Hold the Texas Department of Information Resources Accountable for the Success of Major Information Technology Initiatives
Although the Texas Department of Information Resources (DIR) provides valuable technology-related services for state agencies, universities and local governments, the agency should be held accountable for the success of major agency information technology (IT) projects. The Program Management Office (PMO) within DIR is not meeting its legislative mandates. DIR should recommend a funding formula and should coordinate with the PMO Legislative Oversight Committee to propose a performance measure to ensure that the PMO provides effective IT services for major cross-agency projects. DIR should propose performance measures for its telecommunications and purchasing functions to reduce overhead costs and reduce state agency expenditures. DIR should modify its strategic plan and biennial performance report to improve agency reporting and ensure that agencies comply with its rules and standards. The TexasOnline Division should help DIR redesign its Web site to make it easier for visitors to find information and to provide a public software clearinghouse to help reduce commodity software purchasing costs.
The Texas Department of Information Resources (DIR) was established in 1989 to manage the state’s information technology (IT) resources and ensure that public funds spent on IT are used wisely and effectively. DIR provides services and initiatives that benefit state agencies, other public entities and the public. TexasOnline, for example, is a statewide portal that offers 37 online services to the public, such as licensing, driver’s license renewals and tax payments. DIR’s store offers state agencies and local governments a variety of hardware, software and IT services at discounted prices.
But the Legislature expects more from DIR than simply technology purchasing services and the evaluation of general trends in IT. DIR is charged with providing direct support to state agencies in the planning, budgeting and implementation of IT projects. The 2001 Legislature named DIR’s executive director the state’s chief information officer, with authority over all aspects of information technology for state agencies. The creation of the PMO, along with the transfer of telecommunication services to DIR, constitute a legislative mandate for DIR to be more aggressive in its leadership over state agency IT initiatives.
However, neither the PMO Division nor other DIR service divisions have established technical and operational standards to ensure that IT initiatives are properly planned and completed on time and within budget. Performance measures created by the Legislative Budget Board (LBB), the Legislature and DIR do not necessarily establish the levels of performance needed to ensure that DIR provides the greatest possible value for state agency IT initiatives.
PMO not working
The 2001 Legislature created the PMO to direct and facilitate electronic government projects that affect multiple state agencies. The PMO is expected to identify and approve funding for these projects, create teams to coordinate multi-agency efforts and eliminate unnecessary duplication. It also is authorized to establish standards that state agencies must follow during such projects.
Unfortunately, the PMO has not been able to meet its legislative mandates during its first two years of operation, largely because the anticipated funding for projects and operations was not appropriated. This funding would have included approximately $3 million for 10 full-time positions.
Without legislative funding, DIR has used some of its planning funds to provide three full-time staff members for the PMO. With only three staff and no initiative-implementation funds, the PMO has been unable to establish coordination teams and has not developed technical or process standards for major cross-agency IT projects. It has not eliminated unnecessary duplication of IT projects. DIR’s Legislative Appropriations Request for fiscal 2004 and 2005 asked for authority to staff the PMO with a total of five full-time equivalent (FTE) employees, even though the Legislature determined that 10 FTEs would be needed for the PMO to meet its legislative mandates.
The PMO has made some progress with its two largest initiatives. It is working with the Health and Human Services Commission (HHSC) and the Comptroller’s office to implement a statewide Enterprise Resource Planning (ERP) program, which will use IT to improve state agencies’ financial and human resource accountability. It also is seeking vendor support for a state agency electronic purchasing system. Other PMO initiatives include an electronic grants system, an online travel reservation and ticketing system and a statewide electronic data clearinghouse. Because there is no dedicated PMO funding, DIR has not negotiated with the LBB to establish any performance measures for the PMO. Instead, DIR is waiting until PMO projects, such as electronic purchasing, are underway before defining PMO performance expectations.
Other states with similar offices have been able to achieve greater results than Texas’ PMO. For example, Florida projects 10-year savings of $80 million plus an additional $76.7 million in cost avoidance through the efforts of its State Technology Office (STO). To achieve these benefits, the STO established service agreements with state agencies and other partners to define the roles and responsibilities of all parties for attaining project outcomes, timelines, costs and related responsibilities.
Unlike Florida, the PMO has not defined its own role in ensuring IT project success in Texas. The biggest indicator of the need for direct PMO involvement in major agency IT projects is the high amount of cost overruns reported by the Quality Assurance Team (QAT). The QAT, which includes representatives from the LBB and the State Auditor’s Office (SAO), is charged with examining major state IT projects after implementation to determine whether they have remained on time and on budget and are delivering the benefits they were designed to produce. QAT reports that more than half of 44 major agency and cross-agency IT projects currently under its review have overspent federal and state funds by a total of $361 million.
The QAT also found that projects were generally not properly managed by agencies, citing significant changes in project costs ranging from an increase of $17.1 million to a decrease of $21.4 million compared to their initial planned costs. Five projects expended more than $28 million prior to cancellation. Tracking and evaluating project effectiveness is complicated by the fact that agencies often modify projects that are continued across biennia. Since these modifications don’t necessarily get reported to the QAT, cost and timeline evaluations can be skewed.
If the PMO were properly funded, it could ensure that major IT projects are properly defined and modified when changes are made. It could provide executive management services to the agencies involved in each project to establish plans with costs and timelines, design criteria and management oversight, including:
- clear targets, measures of results at regular intervals, and accountability measures;
- service level definitions that clarify PMO’s role as well as those of participating agencies; and
- recommendations for adequate funding methods for initial development as well as ongoing maintenance and operations.
While code development and other day-to-day operations would remain the responsibility of participating agencies, the PMO would be held responsible for the overall success or failure of these projects, and would act as project manager to ensure that all guidelines, standards, policies, design criteria and schedules are followed.
The Legislature authorized DIR to establish a funding model in coordination with the Comptroller’s office, the Governor’s Office of Budget and Planning and SAO, which would use funding from state agencies participating in selected PMO projects to fund the office’s operations. DIR, however, has not yet established this funding model. It has delayed action because no projects have yet been selected by the PMO, and the legislation requires it to do so before it can draw funds from agency projects.
An appropriate funding model could be developed prior to project selection to identify the targets, accountability measures and service level definitions to be used once selection occurs. Fine-tuning the model to specific projects could occur with the support of participating agencies to demonstrate that they gain more value from PMO support than the costs provided through the funding formula. Such value would include the delivery of effective project management services, enforceable standards to ensure that major IT projects meet established quality criteria, and documented savings and cost avoidance from PMO activities of the type attained by Florida.
DIR’s Business Operations Division operates a cooperative contracts program. The division negotiates master contracts with multiple vendors to provide hardware, software and IT services to state agencies and other public entities at discounts of at least 10 percent below manufacturer’s list prices. Total program sales have risen from $75.3 million in 1997 to $295.5 million in 2002. The program’s success has allowed DIR to reduce its recovery rate (its markup on purchases to cover its costs) from 3.0 percent in 2001 to just 1.4 percent in 2002.
Although the DIR “store” simplifies the purchasing process for public entities and offers reduced prices for some IT products and services, it does not benefit state agencies as much as it could. Most large corporations approach software purchasing and deployment differently. Rather than establishing multiple contracts for similar services and products, they limit agencies’ options through common standards for software, hardware and IT services. DIR is considering negotiating master contracts with such standards to limit the state’s number of IT vendors.
According to one DIR board member, purchasing and contracting standards would improve the state’s IT security program because they would result in fewer hardware systems and software programs needing protection. If DIR were to establish a standardized, central IT procurement process for state agencies, it could help ensure better safety and security for state systems while reducing purchasing costs.
The 2001 Legislature transferred responsibility for the state’s telecommunications services to DIR and established the Telecommunications Planning and Operations Committee (TPOC) to report to the Legislature on state government voice, video and data communications operations and needs. DIR’s Telecommunications Services Division (TSD) now provides all telephone services for the capital complex in Austin and for long distance and other services delivered through the state’s TEX-AN network.
Legislative telecommunication performance measures require DIR and TPOC to establish voice communication pricing below industry levels and to identify and fix equipment problems in a timely manner, but they do not require DIR to limit its operational costs. TPOC’s report to the 2003 Legislature cited TSD losses of $12.6 million in fiscal 2001, and established a goal of full cost recovery by the end of fiscal 2002 through cost reductions and rate adjustments. Unfortunately, TSD’s cost-recovery efforts involved a huge increase in the surcharge agencies must pay for long distance. From September 2001 through June 2002, TSD had been adding a 10 percent surcharge for Southwestern Bell services and 15 percent for AT&T services. These were increased to an across-the-board surcharge of 20 percent in July 2002.
Other states provide telecommunications services with lower surcharges. Georgia’s rate, for example is 17.4 percent of sales. Its Information Technology Division (GITD) is taking steps to reduce this to 12 percent to be more consistent with industry benchmarks for such surcharges. GITD is looking at ways to reduce high overhead associated with overly complex billing and charge-back systems and inefficient and ineffective help desk operations. It is also looking at providing better oversight of service providers, such as long distance companies, to ensure the lowest possible rates and best possible services. Georgia may also implement standards for physical networks, wireless services and video networks to reduce incompatibility among agencies and save money through better efficiencies. These concerns could also be addressed in Texas.
TSD has begun addressing its problems by establishing a new Telemanagement System at a cost of $2.9 million. This automated system allows agencies to receive telecommunications billing information online, and can be used to measure and track performance measures and analyze trends to improve services and reduce costs. But agencies must develop their own software to receive the information, sort it by division and send it to staff members for review. Although the Texas Legislative Council (TLC) already has developed software for this purpose, DIR has not worked with TLC to ensure that other agencies are aware of this system, or provided programming support to help agencies get their billing needs met.
Another cost-reduction option for state agencies is to outsource the consolidation, operation and upgrading of telecommunications equipment and services. HHSC, which oversees a 13-agency consortium of agencies, is seeking a vendor to offer these services at 10 percent below current costs, representing a savings of more than $2 million per year.
Although DIR has attended planning meetings for the HHSC initiative, it has not considered outsourcing as an option for its own operations. If DIR were to set cost-reduction targets similar to HHSC’s and seek an outsourced vendor, or encourage TEX-AN customers to join the HHSC contract, once developed, it could help reduce its overhead costs and surcharges to state agencies.
DIR is required by law to prepare the state’s strategic plan for IT. The plan is designed to establish a common direction for all state agencies and universities to follow concerning the implementation of technology. The biennial report on IT management, also required by law, includes specific information about major projects and progress toward goals and objectives. However, both these documents provide very general information on state goals and trends without establishing a blueprint for public entities on how to design, deploy, and manage successful IT initiatives.
For example, DIR’s strategic plan includes a history of IT initiatives, functions and related economic variables, but useful information and planning criteria for public entities are not included. Obstacles and opportunities are listed, along with technological trends, but these are not enough to provide agencies with specific options for how to meet their technology needs.
The Enterprise Operations Division is charged by DIR with supporting cooperative and intra-agency initiatives, and reviewing existing standards and policies while developing and researching emerging technologies. But the strategic plan does not include detailed lessons learned from these initiatives, and there is no guidance to help agencies develop cost-benefit analyses to help them select the best strategy for meeting their IT needs. Although DIR is authorized to require agencies to report on their hardware, software and technology initiatives, no such requirements are included to help DIR evaluate statewide IT needs and to improve the agency services it provides.
If agencies were to identify and report on existing hardware and software systems and the extent to which they are complying with DIR rules and standards, it would provide better information to the PMO and the Legislative Oversight Committee, created to oversee the establishment of PMO and state agency electronic government projects, to use in selecting projects and targeting technical assistance to agencies and projects most in need of aid.
DIR’s Web site provides links to a number of valuable publications and resources, including general guidance and best practices as well as the legal requirements that agency IT programs must follow. However, it does not incorporate content management or project management software to allow for easier navigation by visitors. These features would allow visitors to find all available information on a topic through keyword searches, and to automate their IT planning processes. The software could restrict access to authorized staff members, and alert managers when projects are falling behind.
DIR’s Web site also lacks information on re-usable software that has been designed and developed by agencies. A Web site, now operated by the Governor’s office, GovernmentDomain.com, lists software programs such as legislative tracking systems, internal financial management systems, grant tracking systems and correspondence tracking systems that have been designed and implemented with public funds. Agencies can use these programs for free, although some costs may be incurred if they modify them for their own needs. The Business Operations Division does not track the use of this software by agencies and does not include any resulting savings in its purchasing performance measure.
A. State law should be amended to authorize the Texas Department of Information Resources’ (DIR’s) Program Management Office (PMO) to reduce cost overruns for major information technology (IT) projects.The PMO is already authorized by Government Code §2055.052 to direct and facilitate the electronic government projects it selects. The amendment would authorize the PMO, with approval of the Quality Assurance Team (QAT) and the PMO Legislative Oversight Committee, to evaluate, redesign and, if appropriate, discontinue major IT projects under QAT oversight that are being managed poorly or have excessive cost overruns.
B. DIR should establish a PMO funding model and performance measure that include the provision of management services for selected projects.State law already authorizes the PMO to establish a funding model and use a portion of the money appropriated for the projects it selects to support its operations. DIR, in coordination with the Comptroller’s office, Governor’s Office of Budget and Planning, the State Auditor’s Office and the Legislative Budget Board, should establish this model to provide the PMO with the staffing and employee benefit costs it needs to oversee and manage the major IT projects it selects. The Enterprise Operations Division should establish technical and business practice standards for PMO projects.The funding model should clearly establish savings and cost avoidance resulting from its management initiatives. The method used by the TexasOnline Division for its benchmark studies should be adapted to PMO outcomes. This method calculates how electronic initiatives reduce agency costs. For example, the Texas Department of Insurance reports 25 percent reductions in its cost per transaction for online license renewals. The Comptroller’s office found that online tax filings can be processed more quickly and cost only 78 cents per transaction, compared to offline costs of $2.72. DIR, in coordination with the PMO Legislative Oversight Committee, should negotiate with the Legislative Budget Board (LBB) to establish a PMO performance measure that identifies the amount of savings and cost avoidance it achieves. The PMO should be held accountable for the success or failure of its projects, although participating agencies should retain all responsibilities for code development and day-to-day operations. The PMO should track and report its progress against the funding model and performance measure and report its progress regularly to participating agencies, the QAT, the PMO Legislative Oversight Committee and the Legislature.
C. DIR should establish performance measures to improve its purchasing and telecommunications services.DIR, in coordination with the Telecommunications Planning and Operations Committee (TPOC), should negotiate with the LBB to establish a telecommunications performance measure that establishes cost-reduction targets for its Telecommunications Services Division (TSD) and reduces the surcharge rates that public entities pay for long distance services. DIR should consider outsourcing some or all of its telecommunications services based on the model provided by the Health and Human Services Commission. DIR should establish contracting and purchasing standards for software, hardware and IT services. The standards should limit vendor selection for identical products, establish targets for agencies to re-use public software, reduce purchase prices and improve security. DIR should negotiate with the LBB to establish a performance measure to identify and set targets for reducing purchasing costs.
D. DIR should improve its direct support to state agency IT initiatives.DIR should modify its strategic plan and biennial performance report to provide an operational blueprint and planning criteria for public entities to help them meet their IT needs. These documents should require agencies to identify and report on existing hardware and software systems; the status of their quality assurance initiatives for security and major IT projects; and measures taken to comply with DIR rules and standards. The TexasOnline Division should modify the DIR Web site by integrating content management and project management features. These improvements would allow visitors to seek information using keywords and would help the PMO, the QAT and agencies to automate the design, implementation, and costing of major IT projects. DIR should coordinate with the Governor’s Office to expand and move the GovernmentDomain.com site to DIR. This public software clearinghouse would allow agencies to reduce design and software licensing costs. The clearinghouse should include telecommunications billing software developed by the Texas Legislative Council.
Recommendations A and B could be accomplished with existing resources. The estimate assumes that the PMO could meet its legislative responsibilities with 10 FTE positions, which would add 7 positions to the PMO. According to DIR’s Business Plan and Budget for Fiscal 2003, PMO staff costs for three FTEs are $223,000 or an average of $74,000 each. Assuming this rate, the cost to DIR for the additional 7 PMO positions would be $664,000 ($518,000 in salaries plus $146,000 in benefits). It is assumed that funding will be provided through agencies that participate in selected projects and that the PMO funding model will include agency savings and cost avoidance amounts that are at or above this level.
For recommendation C, TPOC and TSD could develop a performance measure to reduce telecommunications overhead costs with existing resources; Business Operations could establish contracting and purchasing standards with existing resources. These measures should reduce overhead for telecommunications services and purchasing costs for agencies, but the amount cannot be estimated.
Recommendation D could be accomplished with existing resources. DIR already plans to improve its Web site and could include the required features with the assistance of its TexasOnline Division. The upgraded Web site would provide a tracking mechanism to support low-cost enforcement of standards and track implementation of quality assurance measures at each state agency. The expanded availability of reusable software should save agencies purchase and design costs for new software and associated licenses. These savings, however, cannot be estimated.
Fiscal Year (Cost) for Expanded PMO Operations Agency Contributions to Selected PMO Projects Net Savings/(Cost) to General Revenue Change in FTEs 2004 ($664,000) $664,000 $0 +7 2005 ($664,000) $664,000 $0 +7 2006 ($664,000) $664,000 $0 +7 2007 ($664,000) $664,000 $0 +7 2008 ($664,000) $664,000 $0 +7
Texas Department of Information Resources, Agency Strategic Plan for Fiscal Years 2003-2007 (Austin, Texas, June 17, 2002), p. 5.
Comments of Carolyn Purcell, executive director, Texas Department of Information Resources, board meeting minutes, February 20, 2002, p. 5, and Texas S.B. 1458, 77th Leg., Reg. Sess. (2001).
Legislative Budget Board, Performance Measure Reporting for State Agencies (Austin, Texas, February 2002), p. 1, available in pdf format from http://www.lbb.state.tx.us/Performance/Measures/Documents.htm. (Last visited November 7, 2002.)
Tex. Gov’t Code §2055.054 and §2055.055.
Tex. S.B. 1, 77th Leg., R.S. (2001), Article IX, p. 114.
Tex. S.B. 1, 77th Leg., R.S. (2001), Article IX, p. 114, and telephone interview with Linda Fernandez, chief financial officer, Texas Department of Information Resources, September 4, 2002.
Texas Department of Information Resources, Legislative Appropriations Request for Fiscal Years 2004-2005 (Austin, Texas, August 30, 2002), pp. I.A.1-3.
Texas Department of Information Resources, Request for Offer: Statewide eProcurement Application Solutions, Provider & Associated Implementation Services (Austin, Texas, September 4, 2002), p. 2.
Tex. S.B. 1, 77th Leg., R.S. (2001), Article I, p. 6, Rider 9, Texas Department of Information Resources, “Electronic Reporting,” http://www.dir.state.tx.us/pmo/electronic_reporting.htm (Last visited September 27, 2002), Texas Department of Information Resources, Electronic Grants Management Report (Austin, Texas, February 28, 2002), p. 1, and Texas Department of Information Resources, “eTravel,” http://www.dir.state.tx.us/pmo/etravel.htm. (Last visited November 7, 2002.)
Texas Department of Information Resources, Business Plan and Budget for Fiscal 2003 (Austin, Texas, August 2002), Section 5, p. 5, and telephone interview with Shannon Porterfield, director, Program Management Office Division, Texas Department of Information Resources, August 15, 2002.
State of Florida, State Technology Office Business Plan (Tallahassee, Florida, April, 2002), pp. 6-12.
Based on electronic data supplied by the Texas State Auditor’s Office, Quality Assurance Team, Monitored Projects Spreadsheet, August 21, 2002, and memorandum of the Quality Assurance Team to legislative leaders, January 16, 2002.
National Electronic Commerce Coordinating Council, Audit Guidance Committee of the Electronic Financial Transactions Workgroup, Critical Business Issues in the Transformation to Electronic Government (Washington, D.C., December 14, 2002), Section 5, p. 6.
Interview with Pat Keith, Program Management Office Advisory Council member and chief information officer, Texas State Auditor’s office, Austin, Texas, September 11, 2002.
Tex. Gov’t Code §2055.057, and telephone interview with Shannon Porterfield.
Tex. Gov’t Code §2055.055(c) and §2055.057(a), and interview with Pat Keith.
Telephone interview with Bill Peek, manager, Contracts Department, Texas Department of Information Resources, September 4, 2002, and Texas Department of Information Resources, Business Plan and Budget for Fiscal 2003, Section 4, p. 3.
Telephone interview with Larry R. Leibrock, Texas Department of Information Resources board member and chief technology officer for the College of Business, University of Texas at Austin, September 4, 2002, and comments of Larry Leibrock and Carolyn Purcell, executive director, Texas Department of Information Resources, May 2002 DIR Board Meeting.
Tex. S.B. 311, 77th Leg., R.S. (2001).
Telecommunications Planning and Oversight Council, 2002 Annual Report (Austin, Texas, September 1, 2002), p. 18.
Telephone interview with Eddie Esquivel, director of the Telecommunications Services Division, Texas Department of Information Resources, June 24, 2002.
Georgia Office of Planning and Budget, KPMG LLP, Review of Administrative and Financial Practices, Scope, Area 1: Information Technology and Telecommunications, p. 6.4-19.
Telecommunications Planning and Oversight Council, 2002 Annual Report, p. 35.
Interview with Stephen W. Keyes, programmer/analyst, Information Systems Division, Texas Legislative Council, Austin, Texas, September 18, 2002.
Interview and materials provided by Richard K. Spencer, president, Jazz Networks, and Kim M. Weatherford, deputy director for Information Technology, Texas Department of Protective and Regulatory Services, Austin, Texas, August 22, 2002.
Texas Department of Information Resources, Business Plan and Budget for Fiscal 2003, August 2002, Section 3, p. 1.
Tex. Gov’t Code §2054.052.
Tex. Gov’t Code §2055.106.
Telephone interview with Gary Miglicco, managing director and national director for e-government services, BearingPoint, September 18, 2002.
Interview with Rich Steinle, sales representative, Duration Software, Inc., Austin, Texas, January 23, 2002, and telephone interview with Paul Gulick, information resource manager, Governor’s Office, March 20, 2002.
Texas Department of Information Resources, PMO Roles and Responsibilities: Status Report (Austin, Texas, June 14, 2002), p. 1, and Texas Gov. Code §2055.104.
Texas Department of Insurance, Benchmarking Analysis, License Renewal (Austin, Texas, August 13, 2002, p. 5; and Texas Comptroller of Public Accounts, Benchmarking Analysis, Sales Tax (Austin, Texas, July 17, 2002), p. 6.
Texas Department of Information Resources, Business Plan and Budget for Fiscal 2003, Section 5, p. 6.