GAO Finds Fault in TMF Sustainability

The Technology Modernization Fund (TMF) continues to capture the attention of key leaders and congressional members. In a recent article by GovCIO Media and Research, Rep. Gerry Connelly and Federal CIO Clare Martorana tout the TMF as a catalyst for modernizing government systems, bolstering enterprise cybersecurity, and enabling equitable and accessible public service delivery.

Not so fast says the GAO. In a December 2021 report, the federal government’s watchdog found that the TMF lacks a plan for a sustainable future. Specifically, operating costs of the fund continue to exceed fee collections due to unreliable costs savings reported by awarded projects.

As a recap, the TMF was instituted in 2017 by the MGT Act to lend funds to agencies to support the modernization of aging federal IT systems. TMF guidelines stipulate that agencies must reimburse borrowed TMF dollars with a pre-determined fee based on the award amount. After picking up little steam in appropriations, the TMF received $1B last year from the American Rescue Plan (ARP) to prioritize and accelerate cybersecurity and high priority IT projects. The program also revised reimbursement guidelines to allow agencies to apply for partial or minimal reimbursement, as applicable.  Since its inception, the TMF has awarded 18 projects across 10 federal agencies, with seven of the projects using ARP funding.

Back to the GAO report. Among its findings, the GAO identified $2.8M in TMF operating expenses since FY 2018, yet the program has only collected 29% of that (or $809M) in fees. A key reason for the disparity lies in several projects reducing award amounts for varying reasons, resulting in nearly $1.1M less in anticipated fees for the TMF.

According to the TMF projects site, six projects deviated from their originally proposed cost estimates after being awarded TMF funds:

Project Name	Original	Modified	Reasoning
HUD Uniysis Mainframe Migration	$20M	$13.8M	Project generated additional internal funds.
DOE Enterprise Cloud Email	$15.2M	$3.7M	Reduction in scope and number of mailboxes anticipated for migration.
USDA Farmers.gov Portal	$10M	$4M	Agency reduced requested allocation to avoid tying up TMF funds due to discovery of additional process re-engineering needed for the technology.
GSA Application Modernization Integrating Flexible Architectures	$15M	$9.8M	Rescope of project determined 12 applications instead of 88 to undergo modernization.
USDA Infrastructure Optimization and Cloud Adoption	$5M	$500K	Combination of generated internal funds and revised reduction in scope.
GSA NewPay Payroll and Work Schedule and Leave Management SaaS	$20.6M	$17M	Reduction in scope due to uncertain timing of appropriated funds associated with project.

Based on the above chart, it is interesting to see the TMF’s influence on some of these projects, post-award. For example, a few TMF awards captured enough attention from agency leaders to prioritize and produce internal funds. In other cases, some projects shifted away from their original proposals upon initial fund distribution and revaluations of scope. Still others, forfeited portions of awarded TMF money because of schedule and cost delays.  Nonetheless, it is this instability that has the GAO concerned about the TMF’s financial books.

The GAO report also sheds some light on the contracts that have resulted under TMF-funded projects. Since the TMF’s inception:

• A total of 82 contracts or task orders have been awarded under 10 of the 18 TMF-awarded projects
• Projects with the largest number of contracts/task orders include:
  • EEOC Charge and Case Management System Modernization: 18
  • GSA Application Modernization: 17
  • USDA Specialty Crops System Modernization: 15
  • GSA NewPay: 13
• Officials reported 77 of the 82 contracts/task orders underwent full and open competition, with the remaining awarded as sole sources
• Officials used the federal supply schedule and government-wide acquisition contracts, as well as existing contracts and blanket purchase agreements to award contracts/task orders under TMF-funded projects

Note that these figures include numbers from GAO’s December 2019 report on the TMF.

Overall, despite the GAO’s concerns over the TMF’s fee collection and unreliable proposal cost estimates, the program continues to receive strong support from members of Congress and federal IT leaders. Given this and the number of contracts and task orders awarded from TMF-funded projects, contractors should continue to track the program’s activities for potential opportunities.

Commenting on the TMF’s 2022 action items, Martorana shared that the board will award the remaining ARP funding, prioritizing investments in cybersecurity, modernizing high-priority systems, and cross-agency customer-facing services.