RD315 - Recommended Technology Investment Projects (RTIP) Report For the 2012-2014 Budget Biennium, September 1, 2012 Submission

Executive Summary:
This year marks the tenth annual submission of the RTIP Report by the Commonwealth’s Chief Information Officer (CIO), as directed by § 2.2-2007(10) of the Code of Virginia. During the past decade $2.3 billion in information technology (IT) projects have been reviewed, approved, and reported as part of the RTIP process.

To better ensure the RTIP report adds value to the Commonwealth’s technology investment decision-making process, the current report reflects the CIO’s emphasis on ensuring that IT investments directly align with the Commonwealth’s strategic goals and objectives. As in previous years, this strategic direction is based on the Governor’s initiatives and priorities established by the Council on Virginia’s Future. In addition, the current report also takes into account the technology business plan which was adopted by the IT Advisory Council (ITAC). Although consideration of these strategic goals and directives played an important role, only those projects which were also supported by a strong business case, based on established selection and ranking criteria, were considered as priorities for funding. Appendix J contains an overview of the IT project governance, assessment, and approval processes. Further information is available in the Project Management Standard ( http://www.vita.virginia.gov/uploadedFiles/VITA_Main_Public/Library/PSGs/Project_Management_Standard_11203.pdf).

This year’s report recommends that 23 new projects, with an estimated cost of $218,600,172, be funded and selected by the Secretary of Technology into the Commonwealth Technology Portfolio (CTP) as required by § 2.2-225(11) of the Code of Virginia. In addition, 25 active projects, with an estimated cost of $259,254,706, are recommended for continued funding. The report also presents an update on last year’s key recommendations and actions, along with this year’s recommendations, and summarizes changes to the CTP since the publication of the 2011 RTIP report. Finally, the report documents a major shift in project oversight and governance over the past two years with the implementation of Program Management offices.

As described in last year’s report, in fiscal year (FY) 2011 the Virginia Information Technologies Agency (VITA) successfully implemented the Commonwealth Project Governance Assessment (CPGA) model. With the goal of ‘just enough governance, just in time’, the Commonwealth IT Project Complexity Model was revised to analyze risk and complexity over the life of Commonwealth projects, to determine the appropriate levels of governance and oversight. Projects of $250,000 or more are evaluated, assessed and assigned into one of four oversight and governance categories based on the project’s risk/complexity score. Projects assigned to Category 1 require the most oversight and governance as they are highest risk projects; Category 4 projects require the least oversight and governance.

The breakdown of the 23 projects recommended for funding by risk and complexity can be seen in Exhibit 1. Note that only one project, the Virginia Department of Transportation’s Financial Management System Sun Set and Data Marts, has been classified as a Category 4 project. Because this project’s score indicates it has a low risk and low complexity, once active it will be overseen by the agency and will only have to report quarterly progress updates to VITA’s Project Management Division and will not have to conduct Independent Verification and Validation (IV&V) reviews.

Based on estimated project cost, 53 percent of the projects in the recommended for funding portfolio are Category 1 projects, while 40 percent are Category 2. Accordingly, a significant percent of the portfolio can be characterized as “high risk”, a designation which increases resource demands on those participating in oversight and governance activities. To place this in perspective, two points are noted. First, the category assignment is based on the initial CPGA risk/complexity assessment taken when the project is submitted for Investment Business Case approval. As project planning takes place, subsequent assessments are made when the project seeks project initiation approval and detailed planning approval. These subsequent assessments may result in a lower CPGA risk/complexity score. Second, 11 of the 19 projects that are recommend for funding in category 1 or 2 are under program management, and not just project management. As discussed later in this report, the use of program management provides an additional layer of oversight to mitigate project risks.

Another view into portfolio risk can be seen by the breakdown in what Gartner calls "business affect”, as seen in Exhibit 2. Projects that are “transformational” in nature are higher risk as they transform the way an entire agency does business and involve the reengineering of business processes. Projects that “improve the business” also can impact business processing, although these changes tend to be more localized to divisions within an agency. As shown in Exhibit 2, 73 percent of projects in the recommended for funding portfolio will impact business processing to some degree. Note that one of the two projects categorized as “run the business”, the $58 million Financial Management Enterprise Rollout (Cardinal Project Part 3), is classified as a Category 1 project.

Several changes in recent years have increased the transparency and effectiveness of the IT project oversight process. FY 2010 marked the first year that active major IT projects were included as separate expenditures in the Governor’s Budget and in the Appropriation Act. Additional oversight is provided by the CTP, which provides for regular quarterly portfolio reviews. This enhanced scrutiny of the portfolio by the oversight and governance process has significantly reduced, but not eliminated, the number of last-minute agency projects being submitted for planning and development approval between RTIP reports.

Capturing and retaining project information in the CTP over time also provides the means to begin charting spending trends. Exhibit 3 shows IT project dollars spent on new investments for fiscal years 2008 through 2012. These cost figures were taken from the data reported by agencies on the Commonwealth Major IT Projects Dashboard each month. FY 2011 is much higher than the other years because of unusually large expenditures in the now completed Virginia State Police’s Statewide Agencies Radio System (STARS) project.

Overall IT expenditures for executive branch agencies for FY 2008 through FY 2012 can be seen in Exhibit 4, which shows the breakout between infrastructure, project spending under VITA’S oversight and governance, and ongoing operations and maintenance (O&M) COSTS over the five-year period. These expenditures do not include higher education, the Judicial Branch or Legislative agencies. The data for each of these years are from year-end reports from the state general ledger system and Commonwealth Accounting and Reporting System (CARS), which are provided to VITA by the Auditor of Public Accounts (APA).

CARS captures agency-reported data, making spend numbers wholly dependent upon accurate sub-object coding of expenditures by agencies. As a result, VITA has some reservations about using CARS expenditures as a surrogate for “IT costs” and the CARS reported data may differ from data captured in VITA’s internal PeopleSoft application. However, CARS data are used because the information is provided from a reliable, independent source and the methodology is consistent from year to year.

In the past, agencies have not reported against baselines for projects of less than one million dollars on the Commonwealth Major IT Project Status Report Dashboard or in the Commonwealth Technology Portfolio. Accordingly, VITA does not have a method for determining dollars spent in a given fiscal year for those projects. These dollars are embedded within the O&M category at this time.

The chart shown in Exhibit 6 displays the trend in agency expenditures for Project, Payroll O&M, Non-payroll O&M, and VITA Infrastructure and Telco activities and services over the last six fiscal years. The most variance occurs in the Project and Non-payroll O&M expenditures. The FY 2010 increase in VITA infrastructure and telecommunication service fees resulted from the GA approved rate increase approved by the Joint Legislative Audit and Review Commission (JLARC).