On April 28, 2017, Rep. Will Hurd (R-Texas), Chairman of the House Information Technology Subcommittee, reintroduced H.R. 2227, the “Modernizing Government Technology Act” or “MGT Act.” The legislation previously was introduced in 2016 when it passed the House of Representatives but stalled in the Senate because of cost concerns. The revised legislation comes with a significantly lower estimated cost because of restructured funding, and has gained bipartisan and bicameral support. Indeed, the bill swiftly cleared the House Oversight and Government Reform Committee without objection on May 2, 2017. It will head to the floor of the House of Representatives for a vote in the coming weeks.
The MGT Act aims to modernize federal IT infrastructure and to reduce wasteful IT spending, recognizing that “[t]he Federal Government spends nearly 75 percent of its annual information technology funding on operating and maintaining existing legacy information technology systems.” Such outdated legacy systems pose operational and security risks. From an operational perspective, the existing systems lead to increased maintenance costs, and to an inability to meet mission requirements. The outdated systems also pose security risks, including the inability to use current security best practices, such as data encryption and multi-factor authentication. As a result, the systems are particularly vulnerable to malicious cyber activity.
The MGT Act stresses the importance of modernized information technology solutions, such as cloud computing. According to the bill, modernized solutions offer efficiencies, cost savings, and greater computing power to agencies that can:
- eliminate inappropriate duplication and reduce costs;
- address the critical need for cybersecurity by design; and
- move the federal government into a broad, digital-services delivery model that will transform its ability to meet mission requirements and deliver services to Americans.
H.R. 2227, 115th Congress (2017).
The heart of the MGT Act is the creation of two funding sources to support agency modernization efforts. First, the MGT Act establishes working capital funds where agencies may allocate money saved from the operation and maintenance of legacy IT systems. Agencies may access the funds for up to three years, and may use funds to improve, retire, or replace existing IT systems; to transition legacy systems to cloud computing and other innovative platforms; or to address security threats. The provision thus eliminates the “use it or lose it” approach that generally hinders agency budgets, and instead incentivizes agencies to funnel savings into future modernization efforts.
'Second, the MGT Act establishes a centralized technology modernization fund (authorizing $250 million to be appropriated for each of the fiscal years 2018 and 2019) from which agencies may borrow to modernize their IT systems, enhance their cybersecurity, or develop, operate and procure IT products and services to accomplish their individual modernization requirements. The central fund will be administered by the commissioner of the Technology Transformation Service, an office of the General Services Administration (currently held by former Pixar executive Rob Cook).
The MGT Act follows recent White House efforts to modernize federal IT and to improve how the government uses and delivers digital services. On March 27, the Trump administration announced its creation of the White House Office of Innovation (OIA). The OIA is tasked with implementing policies that apply private-sector innovation and technological advancement to the federal government. On May 1, President Trump signed an executive order creating the American Technology Council, an organization tasked with modernizing the federal government’s IT systems and the digital services it offers to U.S. citizens. Following Rep. Hurd’s introduction of the MGT Act, the White House heralded the bill as “important bipartisan work” that will “enable significant progress” toward a more efficient government.
The MGT Act also has received an outpouring of industry support. Leaders from large IT contractors and trade associations praised the bill’s potential as well as its funding flexibility, which results from the inclusion of both the working capital funds and the centralized fund.
Other industry leaders applauded the fact that the bill allows agencies to individually tailor the modernization efforts to their specific needs. The bill deviates from traditional rip-and-replace requirements and instead gives agencies the flexibility to design and procure practical, modern solutions that best apply to them.
Contractors can expect the MGT Act to accelerate agency efforts to transition to cloud computing and to other modern platforms. Contractors should prepare for opportunities to collaborate with agencies to develop modernization proposals that are individually tailored to the agency’s needs. At a minimum, such proposals should recognize that existing “legacy” IT systems are expensive to maintain and are susceptible to cyber attacks. The proposals should stress cost savings and security as they help the agency transition to modern, more secure, and less costly IT systems.
Reed Smith will continue to monitor this important piece of legislation as it proceeds to the House and Senate for voting.
The Government Contracts & Grants practice is part of Reed Smith’s global regulatory service that provides strategic guidance on regulatory compliance, enforcement proceedings, and other disputes related to antitrust and competition, international trade, government contracts, government relations, securities, or fraud investigations.
Client Alert 2017-123
