White House Suspends $3 Billion in IT Spending for Financial Systems Upgrades

The White House Office of Management and Budget said it will review and streamline 30 projects to modernize the financial systems of some government agencies--amounting to about $3 billion in annual spending--in measures designed to improve the federal government’s IT performance and productivity.

The OMB’s plan, which also calls for detailed reviews of risky federal IT projects, culminates in a set of recommendations in the next four months to improve the government’s IT procurement and management practices.

“While a productivity boom has transformed private sector performance over the past two decades, the federal government has almost entirely missed this transformation and now lags far behind on efficiency and service quality,” said Peter Orszag, OMB director in a blog.

“We are wasting billions of dollars a year, and more importantly are missing out on the huge productively improvements other sectors have benefited from,” Orszag said.

“Quite simply, we can’t significantly improve the efficiency and effectiveness of the federal government without fixing IT,” he said.

Among the OMB’s reforms is a directive to agencies to halt new task orders or procurements for projects to modernize financial systems, spanning about 30 entrants totaling $20 billion or about $3 billion annually.

Orszag said that the projects will not go forward without a review and subsequent approval to streamline plans and cut costs.

“Financial system modernizations projects in the federal government have become too large and complex,” Orszag said. “By setting the scope of projects too broadly rather than focusing on essential business needs, federal agencies are incurring substantial cost overruns and lengthy delays in planned deployments.”

As an example, Orszag pointed to $300 million spent on two financial systems projects by the Department of Veterans Affairs (VA), the first of which failed and the second is non-operational.

Risky projects draw oversight

The OMB’s plan also calls for Vivek Kundra, federal chief information officer, to carry out detailed reviews of the riskiest IT projects across the federal government.

Orszag said that agencies with projects behind schedule or over budget will have to offer a plan for improvement and if problems persist may lose some funding next year.

Under the OMB’s plan, Jeff Zients, deputy director for management, in the next four months will build a set of recommendations to improve the federal government’s IT procurement and management practices.

“These recommendations will address the root-causes of problems plaguing federal IT projects and focus on proven best practices from inside and outside the federal government,” Orszag said.

“They will include higher standards for project management practices and personnel, additional mechanisms for holding managers accountable for project results, and more rigorous review processes,” he said.