Technology Modernization Fund: Past Awards Highlight Need for Continued Scrutiny of Agency Proposals

What GAO Found

The Technology Modernization Fund (TMF) provides awards to agencies to, among other things, modernize aging federal information systems. From the initial $175 million that Congress appropriated for TMF, the Technology Modernization Board approved 11 projects totaling about $76 million (see table 1). Agency proposals were to include estimates of any project-related savings; agencies could use these savings to satisfy the requirement that they reimburse the TMF for any transfers within 5 years. GAO previously reported that for the initial seven projects approved in 2018 and 2019, two had reported generating cost savings but those savings were not documented. For the remaining five projects, two no longer planned on savings, two planned on savings starting in 1 to 3 years, and one did not know when savings would begin.

Table 1: Technology Modernization Fund (TMF) Projects Approved, as of August 31, 2021 (in dollars)

Source: GAO analysis of agency TMF project documentation, May 2022. | GAO-22-106054

^aThe total TMF investments are as of May 2022 and include updates from the initial award.

In March 2021, the American Rescue Plan Act of 2021 appropriated an additional $1 billion to the TMF. In May 2021, the Office of Management and Budget (OMB) provided updated TMF guidance to agencies regarding this $1 billion. Among other things, the guidance (1) prioritizes projects that cut across agencies and address immediate cybersecurity gaps, and (2) allows agencies to apply for a partial or minimal reimbursement of the TMF funds provided (partial is defined as agencies repaying 25 to less than 100 percent of the award while minimal is greater than zero but less than 25 percent). On September 30, 2021, the board announced the approval of seven new projects with awards totaling at least $311 million (one of the seven projects is classified; no award figure is publicly available). In deciding on these seven, the Technology Modernization Board received 113 project proposals requesting a total of more than $2.3 billion. Three additional awards have since been announced (see table 2).

Table 2: Technology Modernization Fund (TMF) Projects Approved, since September 2021 (in dollars)

Source: GAO analysis of agency TMF project documentation, May 2022. | GAO-22-106054

^aThe 10th award is a classified project and no details on the agency, nature of the project, or the amount of its award have been publicly disclosed.

Regarding TMF operating costs and fees collected to offset those costs, as of August 2021, the General Services Administration (GSA) had received fee payments totaling about $810,000, or about 29 percent of its operating expenses of $2.8 million. A key reason for this shortfall was that six of the seven initially approved projects narrowed their scopes. This led to reduced award amounts transferred to agencies, which in turn resulted in about a $1.12 million reduction in anticipated fees. Relatedly, OMB and GSA have not yet implemented GAO's prior recommendation to develop and implement a plan to fully recover operating expenses with fee collection. Doing so would provide greater assurance that fees collected would be sufficient to offset operating costs.

OMB's TMF funding guidelines require projects to include a reliable estimate of any project-related savings, as defined in OMB Circular A-11 (which references GAO's Cost Estimating and Assessment Guide). However, most of the TMF projects awarded through August 2021 relied on savings estimates that were derived from cost estimates GAO found to be unreliable. Specifically, 10 of the 11 projects reviewed did not fully incorporate best practices for a reliable cost estimate.

With hundreds of millions of dollars remaining in the TMF, it is increasingly important that GSA implement GAO's prior recommendation to improve the instructions for the TMF cost estimate template required of each proposal. Such action would help ensure that the Technology Modernization Board is reviewing documentation that is complete, accurate, and reliable. By continuing to ensure that such proposals adequately capture project scope and cost, OMB and GSA can help better position TMF as a useful tool for addressing critical IT modernization needs across the federal government.

Why GAO Did This Study

Enacted in 2017, the provisions commonly referred to as the Modernizing Government Technology (MGT) Act established the TMF in recognition of the challenges in modernizing federal information systems. OMB and GSA administer the TMF, and a Technology Modernization Board comprised of federal IT executives reviews agency project proposals. Since the program's creation, it has received over $1.1 billion in appropriations and made awards to over 20 projects that sought to address the federal technology challenges on which GAO has extensively reported.

The MGT Act included a provision for GAO to report biannually on the TMF and the projects receiving these funds. This testimony summarizes past GAO reporting on the TMF, including (1) the status of the fund and approved projects and (2) the reliability of selected projects' cost saving estimates.

This statement is primarily based on the results of GAO's prior work, which includes the reports cited in this statement. GAO also reviewed the status of approved projects as of May 2022, and agencies' efforts to address its recommendations.