Venture Capital Fund for Innovative Info Tech

4. Establish a governmentwide innovation fund for innovative
information technology projects. (3)

By September 1994, OMB should develop a proposal to establish a
government- wide innovation fund - including draft legislation, if
needed. This fund would support projects with significant benefits to
more than one program or agency.  Enabling legislation for the fund
should parallel the legislation for existing agency WCFs; with
concurrence from appropriations committees, appropriated monies should
be transferred to the fund and retained without fiscal year spending
restrictions until expended on fund-sponsored initiatives. The
legislation would also contain provisions establishing funding
procedures and operating mechanisms that distinguish this fund from a
traditional WCF. Consideration should be given to the options of
creating an independent fund or expanding the scope of the existing
Information Technology Fund administered by the General Services
Administration.[14]

Considerations in the fund's operational framework must ensure that the
fund is established and operated with the conditions necessary to
promote partnership with the IT industry; leverage the fund with other
resources of federal, state, and local agencies, and the private sector;
and manage the risk of IT innovation. The criteria by which initiatives
are evaluated and selected for fund sponsorship are critical to the
value of the fund. The criteria should be established, reviewed,
refined, and published in a process open to public comment. The
objective of the criteria should be to identify those initiatives that
present the best value to the government, considering both return on
investment and risk. The criteria would need to address potential
improvement of agency, interagency, and intergovernmental operations.
Implementation costs, demonstrated savings, agency competency,
technological feasibility, interagency and intergovernmental
commitments, and the participation of the IT industry would all be
carefully weighed.

Capital equivalent to 1 percent of the federal government's annual
expenditures for IT would provide sufficient capital to operate the
fund. Based on fiscal year 1993 estimates, the 1 percent formula would
result in a funding level of approximately $250 million.[15] However, it
would be self-defeating to IT innovation to obtain this funding from
agency IT funds which are already constrained. Therefore, funding should
be identified from within existing agency program appropriations and,
with concurrence from the appropriations committees, transferred to the
fund to avoid new appropriations. The method of capitalization, together
with procedures for periodically reviewing and setting the funding level
in succeeding fiscal years, would be key ingredients of the enabling
legislation to establish the fund. The relationship of the fund and
fund-sponsored initiatives to agency information system plans, budgets,
and appropriations points to OMB for fund oversight and development of
its operational framework.

Recommendation of projects to be sponsored by the fund would be an
appropriate role for the Government Information Technology Services
(GITS) Working Group proposed earlier in this report. In addition, the
views of state and local government and the private sector should be
considered through an advisory role for industry groups and government
associations and/or a consultant role for distinguished innovators.

Endnotes

14. The Information Technology Fund was authorized by the Paperwork
Reduction Reauthorization Act of 1986. The fund enables the General
Services Administration to efficiently provide common information
technology resources to federal agencies on a coordinated basis.

15. OMB, Current Information Technology Resource Requirements of the
Federal Government: Fiscal Year 1993, p. 3.