Administration Takes Aggressive Approach to Stimulate Tech Investments

The U.S. government is moving at a brisk pace to launch information technology projects authorized by the $1.9 trillion American Rescue Plan. Federal information technology providers are looking for the chance to participate in contracts flowing from the $1 billion allocated by the plan to the government’s Technology Modernization Fund (TMF).

The American Rescue Plan was signed into law on March 11. Just two months later, the White House told federal agencies that project proposals for Technology Modernization Fund support that were received by June 2 would get “prioritized” consideration.

In addition to the expedited proposal process and the bolstering of TMF funding by an astonishing six-fold increase, the administration gave agencies greater flexibility in administering TMF projects in order to jump-start federal acquisition of critical IT resources.

“The updated TMF model provides the clarity and flexibility necessary to encourage federal agencies to prioritize technology modernization while transforming the relationship between the federal government and the public we serve.

“It is more aggressive — to meet the urgent technology needs of the federal government today, as well as more ambitious — to anticipate the demands of tomorrow,” said Katy Kale, acting administrator for the General Services Administration (GSA), which manages the TMF.

Technology Fund Essentially Relaunched

TMF was authorized by the Modernizing Government Technology Act of 2017. Cumulative funding from the annual budget process has amounted to $175 million to date. Needless to say, the boost to $1 billion was an eye-catcher, and by modifying project management, the Biden administration has essentially relaunched the TMF operation.

The original model for TMF projects required federal agencies to “repay” the fund from operational savings resulting from productivity gains from IT projects undertaken with “borrowed” funds from the TMF. The idea was to create a rolling repayment mechanism roughly resembling a revolving fund process.

The President’s plan has changed all that. “In order to be able to respond with urgency to the current crisis, repayment will shift from the full repayment model for all projects to a model allowing more flexibility. Repayment will now fall into three categories to optimize for project success and to deliver the highest value to the public,” according to GSA. The categories are:

• Full repayment: For projects that yield direct financial savings that can be used to fully repay the TMF.
• Partial repayment: For projects with strong positive impact and which will yield some financial savings, but where the proposing agency doesn’t expect to reach full cost recovery.
• Minimal repayment: For projects aimed at tackling the most urgent IT issues facing government, including critical cybersecurity improvements and initiatives that help agencies meet the demands of the Covid-19 pandemic, but which are unlikely to create direct cost savings.

In addition, the White House Office of Management and Budget (OMB) emphasized that priority would be given to projects that “cut across agencies, address immediate security gaps, and improve the public’s ability to access government services.”

Four development categories will be given priority: modernizing high-priority systems; cybersecurity improvements; public-facing digital services; cross-government services, and infrastructure.

The orientation towards ‘cross government’ projects and government-wide implementation is a positive approach, according to Dan Chenok, executive director of IBM’s Center for the Business of Government, and Margie Graves, a visiting fellow at the center.

The ‘whole of government’ strategy, “can help OMB, GSA, and the agencies work individually and collectively to ensure that innovative projects awarded under the TMF and related technology lines in the American Rescue Plan will have a greater impact than what could be realized at the individual project level,” they noted in a commentary.

“Such a connection to the overall IT portfolio helped contribute to the success of the government’s 2001 President’s Management Agenda (PMA), elements of which still exist like the shared services lines of business and e-government initiatives including Benefits.gov, Grants.gov, and Regulations.gov.

“Conversely, innovations lacking a connection to longer-term strategy and priorities have often failed to last beyond the tenure of the initial project period,” they said.

Contractors Must Closely Monitor Agency IT

For IT providers, the enhanced funding for TMF obviously presents contracting opportunities. But the process for participating in TMF projects may be more challenging than normal IT acquisition contracting.

“From an industry perspective, the biggest challenge with the TMF process to date has been the lack of visibility and transparency of what agency proposals might be up for consideration for TMF funding,” said John Slye, advisory research analyst for federal markets at Deltek.

For example, GSA and the TMF board do not publicize potential IT modernization projects in advance. Under the current process, TMF projects are posted to their website only after those projects are approved and funded. “So, providers must really be in sync with, and be having targeted conversations with their partner agencies,” he told the E-Commerce Times.

While the posting of awarded projects is helpful, it does not provide visibility into potential projects or what agencies might be considering. “Understanding agency future modernization plans requires contractors to research and investigate the needs of those agencies. No small task,” Slye contended.

In terms of the overall goals of the initiative, “the greatest opportunities are first for providers of cybersecurity expertise and solutions, and for cloud service providers as bolstering agency cyber-posture are the driving forces behind the Biden proposal,” he noted.

Still, providers of general IT products, such as software, that offer greater levels of security as a part of their overall product development lifecycle may have a significant role.

“Vendors don’t have to be specifically a cybersecurity provider to see opportunities if their solution advances an agency’s security goals,” he said. The other part of the administration’s approach was to focus on improving agency digital services for citizens as the pandemic persists. Providers that can help agencies increase their services in a secure way will find opportunities, Slye concluded.

Longer Term Funding Support Still an Issue

The boost in funding for the TMF will help reverse a capital investment gap in federal spending for upgrades and innovations, according to a joint commentary by Steve Vetter, senior strategic solutions executive, and Emily Gottschalk, marketing specialist at Cisco Systems.

They noted that currently, 82 percent of federal IT budgets are dedicated to operation and maintenance, while only 18 percent of funds are allocated for development, modernization, and enhancement (DME). That represents a big drop from 32 percent for DME just ten years ago, they said, citing data from the government and the Professional Services Council (PSC).

“Guided by a holistic architecture approach, the TMF has the potential to become a critical tool in reversing the decline in capital funding,” they said.

The Professional Services Council itself, which represents a broad range of federal contractors, including IT providers, sees the rescue plan as just the beginning of a more robust IT support program. PSC noted that the ARP funding of the TMF was essentially a one-shot, short-term effort designed to address Covid-19 impacts.

PSC supported the ARP increase for the TMF. However, PSC executive vice president for government relations David Broome said the group was “disappointed to see that the administration did not request additional funding to address cybersecurity or IT modernization for the federal government and the industrial base” in a national infrastructure investment proposal now being debated in Congress.

“Given recent cyberattacks — including the Solar Winds breach of government infrastructure and the recent attacks on energy pipelines and water treatment facilities — and the President’s May 12 executive order on cybersecurity, the need for resources to adapt and operate securely in the continuously changing threat environment continues to grow,” Broome said in a May 21 letter to Congress.

PSC said it would support funding to match these needs and requirements, including allocations to the federal Cybersecurity and Infrastructure Security Agency (CISA) and the TMF, as well as agency-specific funding to modernization projects.