Date: 02/06/2015

Final
Presentation of the Joint Budget Committee’s Proposed Policy for Annualization

COMMITTEE ON JOINT TECHNOLOGY COMMITTEE

Votes: View--> Action Taken:
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02:13 PM -- Presentation of the Joint Budget Committee’s Proposed Policy for Annualizing Operating Efficiencies for IT Capital Projects

Alfredo Kemm, Budget Analyst, Joint Budget Committee (JBC) Staff, came to the table to present to the committee on a proposed policy change of the JBC. A copy of his proposal was distributed to the committee (Attachment B). Mr. Kemm stated that he is concerned with the fact that IT budget requests often do not include a cost-benefit analysis or life-cycle cost analysis of the proposed project. He stated that he is looking for a standard way of quantifying cost savings of IT projects and that the JBC has a proposed policy change to annualize minimum expected baseline operating efficiencies for IT capital projects. Under the proposed rule, in the second fiscal year of implementation of a project, personal services would be offset by a base reduction equal to 10 percent of the IT project cost. Additionally, in the second fiscal year of implementation, operating expenses would be offset by an equivalent, ongoing base reduction for annual operating or maintenance costs associated with the IT system. Under the plan, poorly planned or executed projects would be subjected to penalties. Mr. Kemm provided an example of how this would work for a project, referencing the FY 2014-15 supplemental request submitted by Department of Personnel and Administration for its Human Resources Information System.

150206 AttachB.pdf150206 AttachB.pdf

Mr. Kemm explained that the JBC had asked him to explore ways to ensure that departments do their due diligence and planning and achieve on-target execution of projects, which will help reduce the number of projects that require supplemental appropriations down the road. This approach would encourage departments to ensure that a project is worth implementing because it would require future cost savings for a project.

02:26 PM

Discussion ensued on the topics of state agency project planning and management, cost overruns, and appropriations. Mr. Kemm responded to committee questions on the major concerns he has surrounding department project submittals and alternatives to the proposed 10 percent base reduction. Committee discussion ensued on key performance indicators (KPI) that could be applied to projects, how to measure the benefits of new IT systems, quantification of the cost-benefit of a project, the expectations of departments in performing adequate analysis of a proposed project, and departmental accountability for the success of IT projects.

02:43 PM

Mr. Kemm discussed the evolution of the IT budgeting and appropriations process, the need to hold agencies accountable to project success, and how the JBC would like the JTC to take the lead on developing the requirements for departments to quantify savings and benefits of IT projects when submitting a request for funding. The committee discussed coordinating with Mr. Kemm and the JBC to develop these requirements, the criteria it could consider to measure the potential success and benefit of a project, and quantifiable metrics that departments could provide to help the JTC in its consideration of IT budget requests.

02:50 PM

Mr. Kemm discussed a bill the JBC is currently having drafted and the JTC's meeting with the JBC on February 12, 2015. He explained that he anticipated the meeting's focus to surround: how to quantify and identify project funding considerations; IT capital funding being split away from the capital construction fund (CCF) in the 2014 session and whether to revert this change or create a special fund within the CCF for IT capital projects; statutory definitions of IT capital versus building capital; and amending statutes to add IT capital projects to the interim supplemental appropriations process. At the request of the committee, Mr. Kemm explained the interim supplemental appropriations process. He also discussed the Colorado Operations Resource Engine (CORE) supplemental request that the JTC and JBC considered in December 2014. He responded to committee questions on funding of IT capital budget requests, the emergency supplemental process versus the regular supplemental process, agency IT project planning and the funding request process, and expectations the JBC has of the JTC in its review of IT capital budget requests.