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STATEMENT OF
THE HONORABLE KAREN EVANS
ADMINISTRATOR FOR ELECTRONIC GOVERNMENT AND
INFORMATION TECHNOLOGY
OFFICE OF MANAGEMENT AND BUDGET
BEFORE THE
COMMITTEE ON GOVERNMENT REFORM
U.S. HOUSE OF REPRESENTATIVES
April
21, 2005
Good morning, Mr. Chairman and Members of the Committee. Thank you for inviting
me to speak about “OMB’s 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 Administration’s
strategy and progress to date in planning, managing, and measuring the results
of the Federal government’s IT investments.
You asked me to specifically address OMB’s 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
government’s 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 OMB’s 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:
- Establish
processes for executive agencies to analyze, track, and evaluate the
risks and results of major capital investments for information systems,
and
- Report
on the net program performance benefits achieved by executive agencies
as a result of major capital investments in information systems.
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 President’s
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 President’s 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:
- budget
justification and reporting requirements for major IT investments in
areas such as spending and funding plans;
- performance
goals and measures;
- project
management plans, goals, and progress; and
- IT security
plans and progress.
To submit
an investment request for a major IT project, agencies must use the “exhibit
300,” also called the “Capital Asset Plan and Business Case”
(business case).
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:
1. Supports
the President's Management Agenda Items
2. Performance Goals
3. Program Management
4. Alternatives Analysis
5. Risk Management
6. Acquisition Strategy
7. Performance Based Management System
8. Life Cycle Costs Formulation
9. Enterprise Architecture
10. Security and Privacy
In addition to OMB’s 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 OMB’s 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 President’s
Budget for FY2005 included approximately 1200 major IT projects, totaling
about $60 billion. Of this number, OMB reported slightly over half—621
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 President’s 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 year’s 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 year’s 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 President’s 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 President’s
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:
- Strategic
Management of Human Capital - having processes in place to ensure the
right person is in the right job, at the right time, and is not only
performing, but performing well;
- Competitive
Sourcing - regularly examining commercial activities performed by the
government to determine whether it is more efficient to obtain such
services from Federal employees or from the private sector;
- Improved
Financial Performance - accurately accounting for the taxpayers' money
and giving managers timely and accurate program cost information to
inform management decisions and control costs;
- Expanded
Electronic Government - ensuring the Federal Government's $65 billion
annual investment in IT significantly improves the government's ability
to serve citizens, and the IT systems are secure, and delivered on time
and on budget; and
- Budget
and Performance Integration - ensuring performance is routinely considered
in funding and management decisions, and programs achieve expected results
and work toward continual improvement.
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:
- Have
an effective Enterprise Architecture;
- Be able
to demonstrate they are managing their major IT projects using an Earned
Value Management System so they deliver results as expected, ontime
and within budget, i.e., achieving, on average, 90% of cost, schedule
and performance goals;
- Secure
at least 90% of operational systems and sustaining progress correcting
security weaknesses through a Department-wide remediation process verified
by the agency Inspector General;
- Avoid
redundant or agency-unique IT projects by participating in government-wide
E-Gov initiatives and Lines of Business; and
- Successfully
justify major IT investments with complete business cases adequately
addressing: security, measures of success linked to the Enterprise Architecture,
program management, risk management, and cost, schedule, and performance
goals.
Each quarter
agencies receive a scorecard about their progress and status in achieving
the Government-wide goals for these government-wide initiatives. The goal
of the E-Government initiative is to use our nearly $65 billion expenditure
in information technology to its fullest to provide services and information
centered around citizen groups.
We deliberately
included a criterion for “acceptable business cases” for major
systems in the PMA Scorecard, to underscore while investing in information
technology has a technical component, it is at its core an essential management
issue and have greatly increased executive- level attention and accountability
with respect to IT spending.
But again,
the acceptability of businesses cases is just one of a number of critical
components agencies must satisfy to get to green (or yellow) for the E-Government
scorecard. If the business case criteria are not successfully met, agencies
cannot move forward, regardless of their performance against other E-Government
criteria. Agency scores are posted quarterly at http://results.gov/agenda/scorecard.html.
Follow-up
is dependent on the particular issues identified and tends to focus on
strategic issues or problems existing at a government-wide or agency-wide
programmatic level, not tactical ones residing with individual investments.
For example, from reviewing agency investment requests and through our
oversight over the course of the year, we identified widespread weaknesses
in agencies meeting cost, schedule and performance goals. Therefore, we
specifically emphasized earned value management as a key feature in the
quarterly PMA scorecard reviews.
Conclusion
Thank you
for this opportunity to discuss the Administration’s strategy and
progress to date in planning, managing, and measuring the results of the
government’s 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 OMB’s 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.
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