Technology Modernization Fund: OMB and GSA Need to Improve Fee Collection and Clarify Cost Estimating Guidance for Awarded Projects
Fast Facts
The General Services Administration and Office of Management and Budget oversee the Technology Modernization Fund, which awards federal agencies funds to replace aging IT systems. As of August, the fund awarded $89 million to 7 projects. Agencies must repay awards and an administrative fee within 5 years.
We found
GSA spent $1.2 million for expenses but collected fewer fees than planned to offset costs
The 7 projects’ savings estimates aren’t reliable because projects didn’t incorporate all cost estimating best practices
We made recommendations to fully recover operating costs in a timely manner and to follow federal cost estimating guidance.
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Highlights
What GAO Found
As of August 2019, the Technology Modernization Board had made seven Technology Modernization Fund (TMF) awards to five agencies, totaling about $89 million, and had transferred $37.65 million of this funding to the projects (see table). In addition, pursuant to the Modernizing Government Technology (MGT) Act, the General Services Administration (GSA) had obligated about $1.2 million to cover TMF operating expenses, but had recovered only about 3 percent of those expenses through fee payments. The seven projects are expected to make $1.2 million in scheduled fee payments by the end of fiscal year 2025; as of August, three projects have made fee payments totaling $33,165. Based on the current schedule, GSA will not fully recover these expenses until fiscal year 2025 at the earliest.
Technology Modernization Fund Project Funding and Scheduled Administrative Fee Collection, as of August 31, 2019 (in millions of dollars)
|
Project |
Total funds awarded |
Total funds transferred |
Scheduled fee payment based on funds transferred |
Fee payment collected as of August 2019 |
|
Department of Agriculture Farmers.Gov Portal |
10.00 |
4.00 |
.12 |
.003 |
|
Department of Agriculture Infrastructure Optimization |
5.00 |
.50 |
.015 |
.00 |
|
Department of Energy Enterprise Cloud Email |
15.22 |
2.23 |
.07 |
.00017 |
|
Department of Housing and Urban Development Unisys Migration |
20.00 |
10.00 |
.30 |
.03 |
|
Department of Labor Visa Application Transformation |
3.50 |
.20 |
.08 |
.00 |
|
General Services Administration Application Modernization |
14.99 |
3.73 |
.11 |
.00 |
|
General Services Administration NewPay |
20.65 |
16.99 |
.51 |
.00 |
|
Total |
89.36 |
37.65 |
1.2 |
.033 |
Source: GAO analysis of agency TMF project documentation as of August 31, 2019. | GAO-20-3
GSA had collected fewer fees than planned to offset costs due to several factors. For example, the seven projects paid fees based on the amounts transferred, rather the total funds awarded, thereby reducing fee collections in the initial years. Two projects also proposed scope changes that are expected to reduce funding required and, thus, reduce total fees. Such factors raise doubts on whether GSA will be able to fully recover future operating expenses. Although GSA acknowledged this issue, the agency has not yet developed a plan outlining the actions needed to fully recover its TMF operating costs in a timely manner.
The Office of Management and Budget's (OMB) funding guidelines require projects to include a reliable estimate of any project-related savings. However, the seven projects' reported savings estimates derived from cost estimates are not reliable. None of the projects incorporated all of the best practices for a reliable cost estimate, as defined in GAO and OMB guidance. Without clarifying the requirement that agencies follow Circular A-11's cost estimating process (that references GAO's cost estimating guidance discussed in this report), agencies are at risk of continuing to provide unreliable cost information in their proposals.
Why GAO Did This Study
In December 2017, the MGT Act was enacted, which established the TMF. OMB, the Technology Modernization Board, and GSA oversee the TMF. The board is responsible for approval of agency project proposals focused on replacing aging IT systems. Agencies receive incremental award funding and are required to repay the funds transferred and an administrative fee within five years. Agencies may use the project's generated cost savings to repay the award. GSA can use TMF appropriations to cover its operating expenses, and is required to collect administrative fees from awarded projects to offset these expenses. GSA's fee rate was established with the intent to fully recover its costs. As of August 2019, Congress had appropriated $125 million to the TMF.
The act included a provision for GAO to report biannually on the TMF. For its first TMF report, among other things, GAO analyzed the TMF's operating costs and assessed the reliability of selected projects' cost savings estimates. To do so, GAO reviewed OMB and GSA's administrative fund processes, and GSA financial data on TMF operating costs. GAO also analyzed TMF project proposal and supporting cost estimate documentation from selected agencies.
Recommendations
GAO is making five recommendations—two to OMB and three to GSA, including developing a plan to fully recover operating costs and clarifying that agencies should follow required cost guidance. OMB raised a number of concerns that GAO addresses in the report. GSA agreed with one recommendation and partially agreed with the other two. GAO continues to believe all of its recommendations are appropriate.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Office of the Director | The Director of OMB should develop and implement a plan with GSA that outlines the actions needed to fully recover the TMF Program Management Office's operating expenses with administrative fee collection in a timely manner. (Recommendation 1) |
The Director of OMB implemented this recommendation. In October 2021, GSA stopped collecting administrative fees from agencies to offset TMF Program Managment Office's operating expenses. Instead, GSA implemented a plan to set aside money from TMF to cover these expenses. In 2023, we evaluated TMF and confirmed that sufficient funds were set aside to cover operating expenses. By working with GSA to ensure operating expenses are covered, the Director of OMB increases the sustainability of TMF and its ability to fund future projects.
|
| Office of the Director | The Director of OMB should work with GSA to clarify the requirement in the TMF guidance that agencies follow the cost estimating process outlined in Circular A-11 (that references GAO's cost estimating guidance discussed in this report), when developing the proposal cost estimate. (Recommendation 2) |
The Office of Management and Budget (OMB) has taken steps to implement our recommendation. Specifically, staff from OMB's Office of E-Government and Information Technology reported in May 2021 that, in coordination with officials from the General Services Administration's (GSA) Technology Modernization Fund (TMF) Program Management Office, the TMF website and other guidance had been updated to address our recommendation. Specifically, on December 31, 2020, the TMF website was updated to include language that stated that project teams should follow their agency's implementation of OMB Circular A-11 with regards to cost estimating, and OMB Circular A-131 with regards to value engineering. In addition, officials reported that a memo from the GSA TMF Program Management Office would be sent to each awarded project that stated that agencies were supposed to follow their own agency's implementation of OMB Circular A-11 with regards to cost estimating policies and processes. By implementing our recommendation, OMB has helped to ensure that agencies understand the requirements they should follow when providing cost information in their proposals to the Technology Modernization Board.
|
| General Services Administration | The Administrator of General Services should develop and implement a plan with OMB that outlines the actions needed to fully recover the TMF Program Management Office's operating expenses with administrative fee collection in a timely manner. (Recommendation 3) |
The Administrator of General Services implemented this recommendation. In October 2021, GSA stopped collecting administrative fees from agencies to offset TMF Program Managment Office's operating expenses. Instead, GSA implemented a plan to set aside money from TMF to cover these expenses. In 2023, we evaluated TMF and confirmed that sufficient funds were set aside to cover operating expenses. By ensuring operating expenses are covered, the Administrator of General Services increases the sustainability of TMF and its ability to fund future projects.
|
| General Services Administration | The Administrator of General Services should work with OMB to clarify the requirement in the TMF guidance that agencies follow the cost estimating process outlined in Circular A-11 (that references GAO's cost estimating guidance discussed in this report), when developing the proposal cost estimate. (Recommendation 4) |
The General Services Administration (GSA) has taken steps to implement our recommendation. Specifically, officials from GSA's Technology Modernization Fund (TMF) Program Management Office reported in May 2021 that, in coordination with staff from OMB's Office of E-Government and Information Technology, the TMF website and other guidance had been updated to address our recommendation. Specifically, on December 31, 2020, the TMF website was updated to include language that stated that project teams should follow their agency's implementation of OMB Circular A-11 with regards to cost estimating, and OMB Circular A-131 with regards to value engineering. In addition, officials reported that a memo from the GSA TMF Program Management Office would be sent to each awarded project that stated that agencies were supposed to follow their own agency's implementation of OMB Circular A-11 with regards to cost estimating policies and processes. By implementing our recommendation, GSA has helped to ensure that agencies understand the requirements they should follow when providing cost information in their proposals to the Technology Modernization Board.
|
| General Services Administration | The Administrator of General Services should develop detailed guidance for completing the Technology Modernization Fund project cost estimate template, including information on the data elements and the fields required to be completed, in order to help ensure the accuracy and completeness of the provided information. (Recommendation 5) |
The General Services Administration (GSA) has taken steps to implement our recommendation. Specifically, as of January 2024, an official from GSA's Office of the Chief Financial Officer reported that the Technology Modernization Fund project cost estimate template had been updated to address our recommendation. GSA updated its project cost estimation guidance within its templates, which are shared with agency project teams. In addition, GSA developed and shared a comprehensive investment guide with all its agency partners to provide agencies with accurate and complete information. By implementing our recommendation, GSA has helped to ensure that agencies know how to develop accurate, complete, and reliable cost estimates for TMF projects.
|