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Mayor Bloomberg Looks at Public-Private Partnerships (PPP) Minus the Outsourcing

In a surprising announcement (hat tip to GovMangement daily), Mayor Michael Bloomberg (New York City) has announced that he will look to "investment banks" to manage certain city infrastructure and services, but he will not "sell" the infrastructure for budgetary quick-fixes and he will not look to shed union workers.

This is a major about-face from what we've been hearing over the last few years. Moreover, any remark by Bloomberg can become conventional wisdom almost instantaneously. His remarks come on the heels of Rahm Emanuel's election in Chicago, where he was highly critical of the wildly unpopular parking meter privatization. (Bloomberg has already sworn he will never relinquish the city's power to set meter rates.) Gov. Mitch Daniels (R-IN) has taken some indirect heat for his 75-year lease of the Northern Indiana Toll Road. The road operator has seen tolls decline during the economic downturn and has had to raise rates. Meanwhile, Indiana has already pocketed the money.

GovWin's Take:

  • Given the early results from Chicago and Indiana, it's unlikely that investment banks are eager to jump at self-defeating PPPs any more than they are to make more subprime home loans. So, to that extent, Bloomberg is simply adapting to the marketplace.
  • The public won't let politicians off the hook for converting what is perceived as a public burden into a private one. Handing off the "ownership" of a monopoly is not much of a "partnership" anyway.
  • It will be interesting to see if Bloomberg can procure the best of what the ibanks have to offer in terms of management while keeping the public interest safe in Gracie Mansion. At this point, it sounds like he wants to outsource the middle management, who are charged with thinking creatively about service delivery and motivating the front-line, rather than go to war against the rank-and-file union workers who, by his estimation, are doing about as well as non-union workers.

Public Health Initiatives Receive More Attention

The Department of Health and Human Services (HHS) recently announced $270 million will be allocated to information technology support for public health infrastructure and research. The funding comes from the Affordable Care Act's $750 million investment in public health. The funding is expected to empower communities with tools and resources for local health initiatives. Overarching goals from the grant include disease prevention, early disease detection, and managing conditions before they become severe. Public health initiatives are starting to receive more attention on the state and local side as health officials realize the importance of disease surveillance and immunization systems. The data captured in these types of systems is critical in deriving information about population and health. This new focus on prevention will inherently cut down health care costs as a whole.

A handful of states are currently involved in public health initiatives. For instance, South Carolina's Information Technology Management Office (ITMO) recently released a request for qualifications (RFQ) for integrating its electronic disease surveillance system. Responses are due by March 1, 2011. The department is interested in purchasing a modular disease surveillance system with capabilities such as Web-based interfacing, dynamic data collection, master patient indexing, electronic laboratory reporting, and case notification messaging.

The state of Maine recently solicited support on its ImmPact2 immunization information system (IIS). opp link The effort is headed by Maine's Department of Health and Human Services. Its objectives include decreasing operational hosting costs of the ImmPact2 registry, managing life cycle maintenance to keep technology components within their support life cycles, and consolidating onto virtual dedicated Windows server environments.

North Dakota is another state that may procure support services for its statewide public health information system. The state was interested in establishing an information management application to be used by all local public health units for the purpose of tracking client information. Additionally, the Nevada Department of Health and Human Services released a request for information (RFI) in October 2010 for offsite immunization registry hosting services. The state is looking to make its WebIZ (the state's immunization system) highly functional in a way that is equitable to the state and the user community it serves. RFI responses were due in December 2010 and the department is still in the procurement planning phase.

Other states that may have public health initiatives include:

Wisconsin- The Wisconsin Department of Health Services may release a request for proposals (RFP) to replace its Health Alert Network (HAN).

Oregon- The Oregon Department of Human Services may rebid its immunization information system. Its contract with HP Enterprise Services is set to expire in February 2015.

Michigan- The Michigan Department of Information Technology may rebid its disease surveillance system. The contract is currently held by Altarum Institute and is set to expire August 2011.

Arizona- Maricopa County's Department of Public Health recently released an RFP for public health policy initiatives. Proposals are due February 25, 2011. The department may release an RFP for public health policy system implementation services as well.

Delaware- The Delaware Department of Health and Social Services recently released an RFP to provide technical assistance for a division-wide performance improvement initiative (PII) to achieve quality improvement in public health policies, programs, or infrastructure. Proposals are due April 18, 2011.

Arkansas- The Arkansas Department of Human Services, Division of Medical Services (DMS) has included the procurement of a Public Health Electronic Health Record (EHR) System in its proposed Arkansas Medicaid Enterprise (AME) to be used by DMS for Medicaid patients' medical information determined through services provided in public health clinics.

GovWin's Take:

With more focus placed on improving care delivery and cutting health care spending through more preventative strategies, more money is expected to be released for related initiatives such as disease surveillance, public health information systems, health registries and immunization information systems. States will procure public health IT services with the help of HHS funds. Additionally, a considerable amount of states may be rebidding contracts related to these types of systems. These procurements will most likely entail modernization or enhancements to current systems. For that, vendors should pay close attention to states soliciting planning and assessment services for their public health IT systems, in addition to states with contracts expiring in the near future.

FCC 4.9 GHz Band Workshop Recap

Today, the FCC held a workshop on the 4.9 GHz Band, a Spectrum Dedicated to Public Safety for Broadband Use. The workshop consisted of two panels discussing how the 4.9 GHz band currently supports public safety interoperability, and what can be done to increase use of it. The most consistent comment that GovWin observed both from the state and local agency representatives, as well as the manufacturing community, was that the 4.9 GHz band is best used for systems with video capabilities.

The first panel discussed the current public safety use of the 4.9 GHz band. There was heavy state and local representation on panel one, with panelists from Brookline, Massachusetts; Virginia Department of Transportation; Missouri Department of Public Safety; and Los Angeles County, California. All gave an interesting perspective on how their municipality used 4.9 GHz system capabilities. Scott Wilder of Brookline, Mass. explained that the city deployed the 4.9 GHz broadband network for public safety agencies. They have been using the system 24/7 for three years. Wilder mentioned that the city also uses a 2.4 GHz band as backup in case of a catastrophe. Compared to Brookline's 6.8 square miles, Lt. Mark Wilkins from the Los Angeles County Sheriff's Department offered another perspective. The county covers roughly 4,000 square miles and will be deploying the 4.9 GHz band for all public safety agencies using downlink video, surveillance, and backhaul capabilities. One thing Wilder and Lt. Wilkins both echoed is that video is the biggest driver for 4.9 GHz band use.

Missouri Department of Public Safety's Stephen Devine offered some suggestions to the FCC to better utilize 4.9 GHz. He explained that 4.9 GHz is not practical for mobile use, long-term or high traffic use. Event applications seem to be a better use. Devine recommended improving use of band so that tools are made available to allow coordination of use on both a state and regional level. He would like to see a loosely based coordination requirement of 4.9 GHz licensees to allow a national database, with real site locations, (not just license – but technical elements associated).

Finally, the panel also included two perspectives from the vendor community with Mark Jules of Avrio RMS Group and Martin Levetin of Strix Systems.

Jules explained that 4.9 GHz band is most useful in areas like cities, universities, ports and stadiums. Jules suggested the band be accessible for special events, for example, inaugurations, the Democratic National Convention, G-20, and the Super Bowl. A big plus to the system is its quick installation.

Levetin gave real-world case study examples where a 4.9 GHz band would excel. He described the different situations, how they set up the network, and the deployment hurdles his agency overcame. He explained that because 4.7 has more bandwidth than a 700 MHz system, if video is a bid player, like during the Beijing Olympics, 4.9 GHz would be the preferable choice.

Panel two discussed what the FCC can do to increase use of the 4.9 GHz Band. David Buchanan of the National Public Safety Telecommunications Council (NPSTC) started the conversation describing a survey that NPSTC conducted regarding 4.9 GHz band usage. He highlighted the fact that the majority of respondents use or want to use the band for point-to-point communications.

Brett Kilbourne of the Utilities Telecom Council (UTC) explained that utility companies are interested in gaining access to the 4.9 GHz band. Kilbourne suggested that changing eligibility requirements will promote the use of the 4.9 GHz band.

Dr. Nancy Merritt of the DOJ's National Institute of Justice (NIJ) gave more of a social science view of 4.9 GHz. Looking from more of a social standpoint, Dr. Merritt was interested in playing a part of the standards development process. The NIJ would like to be a resource of information for agencies.

Pam Montanari of Pinellas County, Florida described different ways that the County tried to look at using the 4.9 GHz band. In looking into an ad hoc system, the county realized that it would take a lot of pre-configuration and it was also cost prohibitive. Montanari estimated that under the ad hoc system, it would cost $500 per car. The other system was a fixed network. The county used off-the-shelf technology with a multitude of vendors. Montanari was pleased to report that the system got pretty good throughput. The system was less reliable to keep tower equipment operational, but streaming video the best use of the 4.9 GHz system. She recommended system capability tracking on regional basis. Montanari agreed with what Kilbourne has suggested earlier, and explained that the FCC should consider different types of licensing (permanent scale, ad hoc, fixed etc.) and extend to utilities. That cooperation could save lots of money for an agency working with a utility.

Joe Ross of Televate LLC explained that one of the major challenges of 4.9 GHz is that there have been a lot of uncoordinated activities. He explained the best use for 4.9 GHz is pre-planned so the band will have appropriate reliability. Interference in reliability creates potential risk. Ross suggested four things that the FCC could do:

  • Advertise what's been done well/effectively
  • Develop 4.9 GHz planning guidelines for regions
  • Help/guidance with frequency plans
  • Provide more education to vendors and agencies

Finally, Edmond Thomas of Wiltshire & Grannis had only one proposal for the FCC with regard to the 4.9 GHz band. He would like the FCC to seriously consider opening the band to commercial interest, but with secondary capabilities. This would mean that the commercial use of the 4.9 GHz band could be shut down to prevent interference, giving public safety the priority. This proposal would both increase volume of the band and also maintain its supremacy.

GovWins Take: Overall, the workshop highlighted some of the positive capabilities of the 4.9 GHz band (larger bandwidth has better video capabilities), and some of the problems (4.9 GHz does not work well in buildings). GovWin will continue to stay abreast of any developments. For government agencies, GovWin suggests analyzing the amount of bandwidth that your agency is using to determine what system is best. If you plan on having a lot of video and surveillance capabilities, it may be useful to look into a 4.9 GHz band. For vendors, GovWin suggests investing in research and development to provide interoperable 4.9 GHz and 700 MHz capabilities in a single device. If a single vendor had both on a single platform, it could eliminate many headaches. Vendors should also get involved in any standards development that allows them to have a say in the process. With the increased use of video and more complex data uses, the need for a system to handle all different utilities is necessary.

IT Implications of Rahm Emanuel's Victory in Chicago

Rahm Emanuel's victory in this Tuesday's election for mayor of Chicago, bodes well for IT vendors. His campaign agenda was filled with items in the Community Development, Economic Development/Regulation, General Government Services, and Justice/Public Safety verticals. His victory, along with Mayor Gray's (2010) in Washington, D.C., proves that IT remains a key area of investment for America's major cities despite the economic downturn. As with the election of Gov. Quinn (2010), the spotlight is on procurement reform and ethics for government as the state and city seek to reverse their historic (and somewhat overblown) reputations for corruption.

Below are a sample of the agenda items culled from mayor-elect Emanuel's campaign platform with the most direct IT implications.

Community Development

Help all building owners by expediting the development of an online one-stop-shop for building owners.

Make the zoning and business license process more transparent.

Create an online portal to track zoning decisions

Economic Development/Regulation

Cut bureaucratic red tape and streamline business permitting, regulation and inspections.

Make it easier to work with the City establishing an on-line, one stop for businesses.

General Government Services

Overhaul Chicago's broken procurement process.

Make Chicago's contracting process fair and efficient to save $20 million

Open city budget data to public review.

Create an online database of lobbyist activity.

Rein in no-bid contracts and increase transparency.

Crack down on abuse of minority-and women-owned business status.

Enhance compliance with the Freedom of Information Act.

Make all TIF information available for taxpayer scrutiny and move TIFs "on budget."

Justice/Public Safety

Integrate child intervention programs across departments.

Increase efforts to trace weapons that are used in crimes and push to publicly release that information.

To help cops on the beat, Rahm secured funding for CLEAR – a computerized information system that improves information sharing between criminal justice agencies at the local, state and federal level.

Read More
(Subscription to GovWin State & Local Industry Analysis required.)

The “Kill Switch” Bill: What it means to first responders and public safety

In June 2010, Senator Joe Lieberman introduced Senate Bill 3480, titled Protecting Cyberspace as a National Asset Act of 2010. Lieberman and cosponsors Senator Thomas Carper and Senator Susan Collins contend that the bill is intended to establish a set of guidelines for the United States in the event of a large-scale cyber attack. However, it has been dubbed the "kill switch" bill because of the power it would give the president in the event of such an attack. Essentially, the kill switch would shut down the Internet in order to prevent those with hostile intentions from succeeding in their attack.

The "kill switch" bill has gotten a significant amount of press over the past few months, and opponents of it have increased following the protests in Egypt. The Egyptian government shut down the Internet, preventing protestors from using social media sites such as Twitter and Facebook. Advocacy groups claim that such a bill would give the president too much power and violate free speech laws.

Egypt had only four major Internet service providers, which the government was able to shut down. In the U.S., there are more than 2,000 Internet providers, and bringing them to a screeching halt would not only damage their networks, but damage public safety efforts. Public safety officials rely on the Internet and other public safety networks in the event of an emergency as well as in their day-to-day tasks. If a large-scale cyber attack was committed against the U.S., shutting down networks would likely induce panic and require immediate response from public safety officials. In order to keep first responders up and running in such an incident, a nationwide back-up communications network and equipment would be necessary. The prospect of building such a network, especially in the current economy, seems next to impossible.

Another important issue is the fact that so many government agencies, specifically public safety agencies, use social media to communicate with constituents. By using social media, an agency can inform the public of a wanted felon, a car accident that blocks a main thoroughfare, or any other type of emergency situation. Through the use of Twitter, an agency can also receive tips and other information that is often location based through the use of global positioned satellites (GPS) in cell phones. Enacting this bill would restrict agencies from being able to communicate with fellow first responders and the public. Having Twitter, Facebook and other tools like Reverse 911 is essential in a disaster or emergency, and with the Internet shut down, all of these tools would be unusable. This must be considered when law makers vote on the "kill switch" bill.

While the "kill switch" bill is unlikely to pass due to the democratically controlled Senate and the veto power of the president, it has stirred the pot and created a nationwide debate. Sen. Lieberman may have realized it is unlikely the bill he authored will pass, but in presenting it to the 111th and 112th Congresses, debate surrounding the bill will not stop as easily.

APD Reform Comes to the States

While attending the National Child Support Enforcement Association Policy Forum in January, a presentation on the newly announced advanced planning document (APD) reform particularly stood out. Joseph Bodmer, project director at the U.S. Department of Health and Human Services, Office of Child Support Enforcement, walked the audience through the changes and described the two major shifts in oversight: more focus on high risk projects/procurements (with less on low risk) and overseeing the transition from federal to state procurement laws, regulations, policies, and procedures. The biggest change is the newly created operational APD (OAPD), only available for maintenance and operations (M&O) projects. The OAPD is akin to an acquisition checklist, reducing submission/approval requirements for lower-risk M&O contracts. States will only need to provide a simple summary of the project and list the procurements that will be taking place over the next year. Contracts or request for proposals (RFP) documents will no longer be reviewed, and the state will not have to include project plans or benefit analysis studies. The dollar threshold has been bumped from $5 million to $20 million.

The second type of project, software development, is still considered high risk. If a state wants to develop a new IT system, a feasibility study is still needed with a cost-benefit analysis on each alternative solution the state analyzes. However, federal officials no longer require a cost-benefit analysis at each yearly APD update. The threshold for software development has increased to $6 million.

Don't assume a child support enforcement system solution that can be bought "off-the shelf" qualifies as an M&O. Bodmer confirmed that if an ordinary person can purchase the system and use it, then it is considered an off-the-shelf product, not software development. No citizen is going to buy a child support solution that is typically highly customized for each state's needs, so those types of procurements will continue to fall under software development, calling for the traditional APD process.

Independent verification and validation (IV&V) is now subject to all high-risk entitlement programs. Triggers for IV&V include projects:

  • Risk of missing statutory deadlines
  • Risk of failing to meet a critical milestone
  • Indicated need for a new project or total system redesign
  • Development of systems under waivers
  • Risk of failure, significant delay, or significant cost overrun
  • State procurement policies putting a project at risk
With the rise of integrated IT projects touching several state departments, failure to adequately involve state program offices in development and implementation of system projects requires immediate IV&V. Bodmer used the Oklahoma enterprise architecture project as an example. The new IT system will touch 42 different state programs, some at varying phases of the project. If the state had not included the child support program in initial conversations (even though child support would not be included in the system until phase three), the project would not have been approved.

The goals of reform are to reduce oversight in a number of areas and shorten the period of time to execute procurements and contracts. This should help alleviate some of the stress placed on states as they prepare for Affordable Care Act (ACA) requirements looming overhead. Federal officials want to increase focus on high-risk projects and procurements to eliminate instances of project failure, which is no longer an option for states. Any state having a high-risk project fail using federal dollars will see all federal dollars taken back. As APD reform rolls on, federal officials are looking for more electronic submissions and postings, which will hopefully lead to more transparency in the planning project.

For more information on the NCSEA Policy Forum, click here.

Politics and Corrections Spending

Prompted by my colleague Jeff Webster's posting on the California Department of Corrections I spent some time this week reading up on corrections spending. Via Stateline's website, I came across an op-ed written by Grover Norquist, a well known tax reform advocate. What differentiated Norquist's piece from the many I read was that he presented prison spending reform as an element of the conservative political philosophy. I won't recap his entire article (it's a quick read that you can find here), but his basic premise is that reducing incarceration rates and spending is in line with conservative principles of limited government, federal accountability, and reduced spending.

Norquist's position of intertwining prison reform with conservative politics is significant because it brings the idea of reducing incarnation rates to an audience that, in his opinion, was not previously associated with that effort. Should this approach gain steam, it could very likely become a major campaign issue in sates that cannot keep pace with increases in corrections spending.

In a November 2009 blog, I raised many of the same points as Mr. Norquist, but from a politically neutral point of view:

Over the past few decades, "lock 'em up and throw away the key" was the standard mentality that pervaded corrections policymaking. Today, in the wake of the economic downturn, legislators nationwide are scrambling to find that key. Policies such as mandatory minimums, three strikes laws and reducing the availability of early parole caused prison populations to swell, and this policy seemed to work out for everyone (except those who were incarcerated). Voters were content that their representatives were "tough on crime;" politicians were able to bring jobs to rural areas by building bigger prisons; and vendors benefited from the increased revenue the prison contracts brought. This era came to an end when the recession forced politicians to rethink their fiscal priorities, and the level of corrections spending was deemed unsustainable.

Regardless of how the issue of reining in corrections costs is framed by Mr. Norquist or politicians, at its core, it is not a liberal/conservative, red state/blue state issue, but a green (money) issue. There simply is not enough revenue collected at the state level to support corrections spending at pre-recession levels.

What we will likely see is a shift in corrections spending from facilities and guards, to courts, probation and the technological infrastructure that supports these systems. Over the next few years, states will increasingly rely on technologies such as GPS offender monitoring, case management software, and strategic offender management systems to leverage their strained corrections budgets.

GovWin has released its State & Local Justice/Public Safety and Homeland Security Market, 2010-2015 report, which analyzes the trends for police protection, corrections, and judicial IT as well as homeland security. Demand for vendor-furnished information systems and services by U.S. state and local public safety agencies will increase from $5.3 billion in 2010 to $6.1 billion in 2015, bringing $800 million in new spending to the market at a compound annual growth rate (CAGR) of 2.9%.

Florida Prescription Drug Monitoring Program: To be, or not to be?

Over the past few weeks, new Florida Governor Rick Scott made it widely known that he has no interest in allowing the state to develop and deploy a prescription drug monitoring program (PDMP). He's also provided little explanation as to why he wants to prevent a PDMP, which the state legislature fought for and approved a measure to establish just two years ago.

The PDMP project began in October 2009, when the Florida Office of Drug Control issued a request for information to determine various options for the drug monitoring system. In July 2010, a request for proposals (RFP) was issued to solicit bids from vendors that could provide, install and maintain a drug monitoring database across the state. However, due to a protest by Optimum Technology, Inc., the RFP was canceled and a new solicitation was issued in October 2010. The ultimate goal was to prevent individuals from obtaining prescriptions illegally, which in turn could prevent the rising number of deaths caused by prescription drug use.

One of the difficulties in understanding Gov. Scott's stance on the state's PDMP is that the cost of the system is budget neutral. The state received federal grants and donations to foot the $1.2 million bill for the system installation and $500,000 yearly maintenance costs. In January 2011, Gov. Scott dismissed Director of the Office of Drug Control Bruce Grant and now has his sights on dismantling the entire agency.

The state has had significant issues with storefront pain clinics, or so-called "pill mills," especially in Broward County where more than 100 operate. Advocates of the new drug monitoring database are gearing to fight the plan to prevent the database from being created. In order for Gov. Scott to eliminate the program, he will need approval from the state's legislature.

While it is not uncommon for a governor, senator, or even president to disagree with their constituents about a law or other political matter, in this case, it is hard to understand how Gov. Scott can come to the conclusion that this program would not work. While full reasons for his attempts at terminating the program are not known, it is difficult to ignore evidence in other state proving the programs have been very successful. Vendors have worked hard to develop these databases that directly impact the health of individuals and curb illegal use of pain medication. Do these programs stop illegal drug use? Of course not, but using a system that can lower the chances of overdoses is well worth it.

GovWin's Take:

Should Gov. Scott eliminate the Office of Drug Control, it would be extremely troublesome to see jobs eliminated, along with the time, money and support that have gone into the program. If the program does not move forward, it would appear to have been a waste of time and resources for vendors and employees who spent time developing a PDMP. Also, vendors who provide drug monitoring software may no longer be able to look to Florida as a place to do business.

GovWin has released its State & Local Justice/Public Safety and Homeland Security Market, 2010-2015 report, which analyzes the trends for police protection, corrections, and judicial IT as well as homeland security. Demand for vendor-furnished information systems and services by U.S. state and local public safety agencies will increase from $5.3 billion in 2010 to $6.1 billion in 2015, bringing $800 million in new spending to the market at a compound annual growth rate (CAGR) of 2.9%.

California Department of Corrections and Rehabilitation "Year at a glance" report

Last fall, the California Department of Corrections and Rehabilitation (CDCR) released its "Year at a Glance" report, which highlights major accomplishments from 2009-2010, along with data on current activities and populations within the state's correctional facilities. From a contracting perspective, this report provides valuable insight into the department and outlines areas that are or could be in need of advanced technology measures. It also provides a breakdown of budget totals. Since the majority of IT contracting within corrections facilities goes toward inmate and parole supervision, the analysis below should be helpful in framing proposal plans for 2011. Additionally, GovWin has produced a more detailed Analyst Perspective on this report which outlines budget figures for 2011-2012 and provides more action items for vendors.

CDCR numbers:

  • Daily inmate population projected at 163,152 in 2011-2012
  • Daily parole population projected at 107,002 in 2011-2012

Accomplishments:

GovWin's Take: The size of the CDCR is enough to make any vendor salivate at the potential contract value/opportunity. However, given the long-standing nature of correctional contracts such as GPS monitoring, vendors will have to understand that winning these contracts takes years of planning and networking to be atop the list of proposals. It is best for a vendor to develop contacts and relationships now for rebids three to four years down the road.

GovWin has released its State & Local Justice/Public Safety and Homeland Security Market, 2010-2015 report, which analyzes the trends for police protection, corrections, and judicial IT as well as homeland security. Demand for vendor-furnished information systems and services by U.S. state and local public safety agencies will increase from $5.3 billion in 2010 to $6.1 billion in 2015, bringing $800 million in new spending to the market at a compound annual growth rate (CAGR) of 2.9%.

Obama’s FY2012 Budget Request: Cuts and Investments Promise Contentious Debate

On Monday, President Barack Obama unveiled his $3.73 trillion budget proposal for fiscal 2012 which highlights reducing or cutting more than 200 federal programs, while investing in the areas of education, transportation infrastructure and research. With his 2012 budget proposal, the President is aiming to invest in the future of America while reducing overall budget deficits. The goal: reduce deficits down to 3% of GDP by the middle of the decade.

GovWin Federal Industry Analysis (FIA) Initial Observations:

The majority of the proposed cuts are focused in 4 key areas, which don't have significant impact on most federal contractors:

  • Community development grants
  • Housing assistance programs
  • Environment (EPA) and energy efficiency programs
  • Reductions in OCO and Supplemental spending that has occurred in the past

The DoD budget proposes overall spending of $727.4 billion, off 5.8% from fiscal 2011 estimates, with $670.6 billion in discretionary spending. The DoD budget reiterates many of the cuts which have already been announced by Defense Secretary Robert M. Gates. DoD budget highlights include:

  • Cybersecurity: $2.3 billion will be allocated to support improved cybersecurity capabilities within DoD and greater joint planning efforts between DoD and DHS to increase the effectiveness of cybersecurity efforts across Government.
  • Cyber Command will get $119 million to support full operational capability for U.S. Cyber Command, which was established in 2010 to direct the operation and defense of specific DoD information networks.
  • There will be $7 billion in cuts to military construction (not surprising given the amount of money spent on construction under the stimulus package).
  • DoD will begin implementing an in¬novative satellite acquisition approach in order to reduce costs and strengthen the industrial base.

The budget estimates a small increase in federal workforce in 2012 (+0.7% over fiscal 2011 estimates). According to the budget document, hiring will be focused in national security related agencies: the Department of Defense (DoD), the Department of Veterans Affairs, the Department of Homeland Security (DHS), the Department of Justice, and the Department of State.

  • In general this workforce level doesn't bode well for the government's ability to do any significant amount of insourcing, so it will be targeted based on ongoing analysis of internal talent.
  • This is a major driver behind the IT Workforce Capability Assessment being conducted by the CIO Council right now.

On the IT front, there's not much new information within the 2012 budget proposal. Overall, the budget seems to be a continuation of existing plans which have already been discussed. Notable IT highlights include the following:

  • IT budget edges up 1.9% to $79.5 billion. Depending on how the CR plays out, the increase over FY2010 could be higher.
  • Continued focus on cloud computing and the 25-point Implementation Plan.
  • The continued build-out of the Challenge.gov and Performance.gov portals.
  • Increased emphasis on cybersecurity, although much of what's in the budget in terms of target areas is well-known.
  • Sets agency-specific targets for data center consolidation (to be covered in a separate blog), intended to track to the goal of consolidating at least 800 data centers by 2015.

Specific IT budget information is still trickling in, but early indicators point to a mixed bag of positive and negative growth. We anticipate moderate growth in the request for Transportation and Education departments considering Obama's pledge in these areas in his State of the Union address. Justice is positioned for a potential hit – both the budget request and the House Appropriation committees proposals target cuts to the Justice budget.

GovWin's Take:

  • Whether this budget is a starting point for Congress or will be completely scrapped by and started fresh, expect a highly contentious battle over the depth of cuts. The Obama administration has positioned this as a down payment for the future, which critics are interpreting as a lukewarm attempt at making hard decisions about cuts.
  • Expect close scrutiny of the highlighted savings. We believe that some line items presented as savings may be objected to during political debate. For example, some agencies have major declines in 2012 vs. 2010 are due in large part to significant reductions or elimination of supplementals (e.g., military OCO and supplementals to DHS of $5B in 2010 that don't exist (at least not yet) in 2012 budget), which will undoubtedly be debated as true "savings".
  • Despite the potential criticism of touted program savings, the "Administratively Implemented Savings," as reported in the budget (aka "things we've done on our own to improve efficiency and reduce costs") highlight a reliance on IT. The budget request lists 16 initiatives/actions that will result in $120M in savings in FY12, 10 of which rely on the use of IT to streamline operations (see table below).

Source: FY2012 President's Budget Request

The ability of IT to reduce costs by introducing efficiency and integrating redundant systems bodes well for IT in the future, and may even be spurred by the pressure on topline spending. The FIA team is knee-deep in budget documents and will continue to provide analysis. Stay tuned for future blogs and our upcoming report focused exclusively on the FY2012 budget request.

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