Government IT Is a $75 Billion a Year Disaster. What Can Be Done About It?
Policy + Politics

Government IT Is a $75 Billion a Year Disaster. What Can Be Done About It?


After spinning their wheels for nearly four years and spending roughly $1 billion, the Defense Department and the Department of Veteran Affairs this summer abandoned their long-time effort to digitally integrate millions of medical records. Instead, the Pentagon in late July signed a $4.3 billion contract with a private team led by Leidos Inc. to build the system intended to improve care for veteran patients.

The work is scheduled to be completed by September 2025, but it’s hard to believe anybody in a future administration will be holding his breath in anticipation that the project will come in on time or within budget. Indeed, the program’s cost could reach $11 billion or more over the lifetime of the system, according to media reports.

While President Obama and some of his predecessors have struggled to embrace and implement new technology to improve the quality of government services, it is frequently a highly frustrating and losing game. Federal IT ventures invariably entail big bucks and high risks, but for every minor victory or breakthrough the government achieves in automating or streamlining the delivery of services to taxpayers, there is a major disaster like the launch of the Obamacare website in October 2013.

Related: Doh! Obamacare Website Botches Subsidies for 800,000

And the scale of spending and waste on major new software and Internet technology at times is astounding.

Last year alone, the federal government spent $75.6 billion on IT projects, according to a new study by the Brookings Institution. “That is enough to save the world and still have 600 million dollars to spare,” the report wryly notes. If successfully executed, these projects could greatly enhance the efficiency of governmental agencies and enable average Americans to interact online with their government.

“However, government’s IT projects most often fail miserably,” the report states. 

The Obamacare website may have been the most visible IT fiasco, with a budget estimated at $500 million before the launch eventually swelling to $1.7 billion, according to the Office of Inspector General. A study by Bloomberg put the price tag above $2 billion. But in some ways, the project was typical of federal IT efforts. Only 6.4 percent of federal IT projects with more than $10 million in labor costs were successfully executed between 2003 and 2012, according to a report by The Standish Group.

Related: How the Government ‘Lost’ About $4 Billion in IT

Niam Yaraghi, a fellow at the Brookings Center for Technological Innovation and the author of the report, says that the Obama administration for the most part has had “a horrible track record in managing IT projects.”

At the same time, he gives the president an “A” for effort in attracting IT experts from the outside, creating two government offices to foster IT expertise at the federal level, and developing online tools to allow the public to monitor the development and cost of government IT projects.


Yaraghi, an expert on economics of health care information technology, said that while it is easy to criticize government ineptitude in planning and executing major IT projects, the government often faces huge challenges and risks in undertaking complicated endeavors that some in the private sector would never dream of taking on.

Related: Government IT Makes GAO’s High Risk List

“I think the government always has to get the short end of the stick,” Yaraghi said in an interview Tuesday. “There are some projects that if performed successfully are going to benefit a large number of people.... However, precisely because these projects are very large and have large potential benefits, they also have large potential risks” that the private sector is unwilling to bear.

The private sector will, of course, take on major government projects if the contract is right and the businesses bare little of the risk.

As Yaraghi’s report notes, most government IT systems were built decades ago and have never been updated. A full 70 percent of the federal IT budget is expended on merely maintaining these antiquated systems.

What’s more, because of the complexity and the “inter-connected nature of the government,” even small projects have multiple agency stakeholders, which complicates the efforts. In the case of the Obamacare website, for example, the Department of Health and Human Services had to coordinate with the Internal Revenue Service, the Social Security Administration and the Department of Homeland Security to correctly determine eligibility for health insurance applicants.

Related: The Rebooting of America Starts Today

And unlike the private sector, the federal government typically lacks any business incentive. Instead, political considerations play “a more salient role” when making decisions to start a project or prevent the early termination of a project that is not going well, the report says.

“Starting a project is often more important than finishing it; officials take credit for ambitious initiatives that would take longer than their tenure,” according to the report. “As they leave office, the project becomes someone else’s problem.”

Among the solutions offered for improving on government IT projects:

Break large IT projects into smaller ones: “Unlike other types of projects, it is quite possible to break the IT projects into smaller projects and reduce the risks associated with project size.”

Transfer risks: At present, time and material determine the contractual relationship between the government and its IT vendors. “However, if large projects are broken down into smaller ones, then it will be easier to sign fixed-cost contracts in which the government pays contractors only after the project is delivered,” the report says. In this way, the risks are shifted to the contractors, giving them an incentive to perform the project within its schedule and budget.

Become more transparent: The public should know more about how money is being spent on these programs and whether they are on schedule. And federal employees who managed successful projects on time should be recognized and rewarded.