Pay Me Now, or Pay Me Later! Guess What? It’s Now Later!

Computer desk IBM 360 Desk Console

Want to cut down on the size and ineffectiveness of the Federal government? If so, then you will need to shell out significant dollars to replace the decades-old IT systems that the government uses for many of its programs. And you will need to rework many of the procurement practices and political machinations that have hamstrung efforts to update IT systems in the past.

It is not a secret that the IRS is at the rear of the organizations that are updating their IT systems. Two of the main systems for the IRS are IT antiques dating back over 50 years ago, running on IBM mainframes, with programming that is written in assembly language code. There have been requests to modernize the systems involved, but since the IRS is viewed as anathema to the Republicans dominating Congress, the trend over the past decade has been to cut IRS spending, not upgrade the systems. I actually remember IBM mainframes – the IBM 360 was the workhorse of the university computing systems at our school. The fact that essential government functions still run on a similar system now should bring shame to any who care about efficient government services. Indeed, it appears that up to $60 billion per year across the Federal government is being spent trying to nursemaid these antiquated systems through yet another day.

Not only does the government incur substantial costs for keeping these antiques running, it cannot achieve the efficiencies in service delivery that are possible if we use modern computer systems. I worked for over 20 years for my company installing and upgrading our business enterprise software. Our system was SAP, and in the early 1990’s I began work at a chemical plant implementing the mainframe version of this system. Beginning in 1999, I worked full time on SAP implementation for our department, and I understand the complexity involved in uprooting existing systems and implementing brand new business processes. The period immediately before and after go-live was always traumatic and stressful. But it is only after going through these efforts that it is possible to reap the benefits of improved IT. The increase in direct IT support costs is greatly outweighed by the reductions in support staff at the plants and in central offices. Not only are overall costs lowered, but the information that comes from such a system is up to date and accurate. When I began working at a plant, it took a clerk in each process in a plant multiple days to assemble the information needed for monthly cost reporting. These reports were circulated in a preliminary form among the management of the process, and eventually they were issued. Then the plant accountant would assemble all of the overhead cost sheets, and the allocated costs would be figured. All of this meant that cost information was never current, always subject to significant revisions, and provided only a snapshot once a month.

By the time I retired in 2015, cost data was available instantaneously for all products, including labor costing and allocated overheads. The manpower was greatly reduced at a site, the information was better, and managers could focus on factors within their control instead of trying to manipulate the reports to put their operations in a better light.

The Federal government cannot achieve the efficiencies that private industry has achieved, because the impetus to upgrade IT systems has not been sufficient to enable the departments to get the funds to implement the upgrades. In fact, lately this effort has gone in the opposite direction. According to the Government Accounting Office (GAO), Operations & Maintenance spending on IT systems has been rising year by year since 2012, while spending for modernization and development has declined. From fiscal years 2010 to 2017, such spending has decreased by $7.3 billion.

Even when funds are appropriated for upgrades, current procurement practices preclude efficient implementation. I am aware of an effort to implement a portion of business enterprise software for the army. Supposedly the contract for this project was approved in late 2016. However, due to the nature of government procurement, a competitor who was unsuccessful in the bidding process appealed the awarding of the contract. It has been six months, and there has not been any update on the resolution of the situation. Meanwhile, those employees who would have been assigned to the project are awaiting actual productive work at the government contractor. Such delays lead to projects running behind schedule and much above budget.

One reason why the funding has decreased for modernizing IT systems has been the sequester process for budgeting. With funding for discretionary spending flattened by decree, it has been increasingly difficult to gain support for funding for IT improvements. But for fiscal conservatives, it should be a primary goal to ensure that if the government must spend tax dollars, they should do it in a cost-effective manner, and in such a way that overall government employees could be reduced. Unfortunately, this approach has not reached the top 10 list of the Grover Norquist acolytes who view any increase in expenditure from a government agency as sacrilege.

Since the current administration is full of folks with business experience, maybe these types of modernization efforts may finally gain traction. This is one area where I do find agreement with the priorities of the Trump administration. This past week’s gathering of tech business executives with the administration did discuss IT modernization. My fear is that in this administration’s pogrom against discretionary spending, once more we will fall further behind the IT curve. Future archeologists will excavate data centers complete with mainframes and tape drives intact, and will marvel that these relics maintained their usefulness long after they had been abandoned by the world of business.

 

 

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