Federal IT Capital Planning and Investment Control (with CD)

by Thomas G. Kessler, Patricia A. Kelley

Overview

Reduce risk and improve the overall performance of IT assets! Federal IT Capital Planning and Investment Control is the first book to provide a comprehensive look at the IT capital planning and investment control (CPIC) process. Written from a practitioner’s perspective, this book covers a range of topics designed to provide both strategic and operational perspectives on IT CPIC. From planning to evaluation, this valuable resource helps managers and analysts at all levels realize the full benefits of the CPIC process.•Explore the full range of IT investment principles and practices •Learn CPIC project management techniques including earned-value management, integrated baseline review, cost-benefit analysis, and risk-adjusted cost and schedule estimates•Identify strategies to improve how your organization manages its IT portfolio and selects, controls, and evaluates investments •Discover how to leverage scarce IT resources and align investments with program priorities •Benefit from the in-depth coverage—excellent for the experienced as well as those new to the CPIC process

Product Details

ISBN-13:	9781567262223
Publisher:	Berrett-Koehler Publishers
Publication date:	03/01/2008
Pages:	374
Product dimensions:	7.31(w) x 10.31(h) x 1.19(d)

About the Author

Thomas G. Kessler, DBA., CISA, has over 30 years of experience as a manager, strategic planner, and information systems specialist. He was a consultant to more than 30 federal agencies from 1996 to 2006. Prior to establishing his own consultancy, Dr. Kessler worked for the Board of Governors of the Federal Reserve System, Westinghouse Electric Corporation, and the Maryland State Judiciary. Dr. Kessler is co-author of The Business of Government: Strategy, Implementation, and Results, with Patricia A. Kelley. He is a frequent speaker at professional conferences.
Patricia A. Kelley, DPA, CISA, has over 25 years of strategic planning, program evaluation, and operational management experience. She has provided management consulting support to more than 30 federal agencies, and has held senior management positions with the Federal Reserve Board. Dr. Kelley has also worked extensively with the Federal Reserve Banks on automation and payment system policy matters, and has acted as the liaison to other federal banking regulators. Previously, Dr. Kelley evaluated the effectiveness of various federal programs for the U.S. Government Accountability Office.

Read an Excerpt

CHAPTER 1

Overview of Capital Planning and Investment Control

Perfect order is the forerunner of perfect horror.

— Carlos Fuentes, Mexic an auth or

After the Clinger-Cohen Act became law in 1996, its implementation progressed slowly. By the early 2000s, federal agencies were still struggling to implement IT investment management principles, largely because of resistance to changing long-standing approaches, power arrangements, and organizational culture. Substantial effort and resources were expended to implement CPIC processes to comply with Clinger-Cohen requirements, but many implementations were guided by two principles: (1) merely comply with OMB requirements and The only practical way for an agency to maximize return on its IT investment is to treat its collective set of IT assets as a portfolio and to actively analyze, strategize, monitor, and manage the entire portfolio so that it achieves optimal performance. (2) do so in a way that does not interfere with "how we do business because we are very busy and our methods have worked fine for many years."

By 2006, agencies were better positioned to meet Clinger-Cohen and OMB requirements for IT management reform, yet progress was still inconsistent and erratic. Today, most agencies have implemented CPIC processes and are now wrestling with the challenge of instituting change in their organizational cultures to realize the full potential of CPIC.

This chapter presents an overview of the CPIC process. It discusses CPIC goals, the roles and responsibilities of key participants in CPIC, the formal structure of CPIC, and the documentation necessary to support decision-making and monitoring. It also provides insight into the implications of the CPIC process for an agency and offers suggestions for improving existing CPIC processes, including a checklist for conducting a self-audit.

Maximizing Return on Investment

The only practical way for an agency to maximize return on its IT investment is to treat its collective set of IT assets as a portfolio and to actively analyze, strategize, monitor, and manage the entire portfolio so that it achieves optimal performance. The CPIC process provides the framework for doing so. It should be designed to achieve the following goals:

* Ensure that IT use is aligned with the agency's key performance goals and management initiatives

* Monitor and control IT performance and prioritize the use of the agency's resources so that the IT portfolio provides maximum return on investment

* Maximize success when acquiring or developing new IT systems and control the costs of maintaining existing IT systems

* Provide for an impartial decision-making process that enables those involved in the CPIC process, subject to approval of the agency's executive leadership, to make resource-allocation decisions based on an objective methodology

CPIC requires a formal structure and process that enable those who are involved at various times to move in and out of their CPIC roles and responsibilities based on the timing and needs of that involvement. The efficiency and effectiveness of an agency's CPIC structure and process will determine, to a large extent, whether agencies are really maximizing return on investment or just going through the motions of OMB compliance and wasting valuable time and resources.

Although numerous approaches can be followed in designing the CPIC structure and process, we have characterized a general approach that can be customized to meet the unique needs and context of a particular agency. In adapting this approach, an agency should include the following elements:

* Senior leadership must be actively involved, and programs must be represented.

* Sufficient data collection and analytical resources must be available.

* There must be a single decision point for IT project approval and resource allocation decisions.

* CPIC must be integrated with other agency processes, including the budget, strategic planning, procurement, security, and project management.

* The process must comply with the requirements of OMB Circulars A-130 and A-11.

* The process should reflect the varying levels of importance of the agency's investments; small investments should not require an unduly burdensome drain on the time and resources needed to manage the investment.

* CPIC should be as simple and efficient as possible, to minimize the burden on those who are involved part-time in the process.

Roles and Responsibilities

An effective CPIC process requires the support and involvement of key individuals throughout the organization. The Clinger-Cohen Act appropriately shifted strategic IT decision-making from the CIO to the executive leadership and programmatic leaders of the organization. As a result, executives, senior managers, and agency staff across the organization have specific roles to play in the CPIC process.

Agency Head

As with most major strategic initiatives, the agency head (in the case of cabinet-level departments, the secretary) sets the tone for how the process will be received throughout an agency. For CPIC to be more than a mere exercise in compliance, the agency head must champion the process through demonstrated actions such as:

* Describing and supporting the CPIC process through formal policy announcements

* Requiring that IT decisions be made through the CPIC process and ensuring proper linkage of CPIC to the budget

* Requiring formal reporting mechanisms for major IT initiatives j Fostering creative uses of IT that further the agency's mission and improve efficiency

* Preventing "end runs" around the decision-making, control, and evaluation processes

In short, the agency head, while not needing to be involved in CPIC on a tactical basis, should be the catalyst for instituting and supporting IT management accountability and stewardship.

Assistant Secretaries

An agency head generally establishes broad policy goals and a vision of success for the agency. The assistant secretaries are then responsible for refining and implementing policies to achieve the vision. This same relationship exists for complying with Clinger-Cohen and implementing the vision of the agency head for maximizing return on IT investment. Successful CPIC requires that assistant secretaries be actively engaged in CPIC to position and deploy technology so that it supports mission achievement.

Assistant secretaries, generally working through subordinate senior managers, are able to communicate that the agency takes its IT investment management responsibilities seriously. Senior-level commitment is vital because assistant secretaries are best able to deal with the resistance, inertia, confusion, political gaming, and turf guarding that can derail an effective CPIC function. During the first two or three years of implementation, while the process is being institutionalized, secretary-level executives must actively oversee the establishment of the CPIC framework and the agency's commitment to enforcing cultural change.

Senior Program Managers

Senior program managers play a critical role in the CPIC process on both a strategic and tactical level. They are responsible for making investment choices and monitoring the performance of existing investments. They are directly responsible and accountable for assets that support their respective programs, and they must be involved in providing sufficient oversight and management. It is the senior program managers who will be most affected by the CPIC process in terms of time commitment, decision-making responsibilities, pressure to compromise, and assignment and acceptance of accountability.

Chief Information Officer

The CIO is central to the CPIC process, playing important roles in its design and implementation, representing the agency to OMB, ensuring compliance, and providing advice to all participants, including the agency's executive leadership. The CIO's staff generally supports the decision-making and monitoring processes by collecting and analyzing data that are presented to senior management. The CIO also ensures that participants understand the risks and implications of their decisions.

In most agencies, the CIO is responsible for both IT policy and strategic direction and for overseeing system development and operations functions. For this reason, the CIO plays an additional key role in implementing CPIC practices at the project team level. This includes working to overcome any cultural resistance, promoting the importance and benefits of CPIC, and ensuring that project teams fully participate in and support CPIC activities.

Chief Financial Officer

The CFO typically has more expertise in investment management concepts and principles than others in the agency and is therefore more likely to be supportive than most other agency executives by serving as the principal steward of agency financial resources. The CFO's staff of financial analysts can independently analyze and assess business cases and IT financial analyses and can be invaluable as active CPIC process participants. The best CPIC results are realized when the CFO and CIO work together to ensure that the process is used and that everyone actively participates.

Chief Acquisition Officer

The chief acquisition officer (CAO) plays a critical role during the planning and acquisition phases of the investment life cycle. With increased reliance on purchasing off-the-shelf systems and using contractors to support system development, use of the acquisition process to competitively select qualified vendors has become a key to investment performance and success. The CAO representatives develop market research and contracting strategies, and they provide leadership and support throughout the acquisition process.

The CAO is also responsible for ensuring that Clinger-Cohen acquisition reforms, such as incremental and modular contracting and performance-based acquisitions, are implemented. Contracting officers must be trained in and supportive of efforts to ensure that IT risk is equally distributed between the government and its IT contractors. The CAO staff should be responsible for reviewing and approving investment acquisition plans and should be active participants on integrated project teams.

End-Users/Customers

Although they are sometimes treated as an afterthought, the actual end-users, or customers, of an IT initiative must be involved throughout the CPIC process. End-users identify new uses of technology, provide feedback on the performance of IT investments, provide system requirements, approve system designs, and oversee implementation and subsequent operations and maintenance activities. They are also typically involved in preparing investment business cases and are important liaisons to CPIC oversight committees.

Agency Sponsor

Agency sponsors typically are executives or senior managers who need and want an IT system to support a particular program or activity. They are the primary IT system user. As such, they likely initiate the investment, include funds within their own program budget on an annual basis to pay its costs, and "contract" with the IT organization for development, maintenance, and operational support. In some cases an agency sponsor may consist of only a single program or organizational unit and in others there may be multiple programs or organizations that establish joint sponsorship. Sponsors, like champions, play a critical role in the CPIC process. Sponsoring organizations are the "buyers" of IT resources and beneficiaries of IT return on investment. As such, their CPIC role is to maximize their IT return on investment.

Investment Champion

While some agencies may not perceive a need to designate investment champions, those that have done so report that they are extremely satisfied with the results. The investment champion is typically someone from the sponsoring organization who understands and is enthusiastic about the investment. The champion is more effective if he or she is in a management position and/or has sufficient tenure and experience in the organization to know and deal with internal politics and processes.

The investment champion serves as the sponsor for a potential investment and often is the individual who came up with the idea or need for the IT project. The champion plays a critical role in creating enthusiasm for the investment and working with various groups to ensure that an effective business case is developed and that the project is accurately portrayed and explained as it proceeds through the review process.

Investment Manager

Historically, the primary technical manager associated with a system was the IT project manager. The project management role during major development is quite different from the role during ongoing operations and maintenance, and often the development project manager would discontinue his or her involvement with a project once it became operational. For example, the development project manager would typically develop a budget and project plan covering just the development phase of the investment. This created a sense of discontinuity in terms of leadership for an investment over its entire life cycle.

Because CPIC encompasses the entire investment life cycle, investments need managers that are different from traditional IT project managers, hence the introduction of an investment manager role. An investment manager is responsible for an investment over its entire life cycle. He or she may have several technical project managers reporting to him or her over time, but is responsible for preparing and justifying the investment budget throughout its various phases.

The CPIC Organizational Structure

Most agencies have an executive committee of some sort, composed of agency program leaders, often at the assistant secretary level, and chaired by the head of the agency. This executive committee is responsible for overseeing all policy, operational, and administrative functions. CPIC is most effective when it is tightly integrated with the executive committee. The executive committee should therefore establish an IT investment review board (ITIRB) as one of its standing committees and charter it to provide CPIC oversight. The ITIRB should brief and interact with the executive committee on a regular basis.

IT Investment Review Board

The ITIRB is the executive decision-making body for the CPIC process, setting goals and objectives for the agency's IT portfolio and making decisions about the portfolio composition. While the CIO should always be an ITIRB voting member, an executive committee member other than the CIO should chair the ITIRB to demonstrate the agency's commitment to user involvement and oversight of IT resources. The other ITIRB members can include executive committee members or their designees who will represent their interests. Figure 1-1 presents a generic CPIC organizational structure.

The ITIRB is chartered to:

* Ensure that an agency-wide methodology is used to depict and assess agency performance, processes, information needs, and alignment of IT resources

* Review material on the status and performance of the agency's IT portfolio

* Approve investment and funding decisions based on presentation of proposed actions to sustain and improve portfolio performance

* Monitor the progress of IT investments and take corrective action if they encounter problems such as falling behind schedule, exceeding budget, or not achieving expected levels of functionality

(Continues…)

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Excerpted from "Federal IT Capital Planning And Investment Control"
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Copyright © 2008 Management Concepts, Inc..
Excerpted by permission of Management Concepts Press.
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Table of Contents

Preface, xv,
Acknowledgments, xxv,
Introduction The Legislative Basis for Improved IT Management, 1,
Part 1 Implementing CPIC and Integrating It with the Budget Process, 15,
Chapter 1 Overview of Capital Planning and Investment Control, 17,
Chapter 2 CPIC Planning and Selection Phases, 49,
Chapter 3 CPIC Control and Evaluation Phases, 75,
Part II Positioning CPIC as a Global Agency Process, 89,
Chapter 4 Strategically Positioning CPIC within the Organization, 91,
Chapter 5 Integrating CPIC and Enterprise Architecture, 105,
Chapter 6 IT Portfolio Analysis: Evaluation Techniques and Methods, 123,
Chapter 7 Operational Analysis and Post-Implementation Reviews, 145,
Part III Individual Investments: Maximizing ROI and Minimizing Risk, 175,
Chapter 8 Communicating with a Business Case, 177,
Chapter 9 Alternatives Analysis, 205,
Chapter 10 Identifying and Mitigating Project Risk, 219,
Chapter 11 Using Earned-Value Management to Control Cost and Schedule Variance, 245,
Chapter 12 Conducting an Independent or Integrated Baseline Review, 265,
Part IV Realizing the Full Benefits of a CPIC Process, 289,
Chapter 13 CPIC Special Topics, 291,
Chapter 14 Measuring, Monitoring, and Evaluating Portfolio Performance, 313,
Appendix Legislative and Regulatory Requirements, 337,
Glossary, 347,
Bibliography, 357,
Index, 365,