Executive Summary

Imagine a future in which citizens can log onto one Internet site, easily find the government services they are looking for, and use that site to conduct an online transaction; a future in which businesses fill out one Internet form for all their local, state, and federal environmental regulatory compliance requirements; a future in which government officials make all purchases and payments electronically, saving millions of dollars. The technology for all these applications and others is here today, waiting to be adopted by the federal government.

Indeed, these technologies are rapidly spreading in the commercial sector. The economy is evolving to the point where a significant share of economic transactions will soon be conducted through electronic means. Digital technologies are fundamentally transforming our economy and society, and have the potential to transform government. In fact, a key next step in reinventing government involves the widespread application of information and communications technology to the delivery of government services--in short, fostering digital government.

Among the potential benefits of digital government are savings in money and time for the government, consumers, and businesses. If banks can cut their transaction costs by 90 percent through online banking, similar savings for gov ernment are likely. Moreover, users of government services will benefit by greater 24x7x365 access to higher quality services. Most importantly, the relationship between government and citizens can evolve from its traditional hierarchical and arms-length one to a more reciprocal one where citizens are genuine stakeholders in their government.

Done right, digital government promises to transform Industrial Age big government into Knowledge Age smart government. Old economy government was organized around agencies and bureaucracies that operated like "stove pipes" with little information flowing between them, and with operations developed to meet the requirements of agencies, not the needs of citizens. New Economy government will be organized around the functions and the needs of citizens; with information and communication technologies a key enabler of this reinvented government.

Moving to digital government will speed the transition to a digital economy. Part of why this transition is not proceeding even faster is because of "chicken or egg" issues. For example, smart cards have diffused slowly through society, in large part because consumer value is limited as long as few merchants accept them, and few merchants accept them as long as few consumers have them. Similar issues exist with regard to digital authentication, educational software, and to some extent the Internet itself.These impasses will be broken, but if the federal government became a leading-edge, or even "middle-edge," user of information technology (IT), it would enhance the value of being online and speed the transition.

Despite the obvious promise of digital government, it has not yet become a priority of most policy makers. Congressional committees have largely ignored the issue. And while the Administration has articulated goals and begun projects, much more can be done. In the meantime, the issue has remained the province of technologists focused on technically complex issues not readily understandable to policy makers, much less to citizens in general.

In part because of this technocratic focus, digital government progress to date has been slow and not linked to government reinvention. Rather, most IT applications have focused on improving the efficiency of existing operations or providing one-way information dissemination, instead of on fundamentally changing the way businesses and citizens interact with government. As a result, another kind of digital divide is emerging--between government, which is only moving tentatively into digital operations, and the commercial sector, which is moving at "web-speed" into e-commerce.

This report lays out the overall direction the federal government should take to foster digital government and describes how the government can use IT to transform its operations. It first discusses the factors that have slowed progress to date and then describes 12 key principles to follow in implementing digital government. It then lists four major policy recommendations for implementing digital government. Finally, it examines what government is doing now and what it should be doing.

Policy Recommendations

To accelerate the pace of transformation we recommend that the Congress and the Administration do four major things to foster digital government:

1. Establish the Position of a Chief Information Officer for the Federal Government



2. Establish a $500 Million Annual Digital Federal Government Fund to Invest in Cross-Agency Digital Government Projects



3. Give Agencies the Flexibility in the Use of Funds for Digital Government and Let Them Keep the Savings Generated by It



4. Expand Funding for Agencies to Develop Digital Government Applications

Establish the Position of a Chief Information Officer for the Federal Government

Currently, 54 federal agencies have CIOs, but the federal government as a whole does not. Current coordination efforts are just that, meetings among equals without the budget or authority to implement government-wide digital government solutions. A federal CIO would report directly to the President and direct the process of developing a concerted digital government conversion plan. He or she would have a budget independent of individual agencies to help drive the next generation of digital government, much of it involving cross-agency applications. The CIO would head interagency and cross functional IT councils. The office would also take the lead in shaping the Administration's policy regarding the Internet, oversee issues of computer and network security for the government, and work with state and local governments to promote digital government. Just as the Y2K "tsar" was able to assert strong leadership in dealing with a potential Y2K crisis in government, a federal CIO and a comprehensive plan will foster digital government in a faster, more effective, and more comprehensive manner.

A number of states and nations have moved in this direction, appointing technology directors. For example, British Prime Minister Tony Blair has appointed an e-minister to coordinate the various departments involved in developing digital government as well as carry out e-commerce initiatives to improve service to the citizens.

Establish a $500 Million Annual Digital Federal Government Fund to Invest in Cross-Agency Digital Government Projects

Agencies generally have not funded interagency digital government projects. Similarly, appropriations by both Congress and OMB is organized bydepartment, not function, so finding allocations for cross-agency projects is difficult. Only a small amount of funds for agency pilot projects has been allocated. But while pilot projects can get programs launched, they are not able to sustain them or develop them on the scale needed. Providing a pool of funds specifically targeted at implementing significant cross-agency projects would not only provide the resources to implement such projects, it would provide the organizational direction to get them done. However, to ensure agency buy-in, agencies should be required match these funds. And Congress should allocate funds to agencies specifically targeted to joint projects.

Give Agencies Flexibility in the Use of Funds for Digital Government and Let Them Keep the Savings Generated by It

Digital government will save money, but where will the government get the money to implement this innovation? There is a model from the private sector.A number of computer/IT service firms, led by IBM and EDS, contract for these services with companies and, in effect, guarantee productivity gains to the firm. In return, companies are compensated out of a portion of the client firm's productivity gain.

Current law allows federal agencies to contract for energy efficiency technologies that will lower energy costs, with the contractor being paid out of the agency's energy cost savings. In this way, the agency doesn't have to invest up-front appropriated monies in efficiency saving technologies. Rather, it can pay for them over time with a part of the cost savings. The Clinger-Cohen Act of 1996 similarly allow federal agency pilot experiments with such "shared savings" contracting in the information technology area.

The information technology provision hasn't been used yet, probably because there is no "up side" for the agency--it has to return any savings to the Treasury, and can't use savings to enhance its mission responsibility. But if that provision were fixed, and if broader demonstrations were permitted (rather than just the two pilots the law currently allows), this might be a significant way to expand digital government. In particular, agencies should be allowed to earmark the savings from digital government to their own innovation funds to finance further digital government initiatives.

In addition, governmental agencies should be given increased flexibility regarding digital- government-related procurement. The Administration should identify pilot digital government projects that meet certain requirements, and develop new acquisition and procurement methods for them that are faster and more flexible. For example, in 1999 Congress gave the Central Intelligence Agency the authority and funding to create a $28 million "venture capital fund" to help generate and procure advanced information technologies to help the agency carry out it mission.

Expand Funding for Agencies to Develop Digital Government Applications

Federal funding for information technology has grown every year since 1996, but the rate of growth has slowed, while the amount going to new applications has declined. In FY96, federal funding for information technology grew almost 8 percent, while in FY2000, it grew less than 2 percent, increasing slightly more than 4 percent in the President's 2001 budget. Moreover, this growth has not kept pace with growth in private sector information technology expenditures which have averaged over 8 percent growth per year through 1999. In addition, much of the increase in funding for IT has gone to maintaining existing systems (increasing 24 percent between FY99 and FY01), while funding for modernizing and developing new systems has actually decreased 2 percent.

Principles for Implementing Digital Government

1. Think Customer, Not Government Agency
2. Reinvent Government, Don't Simply Automate It
3. Set an Ambitious Goal
4. Invest Now to Save Tomorrow
5. Focus on Digital Transactions Between Citizens and Government
6. Make Government Applications Interoperable with Commercial Ones
7. Pass on a Portion of Savings From Electronic Transactions Back to Citizens
8. Promote Access to Information on the Internet, Do Not Restrict it
9. Respect the Rights of Americans for Information Privacy
10. Online Access to Government Should Not Eclipse Traditional Means
11. Federal Efforts Should Complement, Not Duplicate Private Sector Efforts
12. Take Action Now, and Learn From Mistakes

Blueprint Keywords: Extra DigiGov Extra Digigov Extra Rego