Make Your Best Business Case

Federal IT project managers may successfully
negotiate the minefield that lies between gotta-have-it IT requests and complex procurement
procedures, but they haven't won their IT funding
battle until they can convince the Office of
Management and Budget (OMB) their proposal is
a solid IT capital investment. The demand for long-term IT
capital investment planning is an idea that is not new to
OMB. Outraged and frustrated by what he called "a chaotic
IT procurement process," Sen. William Cohen (R-Maine) in
1994 published a report, "Computer Chaos: Billions Wasted
Buying Federal Computer Systems." In 1996, with the bill's
co-sponsor, Rep. William Clinger (R-Pa.), he followed it with
the IT Management Reform Act, now known as the Clinger-Cohen Act.

The Clinger-Cohen Act mandated that
agencies do investment analyses to ensure
that they get their money's worth. Federal IT
managers have been working since then to
develop the capital IT investment planning
programs that will ensure accountability at
all levels of government.

As part of the investment planning
process, an agency must submit a business
case for any proposed capital investment,
and include details of how the proposed
investment would support its mission. The
requirement reinforces the emphasis on
results, a major tenet of the President's
Management Agenda. (See "Getting to
Green" on page 43.)

"The business case is a good business
practice, but just because it's a good practice
doesn't mean government wants to do it,"
says George Molaski, president and CEO of
E-Associates LLC, a Falls Church, Va.-based
government IT consulting firm. "The main
reason they do it is that they don't get
money unless they do."

Although agencies are at widely varying
stages in implementing capital investment
planning processes, most are lagging,
according to a recent report from the
General Accounting Office. Proposed IT
projects must score at least a four on GAO's
scorecard to be considered for funding; only
the White House scored a perfect five.

A major reason for the disparity among
agencies is federal project managers' lack of
experience in writing solid business cases.
Few federal managers are experienced in
managing the massive business process re-engineering efforts that many large capital
investments involve.

Too often, managers regard writing case
studies as a one-time exercise, Molaski says.
Managers write the business case and get
the money, he says, but they rarely step back
to consider whether they achieved the goals
and received the benefits they planned.

"Agencies need to take it to the next level
and make it more of a management tool than
a paper exercise," he says. "The business case
exercise should be developed into a portfolio
system. Although capital planning is an
important piece, the follow-up—periodic
re-evaluation—also needs to happen."

Though the task itself is far from simple,
finding the resources to do it is often more
difficult. "Congress asks agencies to develop
these systems, but they don't give any real
money to implement what the agencies
need to do," Molaski says. OMB does what
it can to help, he says, but what would help
even more is for Congress to buy into the
business case of funding its mandate.

Postal Opportunity

Despite such issues, the United States Postal
Service (USPS) became an early adopter of
the business case methodology. Taking its
cues from the spirit of the laws enacted by
Congress—such as the Clinger-Cohen Act,
the Government Paperwork Reduction Act
and the Federal Information Security
Management Act—the Postal Service saw a
way to make better IT investment decisions.

Implementing such far-reaching new
planning processes in a large organization can
be painful, "but it's the right thing to do," says
Deborah Judy, USPS manager of IT value.

USPS's goal in creating its Business Case
System was to create an efficient, repeatable
and standardized process for evaluating all
competitors for IT resources. The tool lets
USPS easily create investment analyses and
prioritize IT investments based on value and
risk data. It looks at how the investment
would map to the Postal Service's strategic
alignment, determines the financial value,
cost and benefits, and calculates the value
and risks of the initiative's projected return
on investment.

The USPS evaluated several off-the-shelf
products and methodologies—including
Decision Theory, Applied Decision Analysis,
Economic Value, Balanced Scorecard and
Earned Value Analysis—then incorporated
best practices from several into its proprietary
system.

Understanding the methodology and cost
estimating for all components in the life cycle
of an IT investment isn't easy. To get managers
up to speed, the USPS uses a component of its
Business Case System, the integrated
methodology for system development.

The Advanced Computing Environment,
USPS's seven-year-old network infrastructure,
is an example of a business case success.
Postal Service managers built the business
case and got the funding to replace 200,000
antiquated desktops at roughly 28,000
postal facilities nationwide with up-to-date
desktop and notebook PCs.

Since that effort, the USPS has improved
the business case process for even greater
efficiency.

"The CTO can review the information
and determine which IT initiatives are the
best to invest in," Judy says. "Instead of going
through paperwork, he can create what-if
scenarios. The system automatically re-sorts
the initiative based on the criteria specified.

"We saved substantial time reworking
the business case," she continues.

"The repository was right there. There is
nothing worse than not having a repository
of business cases, because the business case
is a living document allowing us to do trend
analysis over the years and evaluate how
successful we've been."

Controlling the Program

The business case module is only a single
component of the integrated system
methodology. For the USPS, Judy explains,
the system works from the first minute they
contact a customer, through defining
requirements and planning an initiative, all
the way through to implementation and
operations.

In the control phase, the Postal Service
uses its Program Tracking Reporting System
(one component of its integrated planning
system) as an early warning sign of the
health and welfare of an initiative. Each
month, the CTO and direct report managers
review and discuss the status and progress of
all current initiatives.

The next step is the evaluation phase in
which the project manager searches in the
lessons-learned repository for insights from
past experience that could benefit ongoing
or proposed programs.

Although the CTO's endorsement is
invaluable, Judy emphasizes that buy-in
from all the players in the entire technology
organization is a key step in successfully
implementing the Business Case System.
"Mid-level managers need to feel there is
value in this for them," she says.

Communicating the Value

The Veterans Affairs (VA) Department has
also developed its own business case
methodology, focusing on communicating
its value throughout the organization.
Edward Meagher, deputy CIO of the VA,
points out that even though underlying
standards are critical to a CTO's ability to
manage the process, they're virtually useless
without communication to all players in the
IT organization.

"For agencies to embrace this concept,
they must see the value," Meagher says. "If
they don't see this [business case process] as
a discipline that allows them to deliver their
mission more effectively, they won't be able
to sustain the effort required to succeed."

Meagher credits focus and consistency
with his agency's successful submission of
59 business cases to the OMB covering the
VA's entire $1.5 billion annual IT budget. All
of the business cases were approved, so all
will be funded.

The VA went further than simply
embracing the business case process; it also
set a more rigorous scoring standard for
itself than that imposed by the OMB. "In
addition to assigning very knowledgeable,
high-performing people to the task, we
made sure every manager took it seriously,"
says Meagher. He added that his agency
worked closely with the OMB to understand
the process and respond to its information
needs.

The VA, in developing its business case
methodology, adapted many best-of-breed
components used by other agencies and by
the private sector. The result has been more
effective business cases, a reduction in
redundant systems, fewer failed projects,
better risk management, greater transparency
and projects that are more easily integrated
into the agency's enterprise architecture.

Managers who are using this process
should apply the business case discipline to
every project, Meagher advises. "You have to
do it fully or you're wasting time and effort.
You need to manage from your portfolio. If
you manage one program at a time, you're
less likely to make a good decision."