Administration.
Having described a business case as a planning document and the management watch list as one tool used by OMB to monitor agency planning, let me now describe how other tools are used to monitor actual project execution and performance. In doing so, one will see as OMB does, over emphasis on the management watch list is unproductive.
OMB Oversight of Project Performance and the Presidents Management Agenda
Although business cases include information designed to identify whether the agency appropriately considered project performance as part of the project planning, they are but a snapshot in time and are not designed to be nor are they used for measuring project performance (i.e., whether the project is within cost, schedule and performance goals). Managing and measuring project performance is of course first and foremost an agency responsibility. OMB then oversees the agencies activities under the Presidents Management Agenda (PMA) and its associated quarterly reporting process.
I have described the PMA to the Committee in the past and we use it to drive agency results while monitoring progress in a number of areas. The PMA was launched in August 2001 as a strategy for improving the management and performance of the Federal Government. It focuses on the areas where deficiencies were most apparent and where the Government could begin to deliver concrete, measurable results.
Since its creation, the PMA has expanded to include additional initiatives beyond the original five. The PMA continues to be a valuable help for departments and agencies to adopt new disciplines and promote an effective and enduring focus on results. The initial five key Government-wide areas are:
For each initiative, the PMA established clear, government-wide goals or Standards for Success. Agencies then developed and implemented detailed, aggressive action plans to achieve those goals. Most importantly, agencies are held publicly accountable for meeting their goals. A simple red, yellow, and green grading system was developed and each quarter, OMB rates agencies on their status in achieving the overall goals of each initiative and on their progress in implementing their action plans.
Specifically, the Expanding Electronic Government Scorecard includes the standards for success below. To get to green, agencies must:
ConclusionThank you for this opportunity to discuss the Administrations strategy and progress to date in planning, managing, and measuring the results of the governments IT investments. Through our existing processes, Congressional hearings, agency IG reports, and GAO findings challenges regarding effective IT planning and management are routinely raised. As we continue to work with agencies to improve the planning, execution, and management of IT projects, we will also continue to look for new opportunities to refine our oversight. The management watch list represents just one example of such an opportunity and helped to call attention to concerns with the planning for major IT projects. We appreciate your interest in OMBs management and oversight activities and will continue our efforts to drive improved performance and results throughout the Executive branch agencies, including OMB. Thank you. I will be happy to answer any questions at this time.