The road to better federal IT spending: 3 steps for project managers

In 2016, I wrote a LinkedIn post entitled “Five Tips to Get a Financial Grip.” My goal was to introduce some best practices that managers at any level can use to improve project control and deliver more value through IT transformation initiatives as well as day-to-day operations. One of my recommendations was to collect financial data on a routine basis to maintain a view of what your spend is delivering. To do that effectively, you need to have a model or standard to “bucketize” dollars into cost pools. A model provides consistency in how you evaluate spend, identifies the key investment buckets that you need to track, and enables you to roll-up expenditures to support analysis. Enter Technology Business Management (TBM), which offers a model that’s been tested by commercial and government IT leaders, alike.

TBM was established by the TBM Council, which consists of contributors commercial organizations as well as government. It offers a framework, business model, and taxonomy that can be used to standardize how information technology costs are recorded. It also offers the means to roll-up costs for analysis against key performance indicators -- essential to communicate business value for the IT dollar.

The Office of Management and Budget got wind of TBM and saw the value of standardizing how IT costs are captured. With a consistent taxonomy OMB could get a better view of how agencies are allocating their capital and non-capital investments, and agency leaders could more easily benchmark their IT costs. OMB liked the idea so much, in fact, that they began to incorporate TBM taxonomy elements into the Capital Planning and Investment Control (CPIC) processes agencies must follow. Federal News Radio reported in June, 2018, that OMB has plans to fully implement TBM across government by fiscal year 2022.

As a result of these changes, agencies are actively pursuing TBM implementations, and as they do so, they are trying to resolve how different IT organization roles are impacted. In addition, GSA hopes to establish a TBM Program Office to help agencies take advantage of TBM as they pursue IT modernization initiatives. Earlier this year, I briefed an agency’s project management community on what TBM is and how it is relevant to them. Here are a few highlights of what I shared with them.

What do project managers have to do with TBM?

Project managers play a significant role within TBM. Project managers both rely upon and contribute to financial information generated through TBM-aligned processes – making them crucial to the overall success of organization-wide TBM maturity and effectiveness. They are deeply involved in estimating and managing funds that result in new value-generating products and services. Cost estimates are vital to IT executives that champion technology-driven change initiatives. Project managers that correctly allocate cost estimates help agency CIOs to demonstrate how operational efficiencies will arise in IT as well as the business. Similarly, project managers rely upon TBM data to capture baselines, track expenditures, and manage the cost of project delivery. These information exchanges could be increasingly important to important to future TBM-aligned CPIC cost reporting.

These practices aren’t new. The Project Management Institute has promoted the merits of cost estimation, cost management, and communications management at project and programmatic levels. TBM bolsters these best practices by offering a way to organize services, cost pools, and accounting so that IT management information can be captured and used more effectively. The financial perspective TBM provides when evaluating project scope, risk, and value helps IT executives and business executives level set on the business value of investments, and it is program and project managers that are key to communicating that cost data.

What can project managers do to prepare for TBM?

Many project managers have not heard of TBM or are just becoming acquainted with what it is all about. What essential things can project managers do now to get the most out of TBM today? Start with these three steps.

Step 1: Conduct a TBM Assessment.

An assessment to formally capture what models, tools and practices are in place is essential to successfully implement TBM. With an understanding of how you currently capture technology and service costs, you will be able to define a TBM Taxonomy adoption approach. By mapping to the TBM Taxonomy, project managers will be able to communicate using common cost pools and sub-pools that provide views of project contribution across multiple perspectives. They will also be able to better align to downstream CPIC reporting requirements for major investments.

The assessment may also surface useful practices that are already used to measure cost and performance. For instance, some organizations may employ activity-based costing to generate cost baselines. These practices can offer familiar methods to baseline and monitor cost drivers using the TBM taxonomy. The outcome of the assessment should establish the data and practices you can build upon and plot your organization’s path to gain greater insight into IT spending and to deliver stronger evidence of IT investment business value.

Step 2: Understand how project data fits into the TBM Taxonomy and TBM Model.

Project cost data is an important part of TBM. Project costs address the purchase of capital, such as facilities, equipment, and other items. Costs are also recognized on the expense side as labor and professional services are consumed. Project managers play an important role in TBM because they estimate, track, and control costs related to project activity. The project manager ensures that the cost of change is managed within limits so that it does not diminish the planned value.

The TBM Model shows that projects have a direct impact on business value through modernization efforts related to business applications, technology services, and the IT towers (e.g., compute, network, etc.) that support them. The TBM taxonomy helps stakeholders from finance to the front lines assign costs to well-defined cost pools and sub-pools.

When project managers understand how to allocate costs in their estimation process and in the ongoing tracking and management of a project, they participate in and strengthen financial transparency and stewardship that is essential to strong, business-minded management of investments.

Timeliness of project data reporting is essential to decision-making in large-scale organizations. It’s this communication that really makes the TBM model work. Executives and managers are constantly challenged with investment prioritization and justification of each dollar spent. Project managers need cost data for every aspect of their project, whether it be for capital items, services, or other costs. Timely cost reporting ensures that they can manage burn, address risks, and drive greater value for the dollar. It also enables project managers to share project execution data to managers and executives so that value and risk tradeoffs can be managed across the enterprise.

When data is not produced on time – or not produced at all -- project managers cannot reliably manage the cost to value tradeoffs expected for their projects. Furthermore, other stakeholders that rely upon effective financial stewardship of project funds can’t gain a firm grasp on whether something will succeed or fail.

Step 3: Participate in the larger TBM information ecosystem.

TBM is an evolution of conventional IT management that makes more use of structured financial information for decision-making, reporting, and planning. More than likely, your IT management environment has financial systems, models, and templates that are used to capture and report financial information.

To get the most out of TBM, these tools will need to employ the TBM taxonomy. By using the TBM taxonomy TBM participants can seamlessly provide meaningful planning and operations information to project and program managers, which are essential for project planning and program management.

Conversely, these tools provide a means for PMs to communicate project information in a way that reconciles with accounting, service management, and IT program management purposes. Project managers share a variety of information with other stakeholders such as:

• Project cost estimates,
• Project benefit / value estimates,
• Procurement information, and
• Budget burndown / Burn-up information.

These data, when reported in alignment with the TBM taxonomy, allow stakeholders from other parts of the organization to access project financial information that expresses financial status, return on investment, capital planning information, and accounting information. Now, CIOs, Service Managers, and financial analysts can gain consistent, real-time visibility into the business performance of projects and their contribution to the enterprise. That’s TBM at work!

Summing it all up.

IT modernization is top of mind across federal agencies. OMB and agency executives are working to drive down capital costs by consolidating data centers and moving IT services to the cloud. Through TBM, project managers stand to gain a great deal more insight into the cost elements of a project and how to estimate project benefits in terms of cost savings and avoidance that ties to service towers, business applications, and overall IT value to the business. This helps them to build compelling business cases for change as well as to report project cost information in a way that arms CIOs with what they need to articulate the business value of IT. By learning and using Technology Business Management, project managers can strengthen their contribution to Federal cost efficiency, information transparency, and value delivery.