Apr 25 2013

How Agencies Can Handle Their Budget Challenges

Sequestration and debt ceiling battles put CIOs in a tough landscape that demands strategic thinking to survive.

Budget issues have dominated the news in recent months: sequestration, continuing resolutions, fiscal year budgets, debt ceilings and so on. These woes create a difficult decision-making environment for CIOs. IT leaders should strive to find effective strategies as they navigate these treacherous waters.

Management by Meat Cleaver

In my years in Washington, I have observed a distinct evolution in federal leadership on the budget — from micromanagement to the current sequestration process, which has been called “management by meat cleaver.”

In the micromanagement environment of decades past, Congress directed spending at the sub-program and even object-class levels. Capitol Hill set not only a maximum spending level but also a minimum to be spent. Complicating matters further, to comply with appropriations law, we had to add complex features to our financial systems to keep track of actual spending under all these rules. I thought this level of congressional direction was insane, but little did I know we’d see more budget rules that seem crazy.

The Defense Department’s Base Realignment and Closure process was an early step toward where we are now. It was set up as an all-or-nothing proposition, to insulate individual members of Congress from decisions affecting their districts. But BRAC was based on exhaustive, detailed studies, with the best economic choices presented to the political process as a take-it-or-leave-it decision.

Partisan politics and a lack of responsible leadership have transformed management on big budget issues. Lawmakers are content to kick the can down the road and set up a future showdown for someone else to deal with. But in the case of sequestration, no one dealt with it, and the results do a disservice to the nation, as well as to the executive and legislative branches of our government.

In the micromanagement environment, a complex set of rules made budget execution more challenging, but at least the situation offered agencies some certainty about their funding. In our current environment, the only certainty is uncertainty. Agency leaders can’t be proactive; they can only react.

Influence by Overstatement

Our system of government has evolved to include the two-party system, which focuses like-minded folks around key issues.

Often, the contrasts in positions on issues have been sharp and contentious, but it sure seems to me that the discussion has changed. No longer do conversations support a position; instead, they focus on attacking the opponent’s position. This change has been heightened by the introduction of new technologies and media that improve access and communication.

While the democratization of communication is a good thing and a key to a more open, transparent government, it also leads to overstatement. News reports regarding the dire impact of sequestration are no exception. Due to its nature, sequestration will have uneven effects and unintended consequences, but it will not have the severe impact that is presented as fact in statements by the administration, Congress and others. The media coverage of sequestration represents a clear example of influence by overstatement.

The Dangers of Acquisition Reform

The federal government is the largest purchaser of products and services in the world. Not only does it buy large quantities, it also purchases very complex things. And since its actions are by nature public, mistakes and abuses often are highly publicized. It’s a tough environment.

Every few years, a new reform effort emerges in an attempt to fix what ails the acquisition system. New laws are enacted and regulations written. Victory is declared. And 10 years later, we do it again, mainly because the reform effort treated symptoms and not the cause.

Congress is at it again, and I am sure lawmakers have a genuine desire to fix the system. But forgive me if I am a bit cynical. I don’t see much “fix” in the draft legislation proposed, and, frankly, I don’t believe Congress can make the system work.

How much confidence do you have that the current reform efforts will make the acquisitions environment better?

Implications for CIOs

CIOs should expect to be in an uncertain budget environment for a long time. Strategic planning and decision-making will be very difficult. Here are a few focus areas for CIOs going forward:

  • Intensify customer outreach, to discuss where cuts are to be taken and the expected impact of these cuts.
  • Focus on current operating efficiencies.
  • Focus on project management, using some form of earned value management, to find and correct problems early.
  • Tightly manage contractor delivery orders and seek efficiencies that can reduce costs and effort.
  • Look aggressively for small-project opportunities to use IT to bring efficiencies or improve performance in mission programs.

Now is not the time for “reach” projects that involve high risk and high reward. Rather, CIOs should hunker down and make management of IT resources as efficient as they can

<p>Steven Puetzer/Getty Images</p>

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