The White House Releases Final MGT Act Implementation Guidance

Published: March 21, 2018

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New guidance provides agencies with IT modernization funding flexibility.

The Office of Management and Budget (OMB) published a memorandum at the end of February 2018 providing guidance to federal agencies seeking to use Modernizing Government Technology (MGT) Act funds for IT programs. The memo offers insight into how IT modernization efforts will be chosen, approved, and funded that could prove useful to government contractors. If your company is in the business of providing IT services to government agencies you should know at least the basics contained in this memo.

As a reminder, Congress passed the MGT Act as part of the Fiscal Year 2018 National Defense Authorization Act. The MGT Act itself contains two provisions that address agency IT modernization:

  • First, it established a Technology Modernization Fund (TMF) and Technology Modernization Board (TMB) to fund and oversee modernization efforts.
  • Second, it authorized all CFO Act agencies (basically all of the government’s major entities) to establish IT Working Capital Funds that can be used for modernization projects.

TMF Funds and Application Procedures

Funding for the TMF was set at $250M over the 2018 and 2019 fiscal years, but since no federal budget has been signed into law nearly six months into FY 2018, this figure could turn out to be irrelevant. In its FY 2019 budget request the Trump Administration requested $210M for the TMF. It remains to be seen if this amount can be enacted. If the TMF’s budget is approved as part of an FY 2019 budget deal, agencies can apply to the TMB for funding modernization projects, with the stipulation that awarded funds must be paid back within five years.

Successful agency proposals must demonstrate the following to be approved by the TMB:

  • Present a strong case for delivering agency mission objectives and offer a strong likelihood of achieving success.
  • Outline achievable project milestones and objectives.
  • Provide financial analysis showing the project can meet objectives within enumerated costs.
  • Leverage commercial technology to the fullest extent possible.
  • Suggest the use of shared services platforms.
  • Have strong program management support.
  • Provide a clear and achievable technical plan.

The OMB states that it expects agencies to use TMF funding to jumpstart projects that may be planned already. In this way agencies can use the TMF to get projects underway and then operationalize them later using ordinary appropriated resources.

IT Working Capital Fund Guidance

The guidance surrounding agency IT WCFs is a bit more involved. The basic parameters are as follows.

Agencies are authorized to establish an IT WCF for:

  • Improving, retiring, or replacing existing IT systems, or enhancing the cybersecurity of existing systems.
  • Transitioning legacy systems to commercial clouds or shared service platforms.
  • Supporting efforts to address evolving threats to information security.
  • Reimbursing funds transferred to the agency from the Technology Modernization Fund.
  • Reimbursing or funding IT programs that have not been denied or restricted by Congress.

Projects designated by agencies for IT WCF funding will be identified on the IT Dashboard and subject to all PortfolioStat and other performance management standards.


Both TMB funding and IT WCFs will address a critical inhibitor of agency IT modernization efforts – the rigidity of the appropriations process. IT working capital funds in particular will offer a flexible way of funding modernization efforts that could allow agencies to buy cloud services as needed, for example. Using a cloud services paid for on an ongoing basis will allow agencies to shut down expensive server farms, repurpose personnel, and even close data centers.

Getting agencies to adopt cloud, however, isn’t the only motivation behind these funding innovations. Improving the security of government systems is also critically important at a time when cyber attacks are increasing in volume and complexity. Agencies now believe that commercial partners can provide more secure capabilities than they can offer themselves, and at a lower cost. Funding proposed in the TMF and via IT WCFs, therefore, will benefit contractors working in the areas of data center optimization, cloud computing, network engineering, and cyber security. Efficiency clauses in the guidance may also work to the advantage of vendors offering artificial intelligence/machine learning capabilities as a way of “improving” or “enhancing” the operation of agency legacy systems.