New TMF Guidelines Remove Barriers for High Priority Modernization Projects

Key Takeaways:

• New OMB guidelines encourages agency TMF submissions in high capacity and criticality areas to expedite impact of the $1B awarded by the American Rescue Plan.
• Agencies now have several options to repay TMF loans: full, partial or minimal reimbursements.
• In anticipation of increased activity under the TMF, GSA establishes a project fee schedule for the program to cover administrative and management costs.

Making its debut in 2017 by the Modernizing Government Technology Act, the Technology Modernization Fund serves as a vehicle to address federal IT modernization challenges. Agencies may apply for a TMF loan and if awarded, receive funds and technical expertise to modernize programs that serve the American public. Since then, projects such as Enterprise Cloud Email at DOE, Farmers.gov Portal at USDA and UNISYS Mainframe Migration at HUD have utilized the TMF structure to jump-start the initiatives.  

Enter the American Rescue Plan (ARP). The latest COVID-19 stimulus package in March provided a whopping $1B in additional TMF funding (whopping because the TMF only received $150M up until that point), widely turning contractor heads. The boost in funding targets new cross-government IT and cybersecurity programs in the wake of the pandemic and recent cyber incidents.  

In an April letter from the Committee on Oversight and Reform to OMB and GSA, congressional members urged agency leadership to produce new guidelines detailing how the additional funding will be prioritized and spent to expedite impact on federal modernization. Specifically, the Committee writes that “to ensure the most immediate and effective investment of the $1 billion TMF appropriation, we understood that the reimbursement model would need to be relaxed in the American Rescue Plan.”

In response, the two agencies issued new guidance yesterday outlining changes in the TMF process regarding the additional appropriations from the ARP. The new guidelines namely address alterations to the repayment model and institute TMF fees.

Updated Reimbursement Model

The TMF proposal process will remain the same. Agencies will submit an Initial Project Proposal (IPP) for review and preliminary determination by the TMF Board. Thereafter, agencies provide the Board with a Full Project Proposal (FPP) with detailed project and financial analysis. GSA, in coordination with OMB, will approve terms of repayment not to exceed five years. Whereas the TMF required full repayment before, the new guidelines provide agencies with additional alternatives in the repayment process, essentially removing the largest obstacle in applying for TMF assistance:

• Full Repayment. Single agency investments yielding direct financial savings will continue to follow the full repayment model.
• Partial Repayment. Program proposals indicating positive public and agency operational impacts may request a 25%, 50%, or 75% repayment level.
• Minimal Repayment. Flexible repayment plans considered for the “most urgent IT cybersecurity and modernization problems facing our government…this includes those proposals that help agencies respond to gaps exposed by the SolarWinds incident and meet the demands of the COVID-19 pandemic, and can include projects not included in the proposed Cyber Reserve funding in the FY2022 budget.”

TMF Project Fees

Moreover, to address an expected increase in TMF administrative and management costs, GSA will establish and update an annual TMF project fee schedule for agencies. While the new guidelines do not detail what those loan fees will be, the guidelines stipulate, “GSA may introduce project fee caps intended to ensure projects with a high cost are paying an appropriate fee that is proportional to the TMF Program Management Office’s administrative workload.”

Prioritizing Projects

In conjunction with the outlined purposes for TMF funding by the ARP, OMB states that the Board will prioritize projects in four main areas: high priority systems, cybersecurity, public facing systems and government-wide shared services. In particular, the Board is targeting projects that will address immediate security concerns, crosscutting agency modernizations and public access to government services. OMB sums up the driving force behind the new guidelines in one statement, “if your agency has a project that would produce significant positive impact or would address critical security or capability gaps, we strongly encourage you to submit an initial proposal to the Board for consideration.”

Given this, the TMF Board is likely to see an uptick in agency program submissions. Contractors interested in a slice of the additional TMF funding should review their offerings against the areas of significance described above, and identify the agencies with the greatest need in these priorities.

OMB is advising agencies to submit proposals for the additional TMF funding by June 2.