Finding and Funding IT Projects

government today: Budgets are tight. If you've been awake for the last several years, you probably already know that.

But here are a few facts, nonetheless: Total government expenditure as a percentage of gross domestic product has steadily decreased from a high reached in 1991. Federal outlays, for example -- where the data are probably the most accurate -- increased by 11 percent in real terms from 1988-92 and by only 5 percent from 1993-97. They are projected to increase less than 1 percent in the next five years.

It's not a big surprise that money for new projects is scarce and will continue to be.

But scarce funds shouldn't wipe out IT projects. After all, information technologies can deliver sizable efficiencies leading to cost reductions and other benefits. A well-designed IT project is not a mere expenditure but a true investment.

Public managers are looking hard for ways to reap the investment potential of technology but face significant barriers everywhere they turn. This series reports on recent research that seeks to understand and ultimately help overcome these barriers. This article summarizes the problem and some of the most promising solutions being explored in governments today. The remaining articles will analyze three of the most important and innovative ideas in more detail, focusing on case studies that other jurisdictions should soon consider adopting.

THE BUDGETING PROBLEM

Naturally, budgeting involves saying "yes" to some proposals and "no" to others. When resources are scarce, many proposals will be left unfunded. This is expected and isn't necessarily a "problem" -- unless bad proposals get the funds while good ones languish.

Unfortunately, a series of biases in government budgeting often make the public sector unsuccessful at finding and funding good IT projects.

For instance, some of the best IT investments are valuable because they involve large economies of scope and scale -- for example, public/private cooperation to use the banking ATM networks for benefit payments. Such projects typically require cooperation that extends far beyond the boundaries of a single program, an organizational unit or a single budget year. Yet traditional budgets focus on the next year of spending for a single program or agency, too often overlooking multi-year and multi-agency opportunities. Further, projects involving infrastructure construction are often costly -- precisely the kind of project shunned when budgets are tight.

Another example: The best IT investments often depend on significant organizational learning and innovation. As such, their value can't be proven by experience. Unfortunately, as government is risk averse and generally mistrustful of ideas not already in the mainstream, it tends to avoid such projects. As a corollary, governments are reluctant to consider innovative approaches to funding IT projects, such as user charges, capital funding, performances contracting and revolving funds. This limits public managers to the already overburdened tax levy.

Taken together, these characteristics make government IT budgeting worse than it should be. In an economy based on information, with a public demanding better service and lower taxes, this is a big problem.

So, what can the public managers do? Research at Harvard's Strategic Computing Program points to a variety of promising options. Twelve of the most popular options for better IT budgeting were discussed and analyzed by federal, state and local practitioners and researchers at a recent Harvard workshop. Workshop participants rated each option in terms of their degree of present involvement with the option, the degree of confusion and conflict to be overcome in implementation, and the estimated impact of each option on social value (value created net of expenditures).

While each of the 12 options were evaluated as the top priority in one situation or another, six were rated as generally the most attractive in terms of their ease of implementation, their net