1. Evaluation of Budget Process for Information Technology Projects Proposed Final Report February 16, 2006 Joint Legislative Audit & Review Committee Karen Barrett, Research Analyst

2. 2Evaluation of Budget Process for IT Projects Today’s Presentation 1.Assignment & Report Overview 2.Study Conclusions in Brief 3.Agency Responses to Recommendations

3. 3Evaluation of Budget Process for IT Projects 2005 Assignment from Legislature Had 3 Parts: 1.Review agency reporting of IT expenditures 2.Evaluate the state’s IT project review and funding processes 3.Identify processes used by other public and private entities as sources for possible improvements in Washington Compliance difficulties presently limit state government’s ability to understand total IT investment costs Two shortcomings and a decision-support concern about budgeting for IT projects shaped this report and our recommendations Conclusions coordination Better coordination of project reviews with funding actions estimates Better estimates in early project stages for budgeting

4. 4Evaluation of Budget Process for IT Projects Compliance: 67 of 96 Agencies Reported Biennial IT Expenditures to DIS in 2004; State Portfolio Incomplete By ISB Category (1-7)* Same Data By Function* Hardware Purchases 32% Data Processing Services 17% Tele- communications 25% Other Expenses 2% Software Purchases 12% Hardware Repairs 5% Software Maintenance 7% Transportation 8% General Government 25% Health & Human Services 32% Education 27% Criminal Justice 3% Natural Resources 5% * DIS data does not include OSPI for K-12 schools; see page 5 of Report

5. 5Evaluation of Budget Process for IT Projects Step F: Decide The DIS Director/ISB decides whether or not to approve the IT project investment plan. Step F: Decide The DIS Director/ISB decides whether or not to approve the IT project investment plan. Step A: Concept Agency Director determines that the agency needs an IT project. Step A: Concept Agency Director determines that the agency needs an IT project. Step B: Risk Agency conducts a self-assessment of the IT Project according to criteria established by the ISB. Step B: Risk Agency conducts a self-assessment of the IT Project according to criteria established by the ISB. Step C: Check DIS staff check the Agency self-assessment of the project. Step C: Check DIS staff check the Agency self-assessment of the project. Step D: Research For those projects that require additional review: the Agency prepares a feasibility study and develops an investment plan. Step D: Research For those projects that require additional review: the Agency prepares a feasibility study and develops an investment plan. Step E: Evaluate DIS staff evaluate the feasibility study and the investment plan, and make a recommendation about the project to the DIS Director/ISB. Step E: Evaluate DIS staff evaluate the feasibility study and the investment plan, and make a recommendation about the project to the DIS Director/ISB. Step G: Contract If investment plan is approved, Agency issues its RFP for the IT project. Step G: Contract If investment plan is approved, Agency issues its RFP for the IT project. Step H: Work Agency begins work on the IT project. Step H: Work Agency begins work on the IT project. Step I: Monitor ISB monitors project execution against projected scope, schedule, and budget. Step I: Monitor ISB monitors project execution against projected scope, schedule, and budget. Once the Project Design Architect begins work, cost and time estimates for the IT project become more firm Timing of agency budget request to Legislature can occur anywhere between A and F IT Review Process How the Budget Process Overlays This Legislature may not enjoy the benefit of DIS or ISB review when budgeting There are alternative ways to deal with uncertainties IT projects present for budgeting discussed in Chapter 4 of the report.

6. 6Evaluation of Budget Process for IT Projects Recommendations: Compliance to Understand IT Investment 1.The Information Services Board (ISB) should require all agencies to submit IT project expenses and budgets in complete and consistent portfolio reports. 2.The Department of Information Services (DIS) should resume submitting a statewide IT performance report biennially to the Governor and Legislature. We suggested content and basis for analysis be reviewed to confirm its relevancy when lawmakers consider technology investments. Agency Responses: DIS and OFM concur with both recommendations.

7. 7Evaluation of Budget Process for IT Projects Recommendation: Check Staff Capacity to Provide Support 3.DIS should undertake a workload study to identify potential gaps in its ability to provide adequate decision support for its various IT project review, funding and oversight responsibilities, as well as for the state’s biennial budget process. OFM agrees that DIS should check “how it analyzes IT projects to ensure sufficient support.” DIS suggests that if gaps exist, directors will realign resources or present staff needs as a funding decision for the Governor and Legislature to affirm. Agency Responses: DIS Partially Concurs; OFM Concurs Some form of a review will happen.

8. 8Evaluation of Budget Process for IT Projects Recommendation: Improve Experience of Writing Budgets 4.The Legislature should consider ways to time funding actions so that they are closer to when the cost and time estimates for IT projects are more reliable. Process alternatives, among others to consider: Adopt a 2-stage (design then build) funding process; Engage the project IT architect/engineer earlier (like GC/CM); Have OFM/DIS hold and stage the release of funds; Create a revolving fund with the ISB/OFM making decisions about the amount of money and timing on its release. Agency Responses: DIS and OFM Concur.

9. 9Evaluation of Budget Process for IT Projects Recommendation: Improve Experience of Writing Budgets 5.The Information Services Board should investigate other methods to help agencies improve their early IT project cost estimates. New practices or standards to consider: Research and publish a “pre-design” guide with planning ranges defined for agencies’ IT project budgets; Require IT project budgets be developed with “scope” estimators certified in practices like function-point measurement and analysis; Likely, there are additional options DIS could explore. Agency Responses: DIS and OFM Concur