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CIO Kundra on IT Management to CIO Council (9-20-10)

CIO Kundra on IT Management to CIO Council (9-20-10)

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Federal CIO Vivek Kundra provides historical overview to Obama Administration's steps to reform IT project management
Federal CIO Vivek Kundra provides historical overview to Obama Administration's steps to reform IT project management

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09/22/2010

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EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF MANAGEMENT AND BUDGET WASHINGTON, D.C.

20503
Remarks by Vivek Kundra US Chief Information Officer Federal CIO Council, September 20, 2010 Today, I would like to discuss the actions we have taken to reduce wasteful spending and our ongoing efforts to reform Federal IT. We are in the midst of the Information Revolution. In the same way the Agricultural and Industrial Revolutions fundamentally and permanently transformed society, so too is the Information Revolution reshaping the world today. Exponential advances in processor performance, as predicted by Moore s Law, have brought unprecedented computing power to the average person. The sharp decline of storage costs from $10 per gigabyte in 2000 to $0.06 per gigabyte in 20101 has removed traditional barriers to accessing and sharing information across the globe. Twenty-first century technologies are flattening communications and markets, contributing to a period of unprecedented innovation and making us more productive, connected citizens. In our daily lives we can track the status of a shipment, make dinner reservations, and share pictures of our children with family and friends around the world all online, anytime and anywhere. Yet too often we hear stories about how the Federal government, for one reason or another, lacks technological capabilities that are commonplace in the private sector and our everyday lives. This IT gap significantly impacts our ability to improve the efficiency of government and deliver better services to the American people.

1 As reported in Exactly How Much Are the Times A-Changin ? Newsweek Magazine, July 29, 2010,

http://www.newsweek.com/feature/2010/by-the-numbers-how-the-digital-revolution-changed-our-world.html

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A BRIEF HISTORY
For too long we have witnessed runaway projects that waste billions of dollars and are years behind schedule. By the time these projects launch if they launch at all they are obsolete. In 1968, the Air Force Logistics Command estimated that it would take 10 years and $821 million to develop, implement and operate a new computer-based information and data processing system. In 1975, after $250 million had been spent, Congress ordered the termination of the project due to lack of progress.2 In the early 1970s, the Federal Power Commission began developing a computerized system to provide access to current energy data to improve Federal and State energy regulation. In 1979, after nearly a decade of work, the Department of Energy terminated the project. GAO estimated this failed project cost taxpayers $26.5 million.3 In 1974, the Farmers Home Administration began developing a new computer-based information management system. By 1980, the project was five years behind schedule, and GAO estimated that the project would exceed its original budget by $25 million.4 The scope and scale of problems only grew worse in the 1980s and 1990s. In 1988, the National Institutes of Health spent $800 million on mainframe computers that its researchers refused to use. NIH s failure to consult its users prior to the purchase contributed to millions of dollars of waste. Ultimately, some of the mainframes were sold while the rest were relegated to performing administrative tasks, at a fraction of their capacity.5 6 In 1996, the U.S. Agency for International Development deployed its customized New

2 U.S. Government Accountability Office, The Air Force Continued to Develop the Advanced Logistics System, a Program it was Directed to Cancel , April 1978, http://archive.gao.gov/f0902d/105805.pdf. 3 U.S. Government Accountability Office, Millions Wasted Trying To Develop Major Energy Information System , May 1981, http://archive.gao.gov/f0102/115237.pdf. 4 U.S. Government Accountability Office, Farmers Home Administration s ADP Development Project Current Status and Unresolved Problems, February 1980, http://archive.gao.gov/f0202/111697.pdf. 5 Investigative Report of Senator William S. Cohen, Computer Chaos: Billions Wasted Buying Federal Computer Systems , October, 1994. 6 U.S. Government Accountability Office, Poor Management Resulted in Unmet Scientists Needs and Wasted Millions , November 1991, http://archive.gao.gov/d31t10/145582.pdf.

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Management System to serve as its primary system worldwide for performing core accounting and management functions. However, due to numerous software defects and design issues, after just a year the Agency had to suspend overseas operations of the system and limit the financial transaction processing to its Washington, D.C. offices. In 1998, the agency decided to replace the New Management System with commercial off-the-shelf software, despite an investment of over $100 million in the New Management System.7 More recently, the Defense Integrated Military Human Resources System (DIMHRS) was canceled in February 2010 after 10 years of development and approximately $850 million spent8 despite originally being planned for deployment in 2007, at a cost of $427 million.9 As Secretary of Defense Robert Gates put it " years of effort, poor performance, and difficulties" with DIMHRS have amounted to "an unpronounceable acronym."10 Sometimes, the same project has been canceled twice. In July 2010, the Department of Veterans Affairs (VA) canceled its financial management system modernization project, the Financial and Logistics Integrated Technology Enterprise (FLITE) initiative, which was VA s second attempt to replace its core financial management solution. VA had canceled FLITE s predecessor ( Core FLS ) in 2004 after spending approximately $249 million since 1998.11 Numerous laws, regulations, and policies have been established to improve the way the Federal Government manages its information technology investments. Unfortunately, we continue to see major IT projects fail due to a lack of execution.

7 Government At The Brink, Volume I: Urgent Federal Government Management Problems Facing the Bush Administration ,

June 2001, http://hsgac.senate.gov/vol1.pdf
8 Advance Policy Questions for Testimony of Elizabeth A. McGrath to be Deputy Chief Management Officer of the Department 9 U.S. Government Accountability Office,

of Defense, March 2010, http://armed-services.senate.gov/statemnt/2010/03%20March/McGrath%2003-23-10.pdf GAO-04-149R: Military Personnel: DFAS Has Not Met All Information Technology Requirements for Its New Pay System. October 2003, http://www.gao.gov/new.items/d04149r.pdf. 10 DefenseNews, Pentagon Dodges Budget Bullet , February 2010, http://www.defensenews.com/story.php?i=4490383

11 Department of Veterans Affairs Office of Inspector General, Issues at VA Medical Center Bay Pines, Florida and

Procurement and Deployment of the Core Financial and Logistics System (CoreFLS) , August 2004, http://www4.va.gov/oig/52/reports/2004/VAOIG-04-01371-177.pdf

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Almost fifty years ago, in 1965, Congress passed the Brooks Act to provide for the economic and efficient purchase, lease, maintenance, operation, and utilization of what was then referred to as automatic data processing equipment. More recently, to improve information technology management in the Federal Government and to streamline the acquisition processes, the Clinger-Cohen Act of 1996 established the role of the Chief Information Officer at Federal agencies, reporting to the agency head. The Act also directed agencies to establish and use performancebased, outcome-focused management tools and techniques to improve operations, and provided agencies with new authorities for acquiring information technology. To promote the use of digital services and processes by the Federal Government, the EGovernment Act of 2002 established the Federal CIO Council to share best practices and collaborate on information technology projects government-wide. It also created the Office of E-Government and IT to set direction and provide overall leadership for the Federal IT community. These, and other laws, established a strong legislative framework for the management of Federal information technology investments.

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In addition, scores of OMB memoranda have been issued to provide agencies with guidance for implementing and managing IT systems. Yet Federal IT projects have continued to fail due to a lack of execution. For too long, the government has operated in a closed, secretive, and opaque manner with the belief that it has a monopoly on the best ideas. We haven t reached outside the four walls of Washington as often as we should. For too long, the government has been reluctant to make the tough management decisions to terminate, halt, or turnaround failing projects. When I started in February 2009, the public s best source on the performance of the then $76 billion in annual government technology investment was a static PDF document. It was also our best source of information. While you can check your personal investment portfolio on a smartphone, checking the performance of the Federal IT portfolio required sifting through stacks of paper reports. For too long, the entire Federal IT community from vendors to agencies has operated in a broken system where process trumps outcomes. For example, over the past six years the Department of State has spent $133 million amassing a total of 50 shelf feet, or 95,000 pages, of security documentation for about 150 major IT systems. This works out to about $1,400 per page on paper snapshots that are often outdated as soon as they are printed.12

A NEW PHILOSOPHY
To make Federal IT work we must change the way Washington works. The same old ways of managing will yield the same wasteful results. To reform Federal IT, we need a new philosophy, rooted in the principles of transparency and open government. We must create a culture of accountability with a focus on execution. As President Obama said in his inaugural address: Those of us who manage the public's dollars will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government.
12 Statement of John Streufert, More Security, Less Waste: What Makes Sense for Our Federal Cyber Defense , October 2009,

http://hsgac.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=005ffc66-801f-419c-9be1-7543cbe3841e

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To address the problems plaguing Federal IT, we embarked upon a three-part strategy. First, shine a light on the performance of Federal IT investments by harnessing the power of transparency and building a public-facing dashboard to provide information on the over 7,000 Federal IT investments. Second, make the tough decisions to halt, turn around, or terminate failing investments and create a culture of relentless accountability. Third, focus on reforming the structural deficiencies that lead to and perpetuate failures in Federal IT, in areas such as governance, procurement, personnel, and budgeting.

SHINING A LIGHT ON FEDERAL IT INVESTMENTS
Shining light on billions of dollars and years of failed projects was not easy. The IT Dashboard, launched in June 2009, transformed the way we look at Federal IT investments. Information on the performance of IT projects such as project budgets and schedules that was once stored within agency walls on reams of paper and seldom updated is now publicly available online and refreshed every month. Using the Dashboard, anyone from agency officials to the American people can now identify and monitor the performance of IT projects, on their laptops and mobile phones, just as easily as they can monitor the stock market or baseball scores. If a project is behind schedule or over budget, the Dashboard tells you that. The Dashboard also ended the days of faceless accountability. It provides not only the contact information for the agency official responsible for the project, but also shows you their picture and lets you contact them directly to provide feedback on the project s performance. The release of this information was a massive change in the way we had traditionally managed Federal IT. Vendors, project managers, and agency Chief Information Officers are now executing their projects in the light of day.

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For the Dashboard to drive transparency effectively, it had to be easy to use. We sought to build a consumer-class product that opened up the operations of the Federal Government to the world not a compliance-oriented tool that would be seldom used outside the halls of government. So we focused relentlessly on the customer from the outset. We reviewed early versions of the IT Dashboard with members of Congress, GAO, industry, and various good government groups. Their feedback was instrumental in shaping the end-product. To date, the IT Dashboard has had over 130 million hits. We also wanted to make the Dashboard as easy as possible for agencies to update. To help them learn to use the IT Dashboard and see in advance how their data would be reflected, we held a series of open houses with agency CIOs, capital planning leads, project managers, and other IT staff. These sessions not only enabled them to become familiar with the IT Dashboard prior to launch, but also allowed us to hear directly from them how we could improve the IT Dashboard and reduce their burden in reporting on the status of IT projects. We didn t wait until the data was perfect to launch. In fact, had we waited for perfect data, the IT Dashboard would still be awaiting launch. Only by exposing the data and holding agencies accountable will the data quality improve. For example, immediately upon the release of the IT Dashboard, we saw marked improvement in the quality of agency-reported contract numbers. Prior to launch, analysis of legacy data indicated only 435 matches between agency-reported data and contract numbers in USASpending.gov. Today, the match rate has more than quadrupled to over 2,300. Going forward, the Dashboard will continue to evolve to provide even better insight into the performance of Federal IT investments. We continue to listen to and incorporate feedback from Federal agencies, Congress, and the American people.

MAKING THE TOUGH DECISIONS
It is not enough to simply shine light and hope results follow. We must take action. In July 2009, the Department of Veterans Affairs halted 45 IT projects which were behind schedule or over budget, identified in part thanks to the IT Dashboard. After a detailed review, VA terminated 12 of these projects and ultimately was able to avoid $54 million in wasteful spending during fiscal year 2010.

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In January 2010, we held the first TechStat Accountability Session. A TechStat session is a face-to-face, evidence-based review of an IT program, undertaken with OMB and agency leadership and powered by the IT Dashboard. In each TechStat session, the team works together to carefully examine program data, with a focus on problem solving that will lead to concrete action to turnaround, terminate, or halt the project. At the first TechStat session in January, we worked with the Environmental Protection Agency to examine a financial system modernization project that was $30 million over budget and a year behind schedule. Since then, we have conducted TechStat sessions for more than 30 projects at 19 different Federal agencies. As the inaugural TechStat demonstrated, financial system modernization projects in the Federal government have become too large and complex. By setting the scope of projects to achieve broad-based business transformations rather than focusing on essential business needs, Federal agencies across the board are experiencing substantial cost overruns and lengthy delays in planned deployments. Compounding this problem, projects persistently fall short of planned functionality and efficiencies once deployed. That is why, in June 2010, we halted all financial system modernization projects with $20 million or more in planned spending. These financial system projects were immediately frozen from all activity, pending review and approval of more streamlined approach. Collectively, the investments halted represent over $20 billion in total lifecycle costs. We are now seeing the fruits of a focus on execution. Across four agencies, we have already taken decisive action on troubled projects. The Small Business Administration has scaled back its Loan Management and Accounting System initiative by $113 million while the Environmental Protection Agency has moved forward on cuts of $185 million to its troubled financial management system modernization project, the Financial Replacement System initiative. The Department of Housing and Urban Development has scaled back its Integrated Financial Management Improvement Project initiative to concentrate on addressing critical Department-level needs and now expects to see

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deployment within 18-24 months instead of 10 years. In addition, the Department of Veterans Affairs has cancelled its $423 million Financial and Logistics Integrated Technology Enterprise Program system. Our actions so far will lead to budget reductions of more than $750 million when it comes to financial systems. We also zeroed in on 26 of the highest priority IT projects, worth over $30 billion in total lifecycle costs, to ensure that they will deliver value to the American people. We worked collaboratively with agency CIOs to identify these high-priority IT projects across the Federal Government. Many of these projects have been underway for many years but have little to show for their efforts. For example, the Office of Personnel Management has been in the process of modernizing its retirement systems since 1987. At 23 years and running, OPM s efforts have now outlasted the careers of many of the employees served by the retirement systems it is modernizing. Sometimes, while the systems are operational they aren t meeting the needs of their customers. Employees at the Department of the Interior couldn t even send a department-wide message due to its siloed infrastructure, which is consists of 95 data centers, 9,000 servers and $3 billion in spending. Our review of these high-priority investments has already yielded results. For example, the Department of Justice has terminated its Litigation Case Management System which was years behind schedule and over budget. Initiated in 2006, this project would have cost an additional $193 million to complete, twice the original estimate. Meanwhile, the Department of the Interior has turned around its development of a department-wide system to share security, law enforcement, and emergency management information. By establishing incremental deliverables, at least every six months, for its Incident Management Analysis and Reporting System, Interior will accelerate delivery of services that will help 6,000 law enforcement officers protect the nation s natural resources and cultural monuments. Our actions to date are the initial steps in making the Federal government work better for the American people and send a clear message that we are no longer willing to throw good money after bad money. These systems collectively represent over $50

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billion in total life cycle costs. Whether it is investing in modernizing our financial systems or retirement systems, it is vital that the money we spend on IT produces dividends.

DRIVING STRUCTURAL REFORM
The efforts to date prove that the Federal government can take action and execute on tough decisions to turnaround, halt or terminate failing projects. By doing our business in the light of day we can reduce wasteful spending and hold those who manage the public s dollars accountable for results. We are at a critical point in our nation s history, recovering from the worst economic crisis since the Great Depression, facing an unprecedented environmental disaster in the Gulf of Mexico, and confronting new threats at home and abroad. We cannot afford to carry on as we have for decades, sitting idly while IT investments fail and waste billions of dollars. We must act now and relentlessly execute with an unwavering focus on results. I have met with agency CIOs, CFOs, procurement officials, project managers, and members of the contractor community, among others, to listen to their thoughts on how we can create a culture of accountability across the government, focused on execution. They are on the front-lines; every day they work to make sure we are spending taxpayer dollars efficiently and effectively. We are learning from them what doesn t work but also what does work. They are identifying bright spots in the Federal IT portfolio successful projects that can serve as beacons for the future of Federal information technology management. The Department of Education modernized and streamlined its application process and created the Free Application for Federal Student Aid (FAFSA) On the Web . With a shorter, simpler, and more user-friendly form that eliminated 26 financial questions used on old forms, the new system makes it easier for the 16 million students applying for financial aid through FAFSA. The Department of Labor, in a joint investment with the IRS and Pension Benefit Guaranty Corporation, launched a new paperless employee benefit processing system,

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called EFAST2, in December 2009. The $176 million project, which was delivered on time and under budget, reduced processing time from more than 90 days to one day.13 In 1990, the Defense Information Systems Agency (DISA) started consolidating data centers at the Department of Defense. By 2002, DISA reduced the department s 194 data centers down to five, resulting in a reduction of annual operating budgets from over $1 billon to $263 million.14 We must learn from these bright spots and emulate their successes across all Federal agencies. For too long we have admired the problems that confront Federal IT rather than addressing them. Today I ask you to actively participate in developing the solutions. Together, we must strengthen policies and procedures that work while eliminating outdated and cumbersome rules. We must learn from proven best practices from both inside and outside the Federal Government to develop higher standards for project management practices and personnel. We must institute rigorous project review processes that hold managers accountable for project results. Together, we must catalyze a fundamental reform of Federal IT to address the root causes of the problems plaguing Federal IT projects.

13 IT Dashboard, accessed 8/19/2010, http://it.usaspending.gov/?q=content/investment&buscid=105# 14 Lt. Gen. Harry D. Raduege Jr., USAF (Ret.), Patterns Emerge in Consolidating Data Centers , August 2008,

http://www.afcea.org/signal/articles/templates/Signal_Article_Template.asp?articleid=1672&zoneid=238

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