Jun 09 2022

Federal Agencies Can Benefit from the Technology Modernization Fund

Increased funding and flexible repayment plans make TMF money more available for modernization.

The 5-year-old Technology Modernization Fund has provided an extra pool of money for federal agencies who haven’t been able to get sufficient IT modernization cash through the regular budget process. As of early June, the TMF has invested in 23 projects across 14 agencies; one of those projects is classified.

For a relatively young funding source, however, the TMF has undergone some significant changes, including a mind-bending increase in the amount of money available to agencies and adjustments in the way agencies are required to pay back the money (the TMF is more of a loan than a grant).

With all the adaptations, changes and increased funding for this important program in the past year or so, agencies are looking for more information on exactly how it works and what it can do for them.

“There’s a billion dollars there, but that doesn’t mean they give it up easily,” says Guy Cavallo, CIO of the Office of Personnel Management, one of the agencies that has received the funding. “They want to see successes.”

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What Is the Technology Modernization Fund?

The Technology Modernization Fund, or TMF, was created in 2017 as an alternative funding source for agencies that wanted more flexibility in their IT funding. In recent years, the regular budget approval process has been slowed by both political wrangling and government shutdowns.

Initial funding for the TMF’s first year in fiscal year 2018 was $100 million. In all, it’s received $175 million through the annual budget process.

Agencies apply for financial and technical assistance for well-defined projects. The U.S Department of Agriculture, one of the first to be awarded TMF funds, used its $4 million to upgrade its Farmers.gov portal. The Department of Housing and Urban Development, another of the first agencies funded, spent $13.8 million to migrate away from legacy mainframes and COBOL-based applications; that project is expected to be completed this year.

Other funded projects include three related to the creation of zero-trust architecture, a transition to a cloud-based email service and e-certifications for employers looking for certain types of work visas.

LEARN MORE: How does the Technology Modernization Fund prioritize funding?

Only two of them have experienced delays, and “not a single project resulted in a cost overrun,” said Rep. Gerald Connolly, D-Va., chairman of the House Subcommittee on Government Operations, at a hearing on the fund in May.

Agencies that used TMF money to pay for IT projects say they couldn’t have completed those projects without it. “This project is something we had wanted to do for years,” Kevin Cooke, HUD’s principal deputy CIO, told FedTech in 2020.

The TMF is now so popular as a funding vehicle that its board is considering 130 proposals from 60 agencies and their components, totaling $2.5 billion, Connolly said at the hearing.

How Does the Technology Modernization Fund Work?

To get the money, agencies must first submit an initial project proposal (IPP) to the TMF board. The IPP must describe a problem that could not be fixed without the funding, outline the impact of the technology on users and the expected outcome of the project, and describe the key milestones and metrics for success.

The proposal must be clear in direction. As the TMF website notes, “Initial Project Proposals must be limited to two pages and are intended to provide the Board with a high-level overview of the project, the problem to be solved and the amount of money required to deliver.”

If the IPP is approved, the agency then submits a full project proposal with all the details.

When a project is approved, the agency does not get all the funding at once. It receives the money in increments; if it meets the targets for the first batch of funding, it gets the next batch, and so on. The TMF board reviews the projects quarterly and can ask agencies to adjust what they’re doing if the board doesn’t like what it sees.

“It is critical that the Office of Management and Budget and GSA continue to work with agencies to improve the quality of TMF proposals in order to get the most return on future investment,” David Hinchman, the acting director of IT and cybersecurity for the Government Accountability Office, testified at the House hearing.

DIVE DEEPER: Hear what government CIOs have to say about modernization.

If an agency needs assistance, it can call on the U.S. Digital Service or IT Modernization Centers of Excellence teams from the General Services Administration for help. USDA, for example, was the first agency to be selected for the GSA COE program and also received TMF funding. The two can work in tandem.

Once the project is complete, the agency must repay the TMF. Terms depend on the agreement between the board and the agency. The first installment must be paid no more than 12 months after receiving the first incremental payment. Agencies can also negotiate partial or minimum repayment.

A May GAO report, however, found that agencies weren’t repaying as much as promised. Often, the money was to come from savings derived from the modernization project, but GAO found that the amount of savings was frequently underestimated.

As a result, Raylene Yung, the executive director of the TMF for the GSA, told the House committee that “we’ve made a number of improvements to the way that we communicate with our agencies and the public. We now provide written guidance on our website and in each and every kickoff email that we send to new investments.”

How Has the Technology Modernization Fund Changed?

TMF received little additional funding after the initial allocations, but IT modernization remained a critical issue. Technology funding became an even larger problem once the COVID-19 pandemic began and agencies began working remotely, needing new IT to make it happen.

In 2021, the American Rescue Plan (ARP) sharply increased the amount of money available for TMF projects to $1 billion. Still, it may not be enough, given the $2.5 billion in projects under consideration. The fiscal 2022 budget provides no more money above what was made available through the American Rescue Plan.

VIDEO: See how three agencies used technology to adapt to telework.

In addition, a process introduced in May 2021, after the ARP’s passage, prioritized investments to proposals involving modernizing high-priority systems, cybersecurity, public-facing digital services and cross-government services, and infrastructure.

The American Rescue Plan also relaxed repayment provisions somewhat, giving agencies flexibility on projects “that help agencies respond to gaps exposed by the SolarWinds incident and meet the demands of the COVID-19 pandemic,” according to the TMF website.

How Can Agencies Use the Technology Modernization Fund Correctly?

Getting past the first IPP step, however, is not simple. “I was successful in getting one of my six proposals approved,” Cavallo said at the GITEC Emerging Technology Conference in May. “Two of them are still on life support, and three of them are dead.”

OPM will receive $9.9 million to create a zero-trust environment for the agency and meet the requirements of the White House’s executive order on zero-trust security. Cavallo had help crafting the IPP from his CISO, James Saunders.

“The secret here is to get feedback on your proposal before you actually go to the board with it,” he says. “We went back and forth two or three times on zero trust, so that by the time we presented it to the board, we were in really good shape.”

A different modernization project that didn’t meet approval hit a roadblock because “I listed systems to modernize, but I didn’t justify them,” Cavallo says. The next time his agency submits the proposal, it will be far more specific, he adds.

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