Putting Investments to the Test

o longer can agencies complain that the Office of Management and Budget's budget review process for information technology projects is arbitrary.

On Oct. 25, 1996, OMB Director Franklin Raines distributed a memorandum containing the "Raines rules," eight common-sense policy statements on what it takes to make successful investments in technology. Longtime information technology watchers will claim with some basis that there is nothing new here, but that misses the point. Having an OMB director who is prepared to stand behind sensible and clearly articulated policies for technology budgets is both new and important.

The Raines rules emphasize:

• Relying on proven technology and making maximum use of the private sector.
• Managing risk by extensive user involvement, phased development and useable products at each stage of the process.
• Solving the business problem through automation, not automating for its own sake. Harvard professor Jerry Mechling described it best when he said the new wave of automation is no longer about making "the same old messes run faster."

Decisions about technology investments are no longer beauty contests-if ever they were-where the winners are the biggest and best-looking systems. OMB is making itself accountable, at least within the executive branch. It becomes fair game for an agency head to ask his or her OMB representative how an investment proposal scores against the new Raines rules. If a proposal fails, the agency head can ask for a specific explanation of what is required to pass muster or whether it is worth coming back at all.

Perhaps most important, the rules allow-and OMB implicitly encourages-agencies to do their own scrubs first before coming to the budget agency with a proposal. Agencies would do well to put their proposals to the same tests that OMB would apply. Agencies that fail to run their own rigorous reviews first go to OMB at their peril. And to those tests, I would add three conditions that will tell managers immediately whether it is worth going forward.

• If the technologists are the principal advocates for the project, you probably are solving the wrong problem.
• If no one outside your organization other than technology vendors has been involved, ask why. While staff may argue that the nature, size or complexity of the problem you face is unique, someone somewhere has addressed part if not all of what you are facing. If they truly have not, you are into pure research with a very different set of rules and management tools.
• If no useable products are to be delivered within the professional lifetimes of anyone sitting at the table, quit now.

Of course, it would be naive to suggest the investment decision-making process can be reduced to a mechanistic application of the Raines rules. Budget realities will drive budget decisions in the future as they have in the past. There will be lean years when funds for IT investments are tight. An enterprise with cash-flow problems cannot make big investments as freely as one that is cash rich. And there will inevitably be a tendency to favor popular programs over others. As always, the real test will come when a system investment in a hot program fails.

Using good data and analysis can never guarantee the right investment decision. But it can make it a lot harder to make a bad decision.

Franklin S. Reeder heads the Reeder Group, a consulting firm, after spending more than 35 years in government, where he worked in the Executive Office of the President and at OMB.