Governor's IT Project Proposals

Introduction

This report provides an overview of the proposed and approved IT projects in the Governor’s proposed 2020‑21 budget. We first provide relevant background information on the state’s IT project approval process, approaches to development and implementation of projects once approved, maintenance and operation of IT systems once completed, and requirements for state government entities to request resources for projects through the budget process. We then identify and summarize the budget requests to plan proposed projects and to develop and implement projects (whether proposed or approved). As a subset of the latter, we highlight budget requests to develop and implement proposed projects that are still being planned but are expected to be approved in 2020‑21. (We do not provide an in‑depth analysis of any individual budget request for a proposed or approved project in this report, and instead include our analyses in other publications organized by budget area.)

For purposes of our analysis in this report, we focus on budget requests for proposed and approved projects from entities under the authority of CDT. CDT’s IT project approval process provides the Legislature with opportunities to offer input on its priorities in the planning of proposed projects. In addition, given many projects are centralized through CDT, this process presents opportunities to exercise more legislative oversight of IT projects.

Background

Role of CDT. CDT is a department within the California Government Operations Agency with broad authority over all aspects of technology in state government. This report focuses on two of the department’s responsibilities: (1) to review and approve IT projects proposed by state government entities, and (2) to oversee the development and implementation of approved projects until they are completed. (Some entities and projects are not covered by CDT’s authority under state statute. Excluded entities include, for example, constitutional offices.)

Project Approval Lifecycle (PAL). To review and approve IT projects proposed by state government entities, CDT implemented a new IT project approval process—PAL—in 2016. (For a comprehensive description of the PAL process, please see our February 17, 2017 report—The 2017‑18 Budget: The New IT Project Approval and Funding Process.) The PAL process divides IT project approval into four stages: (1) business analysis, (2) alternatives analysis, (3) solution development (including procurement analysis), and (4) project readiness and approval (including vendor selection and finalization of IT project details). Each stage in the PAL process requires entities to submit an associated planning document to CDT for its approval. Collectively, the planning documents from the four stages provide a complete project plan (including the project’s cost, schedule, and scope) to develop and implement the proposed project. Figure 1 provides a graphical depiction of the PAL process.

Development and Implementation. Once CDT approves a proposed IT project (and, for most proposed projects, the Legislature appropriates funding), the state government entities can start to develop and implement their approved projects. Projects can approach the development and implementation of their projects in several ways: (1) the traditional approach, (2) the “agile approach,” or (3) some combination of the traditional and agile approaches. Using the traditional approach, entities develop the entire scope of the project before it is implemented. Using the agile approach, entities develop some of the project scope (often referred to as modules) and implement it while the rest of the scope is being developed. As entities develop and implement their projects, the initial cost, schedule, and scope of the project may change. If entities deviate from the cost, schedule, and scope approved by CDT through the PAL process (in an amount or by a percentage set by CDT)—regardless of development approach—CDT often requires entities to submit a revised project plan in a new planning document called a Special Project Report (SPR). As of February 2020, a total of 23 IT projects (under CDT’s authority) are currently in development and implementation at a total cost of $2.7 billion ($1.5 billion General Fund). Figure 2 shows projects currently underway (under CDT’s authority) in order of total cost and General Fund cost.

Maintenance and Operations (M&O). Once the development and implementation of an IT project is completed, the project becomes an IT system and enters into M&O. M&O includes activities and costs associated with the state government entity’s ongoing upkeep and continuing use of an IT system.

Certain CDT‑Approved Documents Required to Request Resources Through Budget Process, Assisting the Legislature’s Oversight. State IT policy requires state government entities to submit certain documents to CDT for approval before requesting resources through the annual budget process. The administration shares the approved documents with the Legislature to assist with its deliberations over budget requests, including its consideration of whether additional legislative oversight of proposed and approved IT projects is warranted. To request resources for planning to complete the PAL process, entities must submit and have approved by CDT a Stage 1 Business Analysis for the proposed IT project. To request resources to develop and implement a proposed project (that is expected to be approved by CDT in the budget year) or an approved project, entities must submit and have approved by CDT a Stage 2 Alternatives Analysis. A nearby text box explains why some requests to develop and implement projects are submitted prior to completing the PAL process. To request additional resources to develop and implement an approved project that has deviated from its initial cost, schedule, and scope, entities must submit and have approved by CDT a new SPR. (Figure 1 also shows when in the PAL process entities can submit budget requests.) For each request, the Legislature must decide whether to appropriate additional funding.

Fewer SPRs for IT Projects Approved Through PAL Process. Historically, IT projects (especially complex and costly ones) required several SPRs. Each SPR can lead to a budget request for additional resources to develop and implement a project above its initial cost. Since CDT began implementation of the PAL process in 2016, however, no project approved through all four stages of the PAL process has required an SPR on the basis that the project deviated from its initial cost or schedule. (Some projects approved through the PAL process did require SPRs because additional scope was added to the project to, for example, incorporate legislative and regulatory changes made to programs included in the project after the initial scope of the project was approved.) This initial success suggests fewer SPRs might be required for projects approved through the PAL process in the future. However, as few complex and costly projects have been approved through the PAL process to date, and as none of the few approved have been completed, one should be cautious about drawing firm conclusions from the initial track record of the PAL process.

Governor’s 2020‑21 IT Project Proposals

The Governor’s proposed 2020‑21 budget includes a number of requests for resources to plan, develop, and implement proposed and approved IT projects. We organize these requests into three groups: (1) requests for planning resources to complete the PAL process, (2) requests for resources to develop and implement projects (whether proposed or approved), and (3) requests for resources to develop and implement proposed projects that are still being planned but are expected to be approved in 2020‑21. As mentioned earlier, for purposes of our analysis in this report, we only include budget requests from entities under the authority of CDT.

Requests for Planning Resources to Complete the PAL Process. The Governor’s proposed 2020‑21 budget includes six requests for resources to complete the PAL process with a total cost of $18.7 million ($14.4 million General Fund) in 2020‑21, $7.9 million ($7.1 million General Fund) in 2021‑22, and $5.8 million ($5.3 million General Fund) in 2022‑23 and ongoing. (Some state government entities in this group of budget requests also are requesting ongoing resources to, for example, improve their internal business processes even after their proposed IT projects are approved by CDT and completed.) Figure 3 lists these requests by state entity and proposed project name.

Requests for Resources to Develop and Implement IT Projects. The Governor’s proposed 2020‑21 budget includes 30 budget requests for resources to develop and implement IT projects (whether proposed or approved) with a total cost of $213.5 million ($106.2 million General Fund) in 2020‑21, $35.2 million ($17.6 million General Fund) in 2021‑22, $17.1 million ($6.6 million General Fund) in 2022‑23, and $11.6 million ($5.1 million General Fund) in 2023‑24 and ongoing. Based on an initial review of project approval documents, at least 8 of the 30 budget requests are for projects using the agile approach at a total cost of $160.5 million ($83.9 million General Fund) in 2020‑21 with additional costs in future years. Figure 4 lists the 30 requests for resources to develop and implement IT projects, by state entity and proposed or approved project name.

Requests for Resources to Develop and Implement Proposed IT Projects That Are Still Being Planned but Are Expected to Be Approved in 2020‑21... Of the 30 budget requests in the Governor’s proposed 2020‑21 budget for resources to develop and implement IT projects, ten are for proposed projects that are still being planned, but are expected to be approved in 2020‑21. The total cost of these resources are $72.8 million ($37.8 million General Fund) in 2020‑21, $12.6 million ($9.1 million General Fund) in 2021‑22, $4.9 million ($3.1 million General Fund) in 2022‑23, and $2.2 million ($1.5 million General Fund) in 2023‑24 and ongoing. These requests are highlighted in Figure 4.

…Reflect Misalignment of Budget Process and PAL Process. State government entities can request resources to develop and implement proposed IT projects before finishing the PAL process. Specifically, entities with an approved Stage 2 Alternatives Analysis can request resources to develop and implement a proposed project with the expectation that it will be approved by CDT in the coming budget year. By not completing the PAL process before requesting these resources, entities are asking the Legislature to appropriate funding without the benefit of a complete project plan that provides valuable information to the Legislature—including an approved cost, schedule, and scope for the proposed project. (For a more comprehensive analysis of this misalignment, please see our March 14, 2019 budget and policy post—The 2019‑20 Budget: Aligning the State’s IT Project Approval Process With the Annual Budget Process.)

Exercising More Legislative Oversight of IT Project Proposals

A number of the requests in the Governor’s proposed 2020‑21 budget present opportunities for the Legislature to exercise more oversight of proposed and approved IT projects. This section considers some of the opportunities within each of the three groups of budget requests that we identified in the previous section. We also consider whether organizational changes would help the Legislature exercise its oversight role through the budget process.

Evaluate the Proposed Scope of Some Projects Before CDT Approval. The first group of budget requests we identified in the previous section is for planning resources to complete the PAL process. Some of the proposed IT projects in this group have the potential to be complex and costly projects once approved by the administration. One opportunity for the Legislature to exercise more oversight of potentially complex and costly project proposals is to evaluate the proposed scope of the project when considering planning resources. The purpose of this effort would be to determine whether the proposed scope is appropriately sized and cost‑effective, or if a reduced scope with less cost and risk is feasible.

One way the Legislature can consider the proposed scope of a project is to evaluate alternatives. (The nearby text box provides an example of how the Legislature can evaluate alternatives for a proposed project.) State government entities that are proposing projects must evaluate alternatives as part of Stage 2 (the alternatives analysis stage) of the PAL process. Therefore, once proposed projects are approved by CDT through Stage 2, the Legislature could use these evaluations to determine whether it agrees with the administration’s approved alternative. In assessing the alternatives, the Legislature could look at which part of the proposed project would be completed first and determine whether the anticipated benefits from that part is of sufficient value from the Legislature’s perspective were that to be the only part of the project to be completed. The Legislature also could find a part of the project scope that, if developed and implemented, would demonstrate the ability of a future vendor to feasibly complete the entire project scope. This assessment would give the Legislature more confidence that a proposed project would use the funding the Legislature appropriates to complete the project on time and within budget or, if the project is not completed, to deliver at least a part of the project that would be of value. Our nearby text box on the State Controller’s Office’s proposed California State Payroll System project provides one example of how the Legislature could use these tools through the budget process.

Define Project Completion, Take Other Actions to Make Legislative Intent Clear About Project Goals. The second group of budget requests we identified in the previous section is for resources to develop and implement IT projects (whether proposed or approved). Some of the projects in this group are complex and costly projects approved by the administration that use an agile approach for development and implementation. Although the agile approach to development and implementation in concept allows state government entities to start benefiting from their projects sooner, using this approach in practice for complex and costly projects has some risks. Specifically, if the project does not commit to essential elements of the project scope at the outset of the project, the ultimate outcome may end up costing more and delivering less than the Legislature intended. Consequently, additional legislative oversight—by statutorily defining project completion—is warranted.

For example, our office recently released a report on one of the state’s most complex and costly projects using the agile approach—the Financial Information System for California (FI$Cal). (FI$Cal does not have a budget request in the second group we identified in the previous section, and is used here only as an example.) In our report, we found the new definition of project completion in FI$Cal’s most recent project plan—which removed a number of planned activities and system functions from the project scope while adding additional hours to complete what project scope remains—was inconsistent with the agile approach and did not account for the significant amount of work that remains after the project is deemed “complete.” As a result, the administration’s new definition of completion for FI$Cal does not reflect all of the costs associated with the project (including additional costs in the Governor’s proposed 2020‑21 budget). The absence of an accurate total project cost warrants additional legislative oversight, including the potential adoption of statutory language that defines the completion of the project from the Legislature’s perspective. (For a more comprehensive analysis of the FI$Cal project’s most recent project plan, please see our January 8, 2020 report—FI$Cal IT Project Update—Special Project Report 8.)

Another complex and costly project using the agile approach that is requesting resources in the Governor’s proposed 2020‑21 budget is the Child Welfare Services ‑ California Automated Response and Engagement System (CWS‑CARES) project. CWS‑CARES faced a number of challenges using the agile approach at significant cost to the state, and is now proposing to fundamentally change its approach in a new SPR. We plan to publish an analysis of the new SPR for CWS‑CARES (once it is approved by the administration), which likely will include opportunities for the Legislature to exercise more oversight of this project through the budget process.

Condition New Resources for the Development and Implementation of Some Projects on Legislative Notification and Approval. The third group of budget requests we identified in the previous section is for resources to develop and implement proposed IT projects that are still being planned but are expected to be approved by CDT in 2020‑21. We acknowledge that each proposed project should be considered by the Legislature on a case‑by‑case basis and some may warrant approval prior to completing a project plan. But by not completing the PAL process before requesting these resources, state government entities are asking the Legislature to appropriate funding without the Legislature having the benefit of a complete project plan (including an approved cost, schedule, and scope for the proposed project). If the Legislature wants to provide resources to develop and implement proposed projects before they complete the PAL process, one opportunity to exercise more oversight through the budget process is to adopt provisional budget language that conditions the resources on prior written notification of, and approval by, the Legislature once the proposal is approved through Stage 4 (the project readiness and approval stage) of the PAL process. We recommend written notification at a minimum include the key details from the complete project plan, including the approved cost, schedule, and scope of the project.

In the 2019‑20 Budget Act, the Legislature adopted this type of provisional language for several proposed projects. One proposed project received approval through Stage 4 after its estimated start date, and provided written notification to the Joint Legislative Budget Committee. Other proposed projects will not start in 2019‑20 as expected, or were withdrawn from the PAL process. Figure 5 lists the proposed projects with this type of provisional language in the 2019‑20 Budget Act, their expected project start dates at the time the provisional language was adopted, and their actual or expected project start dates as of February 2020.

Continued use of this type of provisional language is one way the Legislature can ensure proposed projects are vetted by the budget committees before the administration begins to develop and implement them.

Organizational Changes to Legislature’s Budget Oversight Could Be Warranted. All of our recommended approaches for oversight would benefit from developing dedicated legislative expertise on IT projects. Currently, the Legislature considers most IT budget requests through subcommittees organized by program area. For example, the health and human services subcommittees will review the CWS‑CARES proposal mentioned earlier. As a result, the Legislature has no venue to vet the entire IT portfolio, including related changes in policy, processes, and technology. Charging an existing subcommittee or creating a new subcommittee in each house and assigning it the responsibility to consider all budget requests for IT projects could allow for more direct involvement in project planning and provide oversight over the entirety of IT projects.

Our nearby text box on the Employment Development Department’s proposed Benefit Systems Modernization project (for which there is a budget request in the second and third groups) provides one example of how the Legislature could exercise more oversight through the current subcommittee budget process or how a new IT‑focused budget subcommittee could be more effective in exercising this oversight.