MeriTalk Insight: TMF Dreaming – and How to Fund IT Fixes Right Now


A billion of anything isn’t quite what it used to be, but it’s still a lot. And when that billion is dollars for the Technology Modernization Fund (TMF) – a great vehicle that has been underutilized because of low funding levels and strict repayment rules – it may yet end up being a real difference-maker across many government agencies looking at IT modernization.

But there’s a ways to go before that new $1 billion of modernization funding becomes available – much less more attractive – to agencies. Also worth keeping in mind: there are 20 or so big Federal agencies, and a few dozen smaller ones, that may be competing for that source of money. So while the new money is great, the math implies that even the enlarged TMF might not turn out to be a winning lottery ticket for any one organization.

With that in mind, let the Old Budget Guy talk about a couple things agencies can do right now to start funding IT modernization that don’t rely on winning the TMF sweepstakes. And how government might consider spending on not just on IT, but also on more streamlined structures, to pull itself kicking and screaming into the 21st century.

Birth of TMF

First, a little recent history necessary to understand where we are now.

The TMF was established back in 2017 as part of the Modernizing Government Technology (MGT) Act after senior officials at the Office of Management and Budget (OMB), the Government Accountability Office (GAO), and others asked why we were letting our IT infrastructure fall to pieces.

Then-Federal CIO Tony Scott called the government’s reliance on outdated technology a “crisis” to rival the Y2K computer glitch. GAO issued reports and testified about agencies that were (and still are) running tens of millions of lines of long-deprecated software code such as COBOL and assembly languages, and about the aging infrastructure itself – switches, routers, servers, desktops, mainframes, etc.

Research performed by a major infrastructure company found that a substantial portion of the government’s IT hardware had already reached LDoS (Last Day of Support), which means it was not receiving updates, security alerts, or patches. An ever greater portion of that infrastructure was projected to reach that same stage in ensuing years.

While the TMF was established to help deal with these problems, initial funding was quite small compared to the problems that need addressing – increased security risks and vulnerability to cyber-attacks; the inability of outmoded systems to support growing demands for greater mobility, collaboration, and analytics; and especially the truly catastrophic blow that a breakdown in crucial technology could be to the business of government.

IT infrastructure – such dull words. But an issue that touches almost everything about how government works – and could work better if given the chance.

The New Billion

Then came President Biden’s American Rescue Plan, and its allocation of $1 billion to the TMF, which in the past three years had received annual appropriations averaging $25 million per year. On top of that, in the so-called “skinny budget” outlining the administration’s FY 2022 funding proposal, the President asked for another $500 million for the fund.

OMB and the General Services Administration (GSA) have, over the last three years or so, developed and matured their processes for TMF business case development, acquisition and oversight. But in that span with limited funding, the TMF has only overseen 11 projects totaling about $125 million.

So the new funding – with possibly more on the way – is a wonderful “problem” to face.

And the temptation – already finding its voice in Congress – is to reach for the “EASY button” and relax or eliminate TMF’s self-sustaining model of requiring agencies awarded funding to modernize their IT infrastructure and pay back the fund within five years.

Making Working Capital Work

While we’re waiting for the TMF funding to shake out, the Old Budget Guy will explain another way for agencies to get money to start skinning that modernization cat.

The legislation that initially created the TMF offered agencies another option to begin to change the imbalance in funding dedicated to IT Operations and Maintenance (O&M), so that more could be invested in IT Development, Modernization and Enhancement (DME).

Crucially, the law authorized the establishment of IT Working Capital Funds (WCF) so that agencies could make more intelligent decisions with their money, and not indulge in end-of-year, use-it-or-lose-it spending splurges. Discouragingly, data from budget and acquisition analysts shows that nothing has changed in final-quarter and final-month buying binges.

According to the data, many agencies obligate up to 40 percent of their contract dollars in July, August and September – the last quarter of the fiscal year. And the data show that in the final WEEK of the fiscal year, between $1 and $2 billion are spent on IT purchases each DAY.

It may seem hard to believe, but only one agency (and a smaller one at that), the Small Business Administration, has taken advantage of the working capital funds authority granted by this law. Before any agency steps in line now to take advantage of the new TMF buffet, I would have them commit to (1) establish their own IT WCF and (2) outline the steps they would take in their own annual budget formulation process to steer investments from O&M to DME.

Reimbursement Outlook

The text of the American Rescue Plan, signed into law on March 11, doesn’t include a reimbursement requirement for the new TMF funding.

Industry representatives, former government officials and even some current OMB executives have spoken – mostly off the record – about how the existing reimbursement model discourages agencies from participating in the fund, arguing that “not all projects have easily quantifiable results.” In this case “easily quantifiable results” equal claimed savings that are real and can be used to pay back the TMF loan.

Having served in government for years, I know some things are hard to do. But if a lot of things – like improved efficiency and effectiveness, cost avoidances, funds put to better use, increased citizen satisfaction, and so on – were all real then we likely wouldn’t be facing a massive deficit and a new low in trust in government.

Measuring success, finding performance metrics for proposals that don’t have easily quantifiable outcomes, demonstrating results from major investments – all those things are hard. They are likely as hard or even harder than setting up a new WCF, redefining an existing one, or curbing late-September buying sprees.

But we should do the right things, in spite of the fact they may be hard. Moreover, those investments that can’t clearly demonstrate results and benefits will only draw political fire that could undermine the very worthy TMF, and be subject to congressional rescission after the 2022 midterm election.

Spending Ideas

Plenty of ideas have bubbled up on where new TMF money could be invested. Examples include citizen services, remote work, cybersecurity, cloud adoption, COVID-19, racial inequity, climate change, and other areas that are already the focus of the American Rescue plan, the FY22 budget request and the administration’s recent infrastructure/jobs proposal.

Rather than double down on existing Biden-Harris priorities, I would propose two alternatives.

The first is streamlining government. Both Presidents Obama and Trump proposed reorganizations that would lead to a 21st century government by using 1950’s or 1960’s administrative methods (e.g., merging the Departments of Education and Labor, relocating offices and personnel from one area to another, creating a new statistical agency by uniting bureaus drawn from multiple existing departments, etc.). Why not invest in virtual restructurings where integration, collaboration, and citizen services could occur in a real 21st century manner?

The second is shared services, an initiative that initially surfaced as a part of President Reagan’s Reform ’88 program and has been endorsed in almost every President’s Management Agenda since then. It is the poster child for the government adage that “when all is said and done, more is said than is done.” Departments have cited the lack of funding as the reason they couldn’t take action. Let’s take away that excuse.

I was an early supporter of the TMF and remain supportive now. Robust funding provides the opportunity to rethink how we fix the government’s aging IT infrastructure. That is at the heart of the problem now. IT infrastructure policy has become a matter of lurching from crisis to crisis, solving problems after the fact rather than preventing them from happening. It’s time to stop being short-term fix addicts, and start really taking the longer view.

Alan P. Balutis
About Alan P. Balutis
Alan Balutis has held senior roles in academia, the Federal government, and both the private and non-profit sectors. He has written extensively about government and management reform in both academic and trade publications. He recently left Cisco Systems. where he headed their Public Sector Strategy and Consulting practice.