The Acquisition Community’s Role in Capital Planning and Investment Control Patricia E. Corrigan DOI Office of Acquisition and Property Management U.S. Department of the Interior Business Conference Hunt Valley, Maryland May 25, 2006

Office of Management and Budget Circular A-11, Preparing, Submitting, and Executing the Budget The Circular applies to all Executive departments and establishments, and it is updated annually. OMB Circular A-11 is structured as follows:  Part 1: General Information  Part 2: Preparation and Submission of Budget Estimates  Part 3: Selected Actions Following Transmittal of the Budget  Part 4: Instructions on Budget Execution  Part 5: Federal Credit  Part 6: Preparation and Submission of Strategic Plans, Annual Performance Plans, and Annual Program Performance Report  Part 7: Planning, Budgeting, Acquisition and Management of Capital Assets - Supplement to Part 7: Capital Programming Guide  Part 8: Appendices

Capital Asset: Defined  Capital assets are: - land (including parklands), - structures, - equipment including fleet, and - intellectual property that are used by the Federal Government and have an estimated useful life of two years or more.  The cost of a capital asset is its full life-cycle costs, including all direct and indirect costs for planning, procurement (purchase price and all other costs incurred to bring it to a form and location suitable for its intended use), operations and maintenance, including service contracts, and disposal.  Capital assets may or may not be capitalized (i.e., recorded on an entity’s balance sheet) under Federal accounting standards.

Capital Programming/Capital Planning and Investment Control  The Clinger-Cohen Act of 1996 sought to improve agencies’ mission performance by requiring agencies to clearly define and implement a Capital Programming/Capital Planning and Investment Control (CPIC) process for selecting, controlling, and assessing IT investments.  However, with annual investments of over $800 million in IT assets and services, and $1.2 billion on construction projects, DOI has joined other agencies in applying CPIC to construction investments.  The CPIC process is useful for all long-term investments in capital assets. However, as recommended in the OMB Capital Programming Guide, agencies should consider the significance of the investment to the agency – both in costs and in its strategic importance – in determining the level of effort devoted in capital programming.

Full Analysis and Management Should be Applied to Capital Assets (Including Major Modifications or Enhancements to Existing Systems) That Meet the Criteria for a “Major Project” as Defined Below  Major IT Investments  Total lifecycle costs greater than $35 million  Financial systems with a life cycle cost greater than $500,000  Multiple-bureau and/or agency projects  Mandated by legislation or Executive Order, or identified by the Secretary as critical  Requires a common infrastructure investment  Department strategic or mandatory-use system  Significantly differs from or affects the Department infrastructure, architecture, or standards guidelines  High risk as determined by OMB, GAO, Congress and/or the CIO  Directly supports the President’s Management Agenda items of “high executive visibility”  E-Government in nature and uses e-business technologies (must be identified as major projects regardless of the costs  Major Construction Investments  Total design and construction costs greater than $10 million  Directly supports the President’s Management Agenda items of “high executive visibility”  Multiple-bureau and/or agency projects  Other significant projects requested by OMB

Strategic Investments  The above investments are considered to be strategic for the Department, and thus require greater documentation as well as Departmental CPIC review and approval.  They are reported to OMB through an Exhibit 300 and included in the DOI capital investment portfolio.

CPIC Process at DOI Five sequential phases:  Pre-Select Phase: Senior bureau decision makers assess each proposed investment’s support of DOI’s strategic and mission goals and incorporate it into a multi-year investment plan. Project stakeholders compile the information necessary for developing a preliminary business case supporting multi-year plans. Individual project proposals are assessed and prioritized in a multi-year plan by each bureau and the Department through executive decision-making bodies.  Select Phase: Bureaus prepare comprehensive business and investment analyses for proposed IT and construction investments that are thoroughly reviewed within the bureau. Department sponsored executive decision-making bodies review and approve the major IT and construction projects that best support the mission of the organization, strategic plans, and support DOI’s approach to enterprise architecture. Approved investments are entered in the budget process or alternative funding sources are identified.

CPIC Process at DOI  Control Phase: DOI and its bureaus ensure, through timely oversight, quality control, and executive review that IT and construction initiatives are executed (e.g., contracts awarded) and managed in a disciplined and consistent manner and are meeting cost, schedule, and performance goals. Corrective action plans are required for investments that exceed pre-set variances for cost, schedule, and performance goals.  Evaluate Phase: Actual results of the implemented projects are compared to performance goals to assess investment performance. This is done to assess the project’s contribution to carrying out DOI and bureau missions and identify any project changes or modifications that may be needed.  Steady-State Phase: All capital investments are assessed to ascertain their continued effectiveness in supporting mission requirements, evaluate the cost of continued maintenance, assess potential life cycle improvement opportunities, and consider retirement or replacement options. (For construction investments, this phase is also referred to as “Facility Maintenance.”)

QUIZ In which of the following phases does acquisition enter the picture? a. Pre-Select Phase b. Select Phase c. Control Phase d. Evaluate Phase e. Steady-State Phase

Who is a Stakeholder? What is a Business Case? Stakeholder: Anyone whose interests may be affected, either positively or negatively, as a result of a project. Business Case: Document containing the analysis and results of business assessments providing the justification to pursue a project.

Business Case – Exhibit 300  Provides a comprehensive profile/assessment of a project including: - Summary of Spending for Project Stages - Project Description - Justification - Performance Goals and Measures - Identifies Integrated Project Management Team - Alternatives Analysis - Risk Inventory and Assessment - Acquisition Strategy - Description of Performance Based Management System - Original Baseline - Proposed Baseline/Current Baseline

Acquisition Strategy The Exhibit 300 prefaces the Acquisition Strategy section by stating: In order to adequately address this area of the business case and capital asset plan you must employ a strong acquisition strategy that mitigates risk to the Federal government, such as using performance based contracts and statements of work. If you are not using performance based contracts and statements of work, your acquisition strategy should clearly define the risks that prompted use of other than performance based contracts and SOWs. Finally, your implementation of the Acquisition Strategy must be clearly defined.

Acquisition Strategy – Exhibit 300 Asks questions such as:  Will you use a single contract or several contracts to accomplish this project?  What is the type of contract/task order if a single contract is used?  If multiple contract/task orders will be used, discuss the type, how they relate to each other to reach the project outcomes, and how much each contributes to the achievement of the project cost, schedule and performance goals. Also discuss the contract/task order solicitation or contract provisions that allow the contractor to provide innovative, transformational solutions.  For other than firm-fixed price, performance-based contracts, define the risk not sufficiently mitigated.  Will you use financial incentives to motivate contractor performance?  Discuss the competition process used for each contract/task order.  Will you use commercially available COTS products for this investment?  What prevented the use of COTS without modification?  What is the date of your acquisition plan?

Early and Active Participation by the Acquisition Community in Integrated Project Teams is Key to Successful Projects!

CPIC Contacts  IT: Sally Good-Burton, DOI OCIO  Construction: Dave Campbell, BLM Lynn Evers-Ertman, BIA Marshall Wright, FWS Bob Springer, USGS Mike LeBorgne, NPS Bob Bochar, BOR Bob Jarcho, DOI - PAM