Saddled with a heavy set of expectations for its potential to jumpstart Federal IT modernization, the cash-rich Technology Modernization Fund kicked off its billion dollar-plus spending spree on September 30 with $311 million of awards to Federal agencies.

In “normal,” pre-pandemic times, that size of that funding round – which more than triples all previous TMF funding activity – would be headline news on its own.

But after years of clamor for sharply higher investment in Federal networks that need updating, and the extraordinary grant of $1 billion of new authority in the American Rescue Plan (ARP) Act earlier this year, the initial funding round totaling about 30 percent of the TMF’s capacity landed with moderate weight compared to expectations of some of the fund’s most ardent supporters.

The relatively measured size, scope, and pace of the initial round of awards revealed much about the TMFs board’s thinking on projects that it is willing to invest in, and how it may proceed with distributing the estimated remaining approximate $700 million in its coffers. Perhaps more importantly than just the dollar figures involved, the initial funding round shows that the TMF board is sticking to its strategic and analytical guns even amidst pressure to move funding out more rapidly.

State of Play

Here’s a look at fund capacity, money being put toward projects in the initial round of post-ARP awards, some perspective on where the next rounds of awards might go, and a gauge of the large appetite for potentially much more robust TMF spending going forward.

To put those possibilities into context for their impact on Federal IT modernization, it’s important to understand how the TMF is undergoing rapid change as the coronavirus pandemic has forced the government to step up its often-outdated technology game and strive to improve operations and citizen services.

How Size Matters

TMF was created by Congress in 2017 as part of the Modernizing Government Technology (MGT) Act, representing an innovative step to craft a source of IT modernization funding outside of Federal agencies’ annual appropriations process. However, despite that initial vision, TMF’s funding levels – before this year – have been geared more toward proof of concepts rather than catalyzing large-scale modernization.

According to the TMF board’s public website, since inception – and prior to its $311 million of fundings announced in late September – TMF made 11 awards totaling $89 million, ranging from $500,000 to $16.9 million per award. That boils down to roughly $20 million per year – a tiny drop in the bucket when compared to a public figure for Federal IT spending of about $95 billion per year (non-public spending for military and intelligence IT makes that number much larger).

The relatively low figure for pre-ARP spend is no surprise. The first curb to larger TMF investments is congressional appropriations. Since inception, the fund has received $150 million to farm out to Federal agencies, including injections of just $25 million in each of the past two fiscal years through the regular appropriations process. That approach continues in some quarters of Congress; a Biden administration proposal for $500 million of new TMF funding for Fiscal Year 2022 through regular appropriations was unceremoniously cut to just $50 million by the House in budget legislation approved in August.

Also holding back the volume of TMF awards historically has been modest demand by Federal agencies for borrowings. Many agency IT leaders say in private that the juice has not been worth the squeeze for TMF funding because agencies have to pay the money back through related project savings, and the fund exerts considerable oversight over how projects are proceeding. For many CIOs, funding from regular appropriations carries much less baggage.

Calculus Changes in 2021

But pandemic experience has revealed strains on many older Federal IT systems, and the new administration appears more friendly to bigger spending to address that problem. These factors have changed the TMF calculus greatly this year.

The fund’s $1 billion cash infusion under the ARP legislation – down from an initial bid of $9 billion of new funding from the Biden administration – represents dramatic change in the TMF’s ability to jumpstart Federal IT modernization. And the administration’s subsequent instruction to the fund to relax or even eliminate pay-back requirements on borrowings has gone a long way toward stimulating more agency interest.

The result has been an outpouring of agency demand for TMF funding. After calling for bids on the $1 billion of new funding in May, Federal CIO Clare Martorana said in July that the TMF board had received 108 proposals from Federal agencies offering up projects totaling $2.1 billion.

Top Modernization Focus Areas

In soliciting bids for the $1 billion of funding, the TMF board instructed agencies to focus their proposals on high-impact areas, cybersecurity, citizen service improvements, and projects with enterprise-wide reach. In the initial list of projects announced in late September, the TMF board remained true to its stated focus on those areas.

On the cybersecurity front, three agencies – Office of Personnel Management, Education Department, and General Services Administration (GSA) – scooped up $60 million of funding for projects to hasten their transition to zero trust security architectures.

Shared services-related projects with cybersecurity implications were the biggest funding winners, with the GSA’s operation snagging $187 million geared toward “widespread adoption of secure authentication for millions of users” that aims to improve the security of government systems. GSA’s operation also took in $14.5 million of funding to provide a “modernized, secure cloud-based solution for cross-agency collaboration, authentication, and other shared services capabilities.”

Outside of that group, the initial round of awards include $50 million to the Department of Homeland Security for its Southwest Border Technology Integration Program, with the goal of using data and technology “to more efficiently, effectively, and humanely” process non-U.S. citizens at the southwest border.

And finally, the initial round features a classified project for which no details – including the funding award size – have been released.

The first round of TMF funding won industry praise for its focus on stated policy goals.

Frank Monastero, VP of Strategic Accounts at ScienceLogic, said the initial round of funding “hit the mark,” adding, “these themes will help focus government and industry. We are especially interested in how the board will identify enterprise applications that can be used by many agencies. Commercial companies tend to be great at following proven templates and we can all learn from that.”

“The TMF Board addressed important projects in the initial round of awards,” commented Fred Butler, Senior Director, Industry Strategy & Solutions – US Federal at DocuSign. “As the Board is addressing these initial awards, organizations are considering opportunities to improve integrations across their disparate systems, but potentially not considering detailing how the processes need to be changed for a smooth transition,” he added.

The Shape of Things to Come

Based on the initial round of funding rewards, and consistent policy direction from top Federal IT leadership on Biden administration priorities, subsequent funding rounds are likely to hew close to the existing stated criteria for the rest of the $1 billion funding round.

Federal CIO Martorana – who chairs the TMF Board – told members of Congress in July that “cybersecurity is our immediate priority in Federal IT.”

She also has been an enthusiastic advocate for taking an enterprise approach across Federal agencies for IT modernization that improves how citizens access services from the government. That kind of service – on par with what people regularly expect from online interactions with private sector companies – “is an expectation in the 21st century,” she said.

The Federal CIO – and her counterparts at numerous Federal agencies – have also been frank in their public statements about what $1 billion of investment in IT modernization can and cannot be expected to achieve. A little back-of-the-envelope math shows that $1 billion divided among the 23 largest Federal civilian agencies yields less than $50 million of new funding for each. Again, that’s not nothing, but it’s also likely not game-changing for many agencies.

Martorana has said she views the initial $1 billion TMF infusion as “just a down payment” on multiple-year modernization projects that Federal agencies have already identified. Agency CIOs appear to share that sentiment, and are pushing for more regular funding for modernization through annual appropriations.

“That money is going to go pretty fast … what’s in TMF is not nearly enough,” Ann Dunkin, CIO at the Department of Energy (DOE), said last month, adding, “IT modernization is by definition expensive.” Dunkin stressed that while the TMF “is a great idea,” when it comes to “self-funding it is a challenge because our mandate in IT continually increases.”

“IT is continually going to be challenged and so our job is really to ensure that our business partners understand the value of the services we deliver so that they choose to help provide the funding necessary to do that work, and that Congress understands the value of the services we deliver and the cost of things like cybersecurity, so that we get the funding from Congress that we need,” Dunkin said.

The Next Round and Beyond

As for the timing and types of projects included in the next round of TMF funding awards, Federal IT leaders and TMF board members have said little in public that would indicate any firm possible date for new awards.

What may help speed the next round is that the process of agencies submitting proposals, and the TMF Board’s acumen in evaluating them, is already developed. The TMF Board is also looking to bulk up its staffing to necessary to evaluate the proposals, posting job openings in late October for three additional technical leads to help with the process.

Agencies making applications for the money have gained some important experience in understanding what the TMF Board needs to know for its evaluation. Deputy Federal CIO Maria Roat said in late July that the board was continuing to accept proposals, and offered some unvarnished advice for agencies looking to make progress.

For agencies submitting their initial project proposals to the board, Roat encouraged agencies to “get to the point,” and said the board is “looking for that really thoughtfully crafted business case.” She added, “That’s what we’re after. It’s not about the tech … it’s really about the entirety of the business case, and that’s what we’re looking for in the proposals.”

DocuSign’s Butler suggested that the TMF Board may want to put additional focus on making it easier for the public to access government services. “There is a need to increase mobile access for the public,” Butler said, adding, “these areas will not only improve processes internal to the government, but also will demonstrate and show the government in an increasingly positive manner.”

He also offered that the board could consider a “TMF Light” regime, where awards “may not be as large … but they enable solving more quick wins that meet departmental needs.”

“We expect the TMF Board to continue a focus on strengthening cybersecurity in Federal agencies,” said Greg Mundell, Account Executive at ScienceLogic. “We hope that they will also invest in projects to support high-impact systems, including modernizing the underlying infrastructure and paying down technical debt.”

Further Funding Outlook

Someday – probably soon – the TMF will have spent its billion dollars, and there undoubtedly will remain a long way to go to scope and pay for further Federal IT modernization. Congress – through which all roads for Federal agency funding must pass – can take a couple of different routes to help keep the modernization momentum going.

The first is to give agencies more money through the annual appropriations process. With the pandemic having heightened everyone’s awareness to the increasingly critical importance of IT to deliver better citizen services, allow for a more flexibly-located Federal workforce, and work toward improved cybersecurity, much of the task of educating lawmakers has already been started.

While the jury remains out on this front at least until we see final FY2022 spending enacted, an early indicator may be the currently warm sentiment in Congress to beef up budgets at the Cybersecurity and Infrastructure Security Agency (CISA) to bolster its ability to serve as the primary conduit to help other agencies improve their security.

The second route could be to again extend more funding to the TMF – and further leverage the board’s expertise to prioritize the most compelling IT modernization projects that fit the administration’s broader strategy. Privately, reliable sources on the Hill say they wish the TMF board would push out funding faster than it already has – not only to illustrate that big-dollar agency investments are sorely needed, but also to convince lawmakers that more TMF infusions are required.

“Our view on future funding is that the government should leverage both the TMF board and the regular annual appropriations process,” commented ScienceLogic’s Mundell. “There is a large need for modernization investments across Federal agencies and it would be helpful to leverage both processes to achieve positive results.”

Looking ahead, DocuSign’s Butler said that while the current round of TMF funding is drawing high agency demand, “future funding levels for the program may require additional planning and definition of planned results and partners.”

“The process to increase funding of IT modernization through regular appropriations may not flow in a timely manner to awardees and potentially cause gaps in the overall plan of action,” he said. “Beyond the technical improvements, projects should also consider the processes in place to see where consolidation of multiple programs and their software and integrations across a dashboard could facilitate additional improvement.”

Despite the historical trend toward modest annual appropriations for the fund, the TMF enjoys energetic and influential backing in the Biden administration and on Capitol Hill – two power centers who already view the historic $1 billion of new TMF funding earlier this year as too small.

For example, current infrastructure funding legislation in the House – which still faces a radical makeover as it works its way through negotiations until recently featured another proposed $1 billion for TMF, and $2 billion for GSA’s Federal Citizen Services Fund. Both of those items were dropped during the most recent negotiations on the legislation, but their presence in the mix shows continuing support for more thinking outside the box for Federal IT modernization funding – a need that will endure far beyond the latest budget cycles.

Read More About
More Topics
MeriTalk Staff