US Government Efficiency Failure - Program Management Blind Spot
Miniseries on the US Government's Failure to Efficiently Manage its Built Infrastructure Portfolio
This Asset Management Partnership (AMP) Newsletter continues a miniseries that covers how the US Government is failing to manage its built infrastructure and how this problem can be solved.
See preceding articles at:
US Government Efficiency Failure – Built Infrastructure Accounting
US Government Efficiency Failure – Real Property Inventory Management
The next mode of the US Government’s failure in its fiduciary duty to efficiently and effectively manage its built infrastructure is the program management blind spot. The program management blind spot is that even through the words in the Office of Management and Budget (OMB) Circular A-11: Preparation, Submission, and Execution of the Budget state that its intent is to manage US Government capital assets, implementation of these words do not support this.
OMB Circular A-11 governs how the President’s budget is developed and executed. This is the most consequential budget management policy in the Federal government. This policy defines how the budget is developed, justified, and executed. It also covers how capital assets owned by the US Government are to be managed. It is a robust and continually evolving policy.
Starting almost ten years ago, in response to the Program Management Improvement Accountability Act of 2016, OMB Circular A-11 incorporated specific requirements to clarify and strengthen Federal project and program management capabilities. This is good stuff. The US Government makes new requirements consequential by tying them to budget development and execution. This is how products from the Program Management Improvement Accountability Act found their way into OMB Circular A-11.
The results of this were the introduction of new OMB Circular A-11 program management requirements and activities. These more recent program management capabilities build on an already significant policy foundation supporting good program management order and discipline. For real property assets (i.e. built infrastructure), these policies are implemented through guidance contained in OMB Circular A-11’s Capital Programming Guide. This guide is a supplement to OMB Circular A-11. It contains, overall, good instruction on how Federal agencies should manage their capital assets.
The program management blind spot that contributes to a failure of the US Government’s ability to effectively and efficiently manage its vast built infrastructure portfolio is generally an act of omission. This blind spot is evident from the onset. It is embedded in OMB Circular A-11’s definitions for program management and capital assets given below:
Definition for Program Management: “The coordinated application of general and specialized knowledge, skills, expertise, and practices to a program for effective implementation. Effective program management requires programs be managed by both individuals and organizations as whole that work in concert to achieve benefits and advance outcomes towards the accomplishment of the agency mission, goals, and objectives..”
Definition of Capital Asset: “Capital assets are land (including parklands), structures, equipment (including motor and aircraft fleets), and intellectual property (including software) which are used by the Federal Government and have an estimated useful life of two years or more. Capital assets exclude items acquired for resale in the ordinary course of operations or held for the purpose of physical consumption, such as operating materials and supplies. The cost of a capital asset is its full life-cycle cost, 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.”
The issue at hand is, despite OMB Circular A-11’s Capital Programming Guide clearly stating its intent to guide management of capital assets over their life cycle in the above definitions, the guidance provided is heavily biased towards program management of the acquisition process. Maybe this is why it is called the “Capital Programming Guide” and not the “Capital Program Management Guide”. My personal wish is for it to be called the “Capital Asset Management Guide”. The distinctions are:
“Programming” is about scheduling and coordinating capital investments
“Program Management” is about coordinating management activities for a capital asset portfolio
“Asset Management” is about managing the value, i.e. the return-on-investment, a portfolio of capital assets generates for the good of the Federal government and American citizens
To OMB Circular A-11’s Capital Programming Guide’s credit, it does contain good words about the need for agencies to have a “Capital Asset Management Infrastructure”. This infrastructure would require periodic executive review and aligning capital life cycle management activities with agency objectives within budget limits. It also has a good description of different phases of capital programming. These are Planning and Budgeting, Acquisition, and Management-In-Use.
Its problem is the program management blind spot. The blind spot is that OMB Circular A-11 provides almost no guidance on nor establishes expectations for how these phases are coordinate. It does however provide substantial guidance and establish expectations for the Planning and Budgeting” and “Acquisition” phases and summarizes this into a narrow concept of program management.
For instance, the Capital Programming Guide introduces the need for an “Agency Capital Plan” as part of an agency’s strategic planning process. It defines the Agency Capital Plan as “the ultimate product of the Planning and Budgeting Phase”. It states that it should be used to inform long-term agency capital asset decisions, but in practice for most agencies utility of the Agency Capital Plan ends in the budgeting process if it gets that far.
Simply, OMB Circular A-11 has good intentions that built infrastructure should be managed well. Words contained in this over 1,000-page policy are conclusive on this point. The problem is when these words are translated into practice a major program management blind spot emerges.
OMB Circular A-11 provides detailed guidance and expectations for “programming” capital asset budgets. It does little to define program management of capital asset portfolios inclusive of capital asset life cycles. It does almost nothing in regard to establishing a “Capital Asset Management Infrastructure”.
The term “blind spot” is another word for “omission”. The failure in OMB Circular A-11 is in the omission of guidance and expectations on how the three programming phases described in the Capital Programming Guide are coordinated. Recent laws and policies, such as those generated in response to the Program Management Improvement Accountability Act of 2016, have emphasized the important role of good program management. Much of this has found a home in OMB Circular A-11.
The blind spot, or current omission in this policy is that program management focus is on the “programming” process and not on how a capital asset portfolio needs to be managed. OMB Circular A-11 does not establish methods for assurance that its good words about capital asset management will be implemented. Its guidance about the Management-in-Use phase can be summarized to be – good luck, hope all goes well.
This Management-in-Use phase is where value is generated by capital assets. For built infrastructure this period of time is typically more than 50 years between major rehabilitation given current Federal funding strategies and budgetary patterns. It is also where most of built infrastructure’s total cost of ownership is incurred, yet it gets only minor interest in budgetary decisions. As evidence of this one need look no further than the rapidly growing Federal real property deferred maintenance backlog.
This problem is compounded by the fact that the Federal government’s accounting system is ignorant to asset-based cost analysis and that there is no performance nor budgetary management incentive to have an accurate real property inventory. See the first two articles in this miniseries (links are above).
This US Federal Government-wide policy, OMB Circular A-11, contains a program management blind spot. This blind spot is that this overarching policy does not understand nor incorporate fundamental asset management principles and practices in the context of program management. This is a root cause of the failure in the US Government’s fiduciary responsibility to effectively and efficiently manage its built infrastructure portfolio. This failure is well documented in many GAO reports and it is the primary focus of the National Academies – Strategies to Renew Federal Facilities (get a free download at this link and read Chapter 2 and Appendix E). This is a solvable problem, but one that needs to take a whole of Government approach to muster.
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Written to Jack Dempsey | December 10, 2024
AMP Newsletter #101
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