Technology Modernization Fund:

OMB and GSA Need to Improve Fee Collection and Clarify Cost Estimating Guidance for Awarded Projects

GAO-20-3: Published: Dec 12, 2019. Publicly Released: Dec 12, 2019.

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Carol C. Harris
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The General Services Administration and Office of Management and Budget oversee the Technology Modernization Fund, which awards federal agencies funds to replace aging IT systems. As of August, the fund awarded $89 million to 7 projects. Agencies must repay awards and an administrative fee within 5 years.

We found

GSA spent $1.2 million for expenses but collected fewer fees than planned to offset costs

The 7 projects’ savings estimates aren’t reliable because projects didn’t incorporate all cost estimating best practices

We made recommendations to fully recover operating costs in a timely manner and to follow federal cost estimating guidance.

Coding text on a blue computer screen

Coding text on a blue computer screen

Additional Materials:

Contact:

Carol C. Harris
(202) 512-4456
harriscc@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

As of August 2019, the Technology Modernization Board had made seven Technology Modernization Fund (TMF) awards to five agencies, totaling about $89 million, and had transferred $37.65 million of this funding to the projects (see table). In addition, pursuant to the Modernizing Government Technology (MGT) Act, the General Services Administration (GSA) had obligated about $1.2 million to cover TMF operating expenses, but had recovered only about 3 percent of those expenses through fee payments. The seven projects are expected to make $1.2 million in scheduled fee payments by the end of fiscal year 2025; as of August, three projects have made fee payments totaling $33,165. Based on the current schedule, GSA will not fully recover these expenses until fiscal year 2025 at the earliest.

Technology Modernization Fund Project Funding and Scheduled Administrative Fee Collection, as of August 31, 2019 (in millions of dollars)

Project

Total funds awarded

Total funds transferred

Scheduled fee payment based on funds transferred

Fee payment collected as of August 2019

Department of Agriculture Farmers.Gov Portal

10.00

4.00

.12

.003

Department of Agriculture Infrastructure Optimization

5.00

.50

.015

.00

Department of Energy Enterprise Cloud Email

15.22

2.23

.07

.00017

Department of Housing and Urban Development Unisys Migration

20.00

10.00

.30

.03

Department of Labor Visa Application Transformation

3.50

.20

.08

.00

General Services Administration Application Modernization

14.99

3.73

.11

.00

General Services Administration NewPay

20.65

16.99

.51

.00

Total

89.36

37.65

1.2

.033

Source: GAO analysis of agency TMF project documentation as of August 31, 2019. | GAO-20-3

GSA had collected fewer fees than planned to offset costs due to several factors. For example, the seven projects paid fees based on the amounts transferred, rather the total funds awarded, thereby reducing fee collections in the initial years. Two projects also proposed scope changes that are expected to reduce funding required and, thus, reduce total fees. Such factors raise doubts on whether GSA will be able to fully recover future operating expenses. Although GSA acknowledged this issue, the agency has not yet developed a plan outlining the actions needed to fully recover its TMF operating costs in a timely manner.

The Office of Management and Budget's (OMB) funding guidelines require projects to include a reliable estimate of any project-related savings. However, the seven projects' reported savings estimates derived from cost estimates are not reliable. None of the projects incorporated all of the best practices for a reliable cost estimate, as defined in GAO and OMB guidance. Without clarifying the requirement that agencies follow Circular A-11's cost estimating process (that references GAO's cost estimating guidance discussed in this report), agencies are at risk of continuing to provide unreliable cost information in their proposals.

Why GAO Did This Study

In December 2017, the MGT Act was enacted, which established the TMF. OMB, the Technology Modernization Board, and GSA oversee the TMF. The board is responsible for approval of agency project proposals focused on replacing aging IT systems. Agencies receive incremental award funding and are required to repay the funds transferred and an administrative fee within five years. Agencies may use the project's generated cost savings to repay the award. GSA can use TMF appropriations to cover its operating expenses, and is required to collect administrative fees from awarded projects to offset these expenses. GSA's fee rate was established with the intent to fully recover its costs. As of August 2019, Congress had appropriated $125 million to the TMF.

The act included a provision for GAO to report biannually on the TMF. For its first TMF report, among other things, GAO analyzed the TMF's operating costs and assessed the reliability of selected projects' cost savings estimates. To do so, GAO reviewed OMB and GSA's administrative fund processes, and GSA financial data on TMF operating costs. GAO also analyzed TMF project proposal and supporting cost estimate documentation from selected agencies.

What GAO Recommends

GAO is making five recommendations—two to OMB and three to GSA, including developing a plan to fully recover operating costs and clarifying that agencies should follow required cost guidance. OMB raised a number of concerns that GAO addresses in the report. GSA agreed with one recommendation and partially agreed with the other two. GAO continues to believe all of its recommendations are appropriate.

For more information, contact Carol Harris at (202) 512-4456 or harriscc@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: The Office of Management and Budget (OMB) has not yet taken any actions to implement our recommendation. We will continue to monitor OMB's progress in implementing this recommendation.

    Recommendation: The Director of OMB should develop and implement a plan with GSA that outlines the actions needed to fully recover the TMF Program Management Office's operating expenses with administrative fee collection in a timely manner. (Recommendation 1)

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of the Director

  2. Status: Open

    Comments: The Office of Management and Budget (OMB) has not yet taken any actions to implement our recommendation. We will continue to monitor OMB's progress in implementing this recommendation.

    Recommendation: The Director of OMB should work with GSA to clarify the requirement in the TMF guidance that agencies follow the cost estimating process outlined in Circular A-11 (that references GAO's cost estimating guidance discussed in this report), when developing the proposal cost estimate. (Recommendation 2)

    Agency Affected: Executive Office of the President: Office of Management and Budget: Office of the Director

  3. Status: Open

    Comments: The General Services Administration (GSA) has not yet taken any actions to implement our recommendation. We will continue to monitor GSA's progress in implementing this recommendation.

    Recommendation: The Administrator of General Services should develop and implement a plan with OMB that outlines the actions needed to fully recover the TMF Program Management Office's operating expenses with administrative fee collection in a timely manner. (Recommendation 3)

    Agency Affected: General Services Administration

  4. Status: Open

    Comments: The General Services Administration (GSA) has not yet taken any actions to implement our recommendation. We will continue to monitor GSA's progress in implementing this recommendation.

    Recommendation: The Administrator of General Services should work with OMB to clarify the requirement in the TMF guidance that agencies follow the cost estimating process outlined in Circular A-11 (that references GAO's cost estimating guidance discussed in this report), when developing the proposal cost estimate. (Recommendation 4)

    Agency Affected: General Services Administration

  5. Status: Open

    Comments: In comments on our report, the General Services Administration (GSA) concurred with our recommendation but has not yet taken any actions to implement our recommendation. We will continue to monitor GSA's progress in implementing this recommendation.

    Recommendation: The Administrator of General Services should develop detailed guidance for completing the Technology Modernization Fund project cost estimate template, including information on the data elements and the fields required to be completed, in order to help ensure the accuracy and completeness of the provided information. (Recommendation 5)

    Agency Affected: General Services Administration

 

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