Obama's Budget Office Puts $3 Billion in U.S. Technology Contracts on Hold
The Obama administration is putting $3 billion in information technology contracts on hold and is examining more than $10 billion worth of other projects as part of an overhaul of spending on such services and equipment.
White House budget director Peter Orszag is ordering a review of the $80 billion the government spends annually on technology to determine whether lax oversight has led to cost overruns, delays and the implementation of obsolete systems.
“For the most part we don’t get a good return on that $80 billion,” said Jeffrey Zients, the government’s chief performance officer. “We need to become better, smarter customers.”
The U.S. government is the world’s largest buyer of information technology. Among the companies with contracts that will fall under the broader review are Accenture Plc, International Business Machines Corp., Oracle Corp. and SAP AG, according to Danny Werfel, the controller at the Office of Management and Budget. None of the companies were singled out for special scrutiny.
The initiative is part of a larger effort by President Barack Obama to pare the budget deficit, which is projected to be a record $1.55 trillion this year, or about 10.6 percent of U.S. gross domestic product. Obama already has ordered a three- year freeze in non-defense and national security programs in his budget released Feb. 1 and ordered some agencies to reduce their 2012 budget requests by five percent.
More With Less
“We need to do more, in effect, with less money,” Zients said. “And technology is the primary enabler of doing more with less.”
The government lags behind the private sector in getting systems in place to reap the benefits from information technology advances, said Vivek Kundra, Obama’s chief information officer.
Kundra cited as an example a Department of Defense effort to consolidate payroll and personnel records. The project went on for more than a decade and cost $1 billion, only to be killed this year after Admiral Michael Mullen, the chairman of the Joint Chiefs of Staff, called it a “disaster.”
About $27 billion worth of government projects are currently behind schedule or over budget, Kundra said.
“This is what we’re facing in terms of some of the structural, systemic problems,” Kundra said.
The most troubled projects are those aimed at overhauling financial and budget systems, such as the canceled military project, which regularly face delays and excessive spending, Werfel said.
Spending Halted
Spending is being immediately halted on about 30 of those projects, which represent about $3 billion in spending annually and are worth a total of $20 billion.
In addition, Kundra will review more than $10 billion in other high-risk projects and will require agencies to submit improvement plans for contracts that are behind schedule or over-budget.
Zients will lead a 120-day review of contracting policies to create rules where underperforming initiatives are canceled and projects are completed in fewer than 24 months instead of over the course of many years.
Zients said he hopes the changes will allow the government to start benefitting from productivity gains seen at many companies over the past decades.
“For the most part the federal government has not had those productivity gains,” he said. “Technology has been at the center of that.”
To contact the reporter on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.net
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