FEDERAL IT CAPITAL PLANNING AND INVESTMENT CONTROL

Thomas G. Kessler

Patricia A. Kelley

INTRODUCTION

The Legislative Basis for Improved IT Management

Initiative is doing the right thing without being told.

—VICTOR HUGO, FRENCH AUTHOR

Capital planning and investment control (CPIC) is a set of practices and procedures for managing the entire set of a government agency’s information technology (IT) resources as if it were a financial portfolio. It is a decision-making process for aligning investments with the agency mission; for selecting investments that are in the best interests of the agency as a whole; and for identifying, managing, and mitigating risk that causes projects to fail. CPIC establishes a mind-set of strategic thinking and stewardship that can, over time, become part of an agency’s organizational culture.

The ultimate objective of the CPIC process is to ensure maximum return on IT investment. The process requires establishing goals for the IT portfolio, ensuring that existing assets are performing well and providing a positive return on investment, and fully scrutinizing potential new investments to determine how they will perform individually and how they will fit in the portfolio as a whole. The CPIC process also ensures that the portfolio is diversified and that the portfolio risk characteristics are consistent with the organization’s risk-tolerance level.

Implementing an effective CPIC process often necessitates changes to an agency’s organizational culture—its long-established ways of doing business—especially with regard to adopting macro-level IT management practices, ensuring the availability of sufficient information for making decisions about each individual investment and the entire set of resources, and raising the level of discussion, dialogue, and decision-making to the agency level.

Federal CPIC Requirements

In the federal government, management reform gained significant attention during the mid-1990s as a series of large-scale IT projects suffered setbacks and, in some cases, turned into major disasters. The Clinger-Cohen Act of 1996 (initially known as the Information Technology Management Reform Act) instituted a number of sweeping changes designed to improve the overall return on investment for federal IT spending. To better align authority and responsibility for IT investments, the Clinger-Cohen Act established chief information officer (CIO) positions and designated the CIO as the senior IT official in each agency. It also mandated approaches for improving IT acquisition and management of large-scale projects.

Several significant factors led to enactment of the Clinger-Cohen Act:

   Congress believed that the chief financial officer (CFO) positions that had been created by the Chief Financial Officers Act of 1990 were effective in improving financial management coordination and accountability within federal agencies, and that creating similar IT senior executive positions would address some underlying IT management problems.

   Congress recognized that private-sector companies had successfully established CIO positions to provide improved IT management coordination and accountability.

   A series of widely publicized cases of troubled large-scale IT projects and acquisitions had galvanized public pressure to improve IT management effectiveness in the federal government.

Appendix A presents a more comprehensive review of the legislation related to management reform.

The Clinger-Cohen Act had positive intentions. Although its origins were rooted in a response to past problems, the Clinger-Cohen Act set out a framework that acknowledged the increasing role and importance of IT as a federal business enabler. Congress recognized that IT had evolved from its early role as a means of making support processes more efficient to a preeminent, mission-critical role. Increased agency reliance on IT meant that it was time to reengineer IT management to ensure that investments aligned with agency missions and program objectives, that program managers were more involved and accountable for the successful use of IT, and that IT risk was managed more effectively so that initiatives could be completed within budget and on schedule—and do what they were intended to do.

Congress also recognized that technology was becoming more diverse and complex. IT stewardship had expanded to encompass a variety of more interconnected and interdependent technologies. IT budgets that had been on the rise for decades were beginning to represent a significant percentage of overall agency budgets and of the cost of doing business. Security and privacy issues also came to the forefront. In short, IT had become so embedded in day-today business operations that proper management required both technical and general business management expertise.

The Clinger-Cohen Act

Congress enacted the Clinger-Cohen Act in 1996. This legislation gained support in large part as a reaction to a series of high-dollar IT project failures that had occurred in the federal government during the late 1980s and early 1990s. Based on hearings, testimony, and analysis, Congress recognized that existing processes and approaches for managing large and complex IT projects were flawed and needed to be addressed to improve the success rates of IT projects.

Clinger-Cohen requires agencies to focus on the results achieved through IT investments by introducing a more rigorous and structured approach for funding and managing IT projects. It requires the establishment of an integrated IT architecture and a rigorous, fact-based decision-making and funding process for IT initiatives.

Congressional Intent: Increased Efficiency

Legislation is best examined by reviewing the intent of Congress when it enacts a law. Congress was determined to halt the string of expensive failed IT projects. It intended to do so by requiring that agencies have increased head-of-agency and senior management support, and that rigorous processes be established for selecting which investments to approve and fund, as well as for monitoring and controlling risk. Congress also expected explicit improvements in efficiency, directing agencies to achieve a 5 percent decrease in operations and maintenance costs and a 5 percent increase in agency operations efficiency each year.