Here is the California State Assembly’s official analysis of the Governor’s proposed Office of Digital Innovation

This post is part of a series created by the California Public Technology Roundtable. Read more about the Roundtable, see a list of all participants, and learn more about our first meeting here.

Credit: David Monniaux

On Tuesday, March 26, 2019, the California State Assembly’s Budget Subcommittee № 4 on State Administration will consider Gov. Newsom’s 2019–20 budget proposal to create a new Office of Digital Innovation in California state government. Below is the Subcommittee’s full analysis (original PDF version with the hearing’s full agenda). In the spirit of open source collaboration, stakeholders are invited to respond here on Medium or open an issue on GitHub.

0511 GOVERNMENT OPERATIONS AGENCY

ISSUE 15: OFFICE OF DIGITAL INNOVATION

The Subcommittee will consider the proposed Office of Digital Innovation.

BACKGROUND

The Government Operations Agency (GovOps) requests $36,156,000 ($33,656,000 General Fund and $2,500,000 Reimbursements) in 2019–20 and $14,584,000 ($9,584,000 General Fund and $5,000,000 Reimbursements) ongoing beginning in 2020- 21 to establish the Office of Digital Innovation (Office) within GovOps. Funding includes start-up costs, personal services, an innovation fund, and operational costs including 50 positions.

According to the Administration, establishing the Office will enhance the usability and reliability of our state’s most important services by using business process improvement and leveraging digital innovation, as appropriate, to transform government services. The proposal has three elements:

• Planning, Business Process, Digital Services, Policy and Strategy: The bulk of the proposed office is staff dedicated to assisting state departments with innovation efforts. The vision for the Office is modeled upon similar programs operating in the federal government.
• Innovation Academy: The Office will address these needs through training on areas such as continuous process improvement, human-centered design, change management, service design, product management and more. Once established, and in coordination with existing training academies, the training will be mandatory for state supervisors, managers, and executives.
• Innovation Fund: This proposal includes a one-time $20 million innovation fund to allow the Office to work on several small-scale demonstration projects with various state entities. The Office will identify which entities would best benefit from their services, such as DMV. After accessing needs or gaps in an entity’s service delivery, the Office will develop or assist in developing projects that better meet its customers’ needs. The innovation fund will provide resources to help state entities acquire the information technology goods and services they need in real-time.

The Department will utilize contracted Administrative Services for fiscal services, human resources, and IT support, modeled after the current GovOps structure. Additional operational costs are standard expenses for a new programmatic function and include expenses for operating a unit in separate office space. We note that when the Office is fully implemented, there may be a need to consider and change the organizational structure based on the assessed needs at that time.

EXECUTIVE ORDER

On January 8, 2019, the Governor issued an Executive Order, N-04–19, related to information procurement that created two new approaches toward procurement derived from existing authority provided by the Legislature:

• Request for Innovative Ideas (RFI2): an alternative process to procure technology.
• Innovative Procurement Sprint: a focused effort to use alternative procurement methodology to address a problem.

TRAILER BILL

The Administration has proposed trailer bill language that:

• Establishes the Office of Digital Innovation;
• Allows the Director to make changes to the State Administrate Manual on issues related to service delivery;
• Creates a new Digital Innovation Services Revolving Fund; and
• Allows the Office of Digital Innovation to procure goods and services using the Public Contract Code 6611 provisions.

PANELISTS

• Julie Lee, Government Operations Agency
• Richard Gillihan, Department of Finance
• Brian Metzker, Legislative Analyst’s Office

STAFF COMMENTS

The goal of this program is to modernize the State’s approach to technology by bringing a different innovative vision to the Governmental Operations to drive innovation across state government. This Office is intended to address a void in the state’s capability to have the tools and vision to drive its own innovations by (1) attracting the world class talent to Sacramento, (2) building the capacity of the State’s existing management core to lead, and (3) creating an entity dedicated to learning and evolving the core elements of service innovation — citizen empowerment, customer services, efficiency, and adapting to emerging technology.

The potential benefits to implementing this office are enormous, as the State has the capacity and the appetite to be more innovative, but has lacked the know-how and strategy to make transformational changes of its systems. California is often innovative, but often only in response to a disaster, failure, or tragedy. This Office could allow the State to be proactive and evolve in our way of serving to reflect the way Californians live their life today.

But successfully implementing this office will be an amazing challenge that will require incredible leadership from the new administration. Similar approaches have been tried before and has left the State with a costly legacy of failed projects and years adrift in a culture that has spurns investment in technological innovation. IT project fail in Sacramento because of either a lack of ownership, governance, or training by the end user. Seldom does a project fail because of the underlying technology. Conversely, usually a project succeeds because a small group of state employees take charge and persevere through the months of thankless meetings, lost weekends, and stressful deadlines it takes to make real change.

The main challenge for this new office is to find a way to foster innovation in an existing culture that does not tolerate risk or failure. In the private sector, one publication estimated 68 percent of all IT projects fail. Employees stay at large tech firms for an average tenure of about a year. The State is culturally and politically incompatible with these elements of tech because it values stability, predictability, and reliability over innovation, change, and growth. Changing the culture at the State is a laudable goal, but becoming more innovative can never be at the expense of being the solid governmental foundation that California residents expect.

How Fast Can This Office Grow?

While there might be a case to be made that this office should eventually be 50 staff members in size, history has shown that trying to build such an office in one year is a mistake. The Department of Technology attempted to create a similar functionality with its Project Management Office (PMO), which was intended to help departments articulate their business process case for an IT project. The PMO attempted to hire too many positions at once, which led to having to make compromises on the talent that was eventually retained because of the size of the Sacramento labor force and the rushed process that didn’t curate the candidate pool effectively. Instead of becoming a helpful resource for departments trying to implement technology, this unit developed a reputation as “DGS East” because it forced departments to fill out forms and go through approval processes that didn’t seem to provide any value to the department’s end users. The Office of Digital Innovation should not repeat this mistake.

Agile Procurement, Promising but Risky

The Budget Change Proposal refers to the use of “agile” procurement. An agile approach is like a DIY approach to home improvements, it is so much cheaper and easier to control a big house project if you buy and install the parts yourself and only hire outside help for specific tasks. But it is also riskier, your DIY paint job might have missed spots and you might have wired the lights wrong. It may end up costing more to fix your DIY mistakes if you lack the skills to do it well the first time. The savings and control you get in an agile project comes with the assumption of additional risk.

The State hasn’t had the skillset or the expertise to take on a true agile project, but has explored using this approach on various projects or for components of projects. The State is in a position to take more control over IT innovations in departments, but it is hard to see the State being able to perform the key system integrator role of a large agile project in the near future.

Innovation Fund Seems Useful, but General Fund?

The proposed “innovation fund” seems like a good way to seed resources so that there are people in place in anticipation of project needs. However, the proposal should be modified to allow for reimbursements after these projects are identified and undertaken. Using General Fund to underwrite this investment give the department flexibility, but the State should be attributing costs to special funds and drawing down federal matching funds when appropriate for the end users.

State Workers Need To Be the Office’s Target Audience

The primary barrier to innovation in state government has been the state workforce. Projects have been created that lack the ownership, training, and support of the end users. We have routinely allowed technology vendors to design our business processes instead of our own administrators. Part of this has been a lack of knowledge, skills, and abilities of the state workforce, particularly during the era when staff could not attend conferences or trainings due to budget cuts. But the State has underinvested in engaging with staff at every stage of the process, from problem definition, to change management, to training. The future success of this office is going to hinge on convincing state workers, managers, and administrators to trust, take risks, and own the work necessary to innovate. The Office will need to help overcome confusing word salad featuring TechCrunch’s hottest keywords that dominate technology conversations, but alienate the most important stakeholders, state employees.

What is Office’s Role in Procurement?

The proposed trailer bill allows the Office of Digital Innovation to use Public Contract Code Section 6611 to procure goods and services. It is unclear how this new Office’s authority would fit with Department of General Services and the Department of Technology, the two control agencies that current have this role.

Committee staff have been contacted by members of the public that wish to provide comment on the proposed office and the recent change in procurement.

Staff Recommendation: Hold Open

If you would like to submit official comments for the Legislature’s consideration, you may find contact information for the Subcommittee #4 on State Administration at: https://abgt.assembly.ca.gov/committeestaff

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