Where Will the New $1 Billion in IT Modernization Funds Go?

Even before its passage by Congress, the $1.9 trillion American Rescue Plan Act of 2021 (ARP) had captured the attention of federal contractors due to the information technology (IT) provisions in the bill. As it became clear that the bill would became law, we began receiving questions from contractors who wanted to know where the funds for IT would be spent and for what.  

Not so fast. The first thing to remember is, at its core the ARP is a COVID-19 economic relief bill aimed at stimulating the private economy and furthering coronavirus response efforts, much of which passes through to states to administer.  Even so, some significant funds were appropriated for information technology (IT) at federal agencies and various other non-COVID-19-related items.

One element of the ARP that is of special interest to federal IT contractors is the $1 billing in new funding for the government-wide The Technology Modernization Fund (TMF). Although far short of Biden’s original proposal for Congress to provide $9 billion for the TMF “to help the U.S. launch major new IT and cybersecurity shared services at the Cyber Security and Information Security Agency (CISA) and the General Services Administration and complete modernization projects at federal agencies,” the final $1 billion amount is an order of magnitude increase. Since its inception under the Modernizing Government Technology Act of 2017, Congress has funded the TMF with $100 million in FY 2018 and $25 million in each subsequent fiscal year. The $1 billion influx is good through FY 2025.

What Contractors Need to Know about the TMF

Naturally, IT contractors are interested in knowing where the new TMF funds will be going – to which agencies and for which IT modernization projects. Typical of most funding legislation, the ARP does not prescribe specific initiatives in the text of the legislation. If only it were as simple as going to a web site with a wish list of federal modernization projects, but it is not quite that simple.

For contractors that may have overlooked the TMF until now, the first task is to become familiar with the TMF proposal process agencies are required to follow to request TMF dollars as well as the selection criteria by which funding decisions are made. The General Services Administration (GSA) administers the TMF and provides support through their TMF Program Management Office (PMO) to applying agencies throughout the process, from initial concept and proposal development to final award.

In the current federal IT environment in the wake of the SolarWinds and Microsoft Exchange cybersecurity incidents it is noteworthy that two of the permanent TMF Board members include both the U.S. Chief Information Officer at the Office of Management and Budget (OMB) and the Deputy Assistant Director for Cybersecurity at the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA).

The current TMF process includes posting awarded projects to the TMF web site once they are awarded. While that is helpful to show what types of projects the Board likes and what agencies already have underway, it does not provide visibility into potential projects or what agencies might be considering. Understanding agency future modernization plans requires potential supporting contractors to research and investigate the needs of those agencies. No small task.

Where Will the ARP Money Go?

Agencies and contractors anticipating that the new TMF funding will follow the traditional path may need to adjust their expectations. In a recent interview, Deputy Federal CIO Maria Roat indicated that the $1 billion in funding was meant to target government-wide technology needs, particularly around agency pandemic response and major cybersecurity vulnerabilities like those exposed by the SolarWinds and the Microsoft Exchange incidents. This fits with how CISA has said they intend to use the $650 million in ARP funds they received, to address critical cybersecurity needs across the government.

Changes to TMF Coming

As part of the original Biden funding request was a proposal to eliminate the existing TMF payback model where agencies that receive funding pay back the funds over several years. Congress did not address TMF structure or processes in the ARP, but Roat indicated that OMB believes it has the latitude to adjust or eliminate the payback structure without action from Congress.

Another area where Roat signaled that change is likely is in current “pitch and approval” process whereby agencies present proposals to the Board and answer questions. While that will remain true for most projects, Roat suggested some alterations may be made for the large government-wide efforts that the Board wants to tackle, although she did not elaborate.

A growing coalition of industry associations has called on the Biden Administration to both revamp the TMF process that they deem is “unnecessarily complicated and restrictive” and to use the new TMF funds to address pandemic response and cybersecurity, but also to go beyond that to improve agency digital services and address other agency modernization needs.

Contractor Considerations

The TMF may pursue the pandemic response and cybersecurity priorities Roat mentioned, but it is still unclear exactly how such government-wide efforts will proceed. It is possible that we could see a mixture of government-wide/multi-agency awards combined with individual agency awards that work in concert to achieve OMB’s and CISA’s goals. In some ways, it may be likened to a program that chooses a systems integrator to coordinate the larger project and multiple niche companies to offer targeted products and expertise.

Contractors interested in getting a piece of the action need to assess how their offerings fit with the above priorities and map those against the agencies that have the greatest needs and do the legwork to confirm their assessments. It is possible that we will continue to get additional insight into the TMF plans, but given the limited transparency of the existing TMF process we may not know where the funds are going until they are awarded.