The fiscal year 2001 Working Capital Fund request of $322,950 thousand represents an increase of $55,200 thousand over fiscal year 2000. The increase is due to several factors, including: (1) enhancement and improvements to the IT infrastructure created by increased demand and obsolete technologies; (2) an emphasis on enterprisewide solutions that require a increase in short-term money to realize long-term benefits; and (3) higher maintenance costs as new IT systems are deployed; and (4) an expedited effort to develop and implement a comprehensive IT investment strategy.

As HUD moves into the 21^st century, technology has become an increasingly integral component of the Department's HUD 2020 Management Reform. A key objective of these reforms is to deliver services in a more streamlined and cost effective manner. Consequently, investments in information technology (IT) have grown steadily over the past several years. The steady investment in IT reflects the Department's commitment to the maintenance of and enhancement to the HUD 2020 Management Reform.

Starting in fiscal year 1997, the Department has been refining its strategy to integrate IT investment decisions with business goals and objectives. The Department recognizes that it is critical that it spend limited IT dollars in the most cost effective manner and identify opportunities to leverage IT investments whenever possible. Moreover, the Department further recognizes that each IT investment must demonstrate a clear linkage to HUD's strategic goals and, that, to accomplish this objective, the Department must implement comprehensive IT investment management reform.

Towards that end, the Department established the Office of IT Reform to develop a comprehensive strategy for selecting, controlling and evaluating its IT investments by creating an IT investment management strategy and enterprise architecture, training its IT managers in proper project management practices, and working with the Program Areas to help them identify and develop IT solutions. An initiative spearheaded by the joint efforts Office of the Chief Information Officer, the Office of the Chief Financial Officer, the Office of the Chief Procurement Officer, and the Office of Administration is working with all business units in HUD to ensure its success.

1. Infrastructure

HUD's IT infrastructure is the backbone of the IT portfolio. The communications element includes the network (LAN/WAN), mobile communications network, and all of the hardware and software necessary to support its continued operations. HUD's networks link over 9200 HUD employees in over 80 offices throughout the country. The network also links HUD to many of its vendors, such as banks and loan institutions that are critical to its lending and mortgage practices, and enables HUD to provide services in local communities through investments such as the Storefront Kiosks.

To support its infrastructure and the evolution of e-government solutions, the Department must invest in an array of high-technology equipment, including: enterprise servers, network servers, routers, frame-relays, proxy-servers, file servers, etc. In addition to the hardware costs, the infrastructure budget includes several million dollars to provide 365-day/year 24-hours/day operational and maintenance support for the infrastructure and remote back-up systems. Currently, the Department is researching methods to reduce operational and maintenance costs in support of the infrastructure for fiscal year 2001 and beyond.

HUD's 2020 Management Reform Plan emphasized the need for further integration between business operations and IT solutions. Therefore, investments in advanced and evolving technologies become critical. These investments require investing in greater network bandwidth to accommodate increased traffic. To meet this need, HUD will continue to invest in fiscal year 2001 and beyond to replace its current LAN/WAN infrastructure with newer technologies.

The desktop platform enables HUD staff to communicate with vendors, customers and receive information from electronic mail and the Internet. Second, the desktop platform is an interface for HUD's applications and for software and tools that provide standard office functionality. Third, the standard desktop platform enables HUD to use commercial-off-the-shelf rather than customized solutions consistent with the Clinger-Cohen Act. The platform includes the desktop and laptop PCs, printers, scanners, standard office applications, etc. The Department also must support its platform, including technical and help-desk support, and develop and enforce local access network (LAN) and desktop/office standards. For example, HUD budgeted money in fiscal year 2001 to upgrade from Office 95 to Office 2000 to ensure employees can communicate with third parties. The Department continuously searches for opportunities to improve the efficiency of its employees and the delivery of services through investments in the desktop platform.

2. IT Strategy and Policy Development

   IT Strategy and Policy Development investments provide the "blueprint" necessary to develop and maintain the IT portfolio. Consequently, the Department is investing in establishing and implementing the Department's IT investment management strategy, security policy, data management policy; implementing an Enterprise Architecture; and conducting high-level IT management studies such as exploring increased use of e-government solutions. These strategic investments will help HUD spend its IT dollars cost-effectively while leveraging limited resources. For example, development and deployment of the Enterprise Architecture, which will be completed in fiscal year 2001, will lead to savings in infrastructure expenditures by reducing the number of operating platforms used by IT systems, in turn reducing the number of people required to maintain the systems. In addition, the OCIO is investing in the development of an IT investment management strategy, process, and operating procedures based on the Clinger-Cohen Act of 1996. A key component is IT investment project manager training, which will train the HUD IT project management workforce to develop and then manage projects to a cost, schedule and technical baseline. Elements of the strategy are being deployed in fiscal year 2000 and the balance will be implemented in fiscal year 2001. Implementation of the strategy will enable HUD to select the portfolio of IT investments that is most closely aligned with HUD's mission and strategic goals.

3. Maintenance

HUD's portfolio of IT systems requires ongoing corrective/adaptive maintenance for all operational systems. System maintenance costs are incurred until a system is retired or replaced. Maintenance includes systems operations and corrective/adaptive maintenance activities, such as on-going user training, minor coding changes, and user support. HUD has over 145 systems receiving maintenance in fiscal year 2000. The Department is continually looking for opportunities to consolidate legacy systems as enterprisewide solutions emerge and retire other systems as new technologies are identified.

4. Systems Development

The two main sub-categories of systems development are ongoing systems development/enhancement and new systems development. Enhancing existing systems and building new functionality is executed, when possible, in modular fashion, with useful segments completed within 18 months from inception. The decision to invest in new technologies follows a careful and rigorous process that ensures that HUD invests only in those initiatives that provide the highest return and are closely linked with the Annual Performance Plan.

Given HUD's growing reliance on IT solutions, investments in new development will increase in the coming years. Short-term costs are also expected to rise as HUD focuses on enterprisewide solutions. Enterprisewide solutions create significant cost-savings in the long-term, but are resource intensive in the beginning as Departmentwide requirements are identified and systems are developed and deployed. Specific examples of HUD's focus on enterprisewide solutions include the Consolidated Help Desk, which will centralize several help desk functions, and the empowerment information system/enterprise data warehouse/GIS (geographic information system), which will provide an integrated approach to managing and distributing HUD data for HUD employees, customers, business partners, and the public at large.

In addition, legislative requirements necessitate a significant investment in new technologies in fiscal year 2001. Furthermore, HUD continuously enhances existing systems with new functionality. Among the key enhancements for fiscal year 2001 are increased accessibility for business partners and expanding the electronic transfer of funds. Investments such as these are necessary to ensure that HUD achieves its strategic goals and continually improves the quality of its services.