Moratorium on financial projects could leave staff in the lurch

The uncertainty caused by the White House's recent move to halt development of all financial management systems for an unspecified period could affect talent retention and budgetary planning, according to some industry representatives and contracting reform activists.

The White House in June put a blanket freeze on all financial system modernizations -- a historically expensive category of projects -- to pare back construction timetables and expectations. About 30 systems worth a total of $3 billion annually and $20 billion over project duration were affected. The action followed a Veterans Affairs Department announcement last July that it would suspend 45 information technology projects that were either over budget or behind schedule. The department restarted most of the initiatives within five months, except for a project to modernize its online training system, which remained on hold for nearly a year, VA officials said on Tuesday. They declined to comment on the reason.

The goal of both the White House and VA efforts was to stanch wasteful spending by overhauling, scaling back or canceling projects. VA scrapped 12 of the 45 projects last year. While there is much controversy over the Obama administration's threat to cancel projects, the potential ramifications of the unprecedented freeze also are stirring debate. Top-notch employees -- on both the federal and contractor sides -- could move on to other work and agency managers might have to guess on IT investment figures in preparing budgets, some acquisition specialists and industry officials said.

"The personnel issue is certainly an important part of this equation," said Trey Hodgkins, vice president for national security and procurement policy at TechAmerica, a trade association. "Either the government employees will be devoted to something else, or the contract employees will be shifted to something else. Then we don't have the skills that are needed for when it's time to go back to work."

Alan Chvotkin, executive vice president and counsel for the Professional Services Council, a group representing contractors, said the Office of Management and Budget must be sure to keep lines of communication open with agencies. "In fairness to the agencies -- in executing the agency's budget -- they've got to give agencies some feedback," Chvotkin said.

Agency officials are in the process of drafting their spending proposals for the fiscal 2012 budget, which is expected to be released in February. A senior OMB official on Monday said the timelines for freezes will vary by department, from a few months to half a year.

"I would hope that some of those could be reactivated fairly quickly," Chvotkin said. "I would suspect that 'fairly quickly' and OMB reviews should not be used in the same sentence."

PSC supports the intensive reviews and potential corrective actions but opposes the administration's decision to stop financial projects that were performing well, he said. When VA halted work, the department already had reviewed each IT project and suspended only the problematic ones.

White House officials have said they want financial systems delivered faster and cheaper, which means ridding all projects of superfluous capabilities and expansive milestones. Projects designed to be simple in scope from the get-go likely will resume development sooner than projects that have more complex system requirements, the senior OMB official said.

The administration has set an aggressive timeline for evaluating each project, but officials also want to ensure they are thoughtful and deliberate in reaching those decisions. OMB will take as much time as necessary on reviews to protect the taxpayers' interest, the official said.

The OMB assessments could take longer than the five months VA spent reviewing most projects, according to Hodgkins. "Is there a need for a mitigation plan, a corrective action or is it so bad that we need to kill it? That whole conversation hasn't even begun in a whole host of instances," he said. "Given the pace of government I don't think it's unreasonable to say it could go beyond the release of the 2012 budget."

TechAmerica on July 14 announced it had established a task force to recommend to the White House alternatives to across-the-board freezes on categories of projects. But others in the private sector and government reform realm said in this case, a timeout might be a good solution.

"It's natural to pause for perspective," said Greg Parston, director of the Accenture Institute for Health and Public Service Value, a part of the consulting firm that researches service delivery. If a project requires contractual changes, a freeze could last a year, he speculated about the one VA outlier. The department would have to negotiate with participating stakeholders in such instances, Parston added.

The IT-Acquisition Advisory Council, a relatively new public interest group that supports the administration's bold tactic, said taking an extended break on huge, high-risk programs has enough upsides for the taxpayer and the agency to outweigh the potential of losing good people.

"It is logical to take such a disastrous sequence of failures and look at the root causes. Are there a few programs that will suffer? Yes. But will the best interests of the taxpayer be served? Yes," said John Weiler, founder and a vice chairman of the Interoperability Clearinghouse, a nonprofit collaboration of standards associations, research organizations and IT firms.