Bush administration rethinks IT spending

Revised FY 2003 Funding Guidance and Freedom to Manage Initiatives

The Bush administration—looking to weather the economic downturn and increased federal spending in response to the Sept. 11 terrorist attacks—will most likely push agencies to shift some information technology spending as part of larger program priorities in the fiscal 2003 budget, according to agency officials.

For months, White House officials have said that IT programs that can save money, such as e-government initiatives and system consolidations, are a big part of the administration's fiscal plans, said Sean O'Keefe, deputy director of the Office of Management and Budget, in an interview last week with Federal Computer Week.

But after the attacks on the World Trade Center and the Pentagon, budgets could be tighter as spending shifts to pay for the American response, federal officials said. Those programs that can save money should receive higher priority from agencies, while programs and systems that will not bring significant savings could be cut, O'Keefe said.

For big-budget programs that could directly support the war on terrorism, the Bush administration will likely include them in supplemental budget requests, said an agency official, who asked not to be identified.

Congress last week passed one such measure, providing $40 billion for recovery efforts in New York, Virginia and Pennsylvania, and for military action. It is unclear how much of that will be spent on IT.

The terrorist attacks have made federal officials more reluctant than usual to discuss a budget under development. But another federal official said agencies might reorganize their spending priorities. Systems that were on the chopping block before may now have new significance and receive more funding. At the center of the spending shifts is an OMB memo issued Sept. 10, one day before the attacks on the World Trade Center and the Pentagon. OMB has just begun formulating the fiscal 2003 federal budget request President Bush will present to Congress early next year.

The office issued the directive in reaction to the U.S. economy's slow growth in the first six months of the year and the shrinking federal budget surplus.

In the memo, OMB Director Mitchell Daniels Jr. directed agencies to identify 5 percent of their fiscal 2003 discretionary budget request that could be cut if necessary, including IT spending.

"We're telling agencies, 'Rather than have us come up with something you're going to hate, why don't you come up with your best judgment on some ideas to consider?'" O'Keefe said. "Let's have your ideas upfront so that if we've got to go forward with this, we've got some ideas that have been vetted." Agencies have yet to respond to OMB's request.

In the past, agency managers would respond to OMB's calls for possible spending cuts by carefully crafting responses that listed programs someone in the White House or Congress was sure to fight to keep, said an industry official who spent many years in government.

"That list is a kind of fairly tired academic exercise at this point," the official said.

But with shrinking tax revenues, which will likely worsen in the short term because of the economic fallout of the terrorist attacks, the cuts seem more probable, and they could include IT systems if they are part of the programs on the chopping block.

But other IT programs could receive more funding if agencies can prove they will save money. OMB is now more serious about agencies using the reform measures outlined in the President's Management Agenda—such as expanding e-government initiatives and allowing agencies to compete against the private sector to see who can perform government functions most effectively—to provide federal services more efficiently and cheaply if possible, O'Keefe said.

The Bush administration understands that many e-government initiatives require an upfront commitment of funding, and that they are unlikely to yield big savings in the near term, O'Keefe said.

Although White House officials have not speculated on a dollar amount, they believe agencies will save money in the long run, he said.

Any savings will likely be welcomed by the White House as the budget gets tighter and more money goes to national security and military action, said an agency official, who asked not to be identified.