The 2023-24 Budget

Overview of Information Technology
Project Proposals

Introduction

This post provides an overview of the information technology (IT) projects in the Governor’s proposed 2023-24 budget. We first provide relevant background information on the California Department of Technology (CDT) and the phases of an IT project. We then identify each of the budget proposals to plan, develop, and implement IT projects. We provide our assessment of topics common to several IT project-related proposals and offer options for legislative consideration. (We do not provide in-depth analysis of any individual budget request in the post, but link to other IT project-related analyses in other publications organized by budget area.)

Background

Role of CDT. CDT is an entity within the Government Operations Agency with broad authority over all aspects of technology in state government. This post focuses on two of the department’s responsibilities: (1) to review and approve IT projects proposed by state entities, and (2) to oversee development and implementation of approved projects until completed.

Phases of an IT Project. A state IT project goes through three distinct phases: (1) planning, (2) development and implementation (D&I), and (3) maintenance and operations (M&O). Most state IT projects in the planning phase (referred to as proposed projects) are required to complete CDT’s Project Approval Lifecycle (PAL)—the state’s IT project approval process. Some proposed projects, such as low cost and/or low risk projects, are delegated back to entities to plan, develop, and implement without direct approval and oversight by CDT. Other proposed projects are determined to be exempt from PAL, for example, minor upgrades to existing IT systems. Once approved through PAL (referred to as approved projects), state IT projects begin D&I. Once D&I is completed, state entities begin M&O of the IT system. We describe each phase in more detail below:

• Planning (PAL). The PAL process divides state IT project approval into four stages: (1) business analysis, (2) alternatives analysis, (3) solution analysis, and (4) project readiness and approval. 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 cost, schedule, and scope of the project. Figure 1 provides a graphical depiction of the PAL process.
• D&I. Once CDT approves a proposed IT project, state entities can start project D&I. Projects can approach D&I in several ways: (1) the traditional “waterfall” approach, (2) the “agile approach,” or (3) some combination of traditional and agile approaches. Using the traditional approach, entities develop the entire scope of the project before it is implemented. Using the agile approach, by contrast, entities develop some of the project scope (sometimes referred to as modules) and implement it while the rest of the scope is being developed. A combination of the traditional and agile approaches might develop project scope as modules, but combine the modules into a few discrete releases for implementation to reduce the frequency of user testing and training.
• M&O. Once IT project D&I is completed, a project becomes an IT system and enters M&O. M&O includes activities and costs associated with a state entity’s ongoing upkeep and continuing use of a system.

Relevant Changes to IT Project Procurement and Oversight. Two recent changes to state IT project procurement and oversight are relevant to this post.

• Challenge-Based Procurements. In January 2019, Governor Newsom signed an executive order (EO N-04-19) directing CDT and the Department of General Services to develop new procurement approaches that defined a problem for bidders to solve and asked them to demonstrate their ability to solve it through demonstrations, proofs of concept, and prototypes. We generally refer to these new approaches as challenge-based procurements in the post. The goal of challenge-based procurements is to allow more bidders to offer solutions to the state’s complex problems, rather than requiring the state to pre-define solutions with detailed requirements-based solicitations.
• Enterprise Modernization Efforts. Large state entities such as the Department of Health Care Services (DHCS) and the Employment Development Department (EDD) are using an enterprise project management approach (that is, managing a number of concurrent and often related IT efforts and projects) to modernize their programs and/or services. As individual IT projects progress through different phases, CDT tries to provide oversight not only of the individual IT project but also of the entire enterprise portfolio of IT efforts and projects. Key examples of this approach are DHCS’ Medi-Cal Enterprise Systems (MES) Modernization and EDD’s EDDNext modernization effort.

Governor’s 2023-24 Budget

Governor’s IT Project Proposals Total $641 Million ($432 Million General Fund) and 275.2 Positions. According to CDT and the Department of Finance (DOF), 40 budget proposals in the Governor’s 2023-24 budget are related to IT project proposals (Figure 2). These proposals request a total of $641 million ($432 million General Fund) and 275.2 positions. Some of these proposals contain non-IT project-related funding and/or positions, as we are unable to separate IT project-related and non-IT project-related costs in each proposal.

IT Project-Specific Work Products

We do not provide in-depth analysis of any individual budget request in this post, but we have covered the California Department of Corrections and Rehabilitation (CDCR) BIS Migration to S/4 HANA project in a previous publication The 2023-24 Budget: The California Department of Corrections and Rehabilitation—Migration of Business Information System to Updated Software Platform (2/16/2023).

Assessment

Increased Use of Challenge-Based Procurements Without Evaluation. A number of the IT project proposals in the Governor’s 2023-24 budget used challenge-based procurements (such as the State Water Resources Control Board’s Water Rights Modernization Continuation proposal) or are planning to use said procurements. Some procurements may require upfront funding from the state for demonstrations, proofs of concept, and prototypes (such as the Department of Food and Agriculture’s Emerging Threats Information Management System proposal). However, we have seen no evaluation performed by the administration of challenge-based procurements to determine whether, for example, additional planning costs for these demonstrations, proofs of concept, and prototypes led to improved project D&I outcomes.

Large Enterprise Modernization Efforts Make Legislative Oversight More Challenging. Two IT project proposals in the Governor’s 2023-24 budget—DHCS’s MES Modernization proposal and EDD’s EDDNext Modernization proposal—are enterprise modernization efforts that contain a number of IT projects in different phases of PAL, D&I, and M&O. For both of the efforts, the Legislature approved quarterly reporting requirements and, for MES Modernization, CDT started portfolio-level independent project oversight reports to track IT efforts and projects that are part of the larger modernization effort. In both cases, we find these oversight tools to be insufficient to monitor complex and costly modernization efforts with significant programmatic effects. For example, while individual efforts and projects are tracked within the portfolio, what efforts or projects are most critical to the success of the modernization effort and/or pose the most risk if they are not successful often is unclear. Also, programmatic effects are not always evident, as individual efforts and projects might be focused on modernization of technical functions within IT systems (such as claims processing or drawing down federal funds) rather than certain programs and/or services. Knowing how much a complex, large modernization effort will cost and over what time frame also is difficult for the Legislature to oversee as the scope of the effort is not always known at the outset.

Projects Increasingly Use Combined Agile and Traditional D&I Approaches With Mixed Results. We find that more IT project management staff are familiar with the agile approach to project D&I. We also find that more projects acknowledge the realities both of the annual legislative budget process and of state entities’ continued programmatic responsibilities that necessitate some elements of the traditional approach to project D&I. Combinations of agile and traditional approaches to project D&I, therefore, are becoming more common. For example, for the Department of Social Services’ Child Welfare Services – California Automated Response and Engagement System project, the project D&I approach changed to a combination of agile and traditional approaches because county eligibility workers needed to limit the amount of user testing and training required. Discrete releases of new functionalities, rather than continuous implementation of new functionalities, allows workers to continue to focus on their primary workload. However, we find that new oversight tools from CDT for agile or combined agile and traditional projects are insufficient. For example, CDT introduced an annual iterative project report (IPR) for approved IT projects using an agile or combined agile and traditional approach to allow, for example, reprioritization of modules without a Special Project Report (SPR). (An SPR is a report required for projects that deviate from their baseline cost, schedule, and scope by approximately 10 percent.) However, the IPR as introduced may compromise legislative oversight if the project cost, schedule, and scope change on an annual basis without clear measures of success.

Options for Legislative Consideration

Direct CDT and DOF to Lead Evaluation of Challenge-Based Procurement Changes. We recommend the Legislature adopt supplemental report language (SRL) that directs both CDT and DOF to evaluate, at a minimum, whether additional planning costs requested by state entities for challenge-based procurements have led to improved project D&I outcomes. DOF could use quarterly project planning expenditure reports for proposed IT projects to inform their analysis. We also recommend the Legislature request this report no later than April 1, 2024 to inform the 2024-25 budget process.

Direct CDT and DOF to Work With Legislature on Oversight of Enterprise Modernization Efforts and Projects Using Agile Approach. We recommend the Legislature adopt SRL that directs CDT and DOF to work with legislative staff on options to improve oversight of enterprise modernization efforts and projects using an agile approach or combined agile and traditional approaches to project D&I. The report could consider, for example, whether new standardized reports for these efforts and projects, both to CDT and the Legislature, are warranted. The report also could consider whether changes in CDT’s PAL process are needed to consistently plan these efforts and projects. We also recommend the Legislature request this report no later than April 1, 2024 to inform the 2024-25 budget process.