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Definition

federal portfolio management

Federal portfolio management is a methodology used by the Chief Information Officers (CIOs) of U.S. government agencies to manage their organizations’ IT projects, resources and investments in an effort to maximize resources, minimize costs, deliver on objectives, reduce redundancy and enable better decision making. A portfolio is a useful way to organize and manage a collection of items that are somehow connected. 

Portfolios are created by putting together groups of assets in different proportions and then measuring the resulting aggregate risk and return of each group so that dollars can be appropriately distributed between risky and stable investments in accordance with the agency's business goals. Federal portfolio management is similar to financial portfolio management in that high-risk investments are balanced by conservative investments, and the mix is continually monitored to determine which projects are on track, which need help, and which should be discontinued. 

Federal agencies face a number of challenges when it comes to supporting their missions while also satisfying stakeholder and constituent demands. These include shrinking budgets, non-integrated systems, legacy applications, data silos and disparate decision bodies affecting IT investments across an agency.  Giving all stakeholders a single view and providing a holistic view of an agency’s overall IT strategy and visibility into projects makes it easier to reduce the number of low-value and redundant projects. It also improves communication between IT and business leaders and alignment between IT and business objectives.

A number of laws and compliance regulations established by Congress and the Executive Office have IT governance requirements that can be met through federal portfolio management. These include the Clinger Cohen Act of 1996, OMB Circular A-11, the President’s Management Agenda, the Government Performance Results Act (GPRA) and Earned Value Management/ANSI 748.

There is no one way to implement federal portfolio management. To successfully implement this approach, however, an agency needs to conduct an ROI analysis on current and proposed projects and analyze how new initiatives will help the agency meet its business goals. Although there are several commercial-off-the-shelf (COTS) software suites available for portfolio management, agencies can also choose to develop their own methodologies by using heuristic models, scoring techniques and visual or mapping diagrams.

See also: application portfolio management, Balanced Scorecard Methodology

Learn more:

The U.S. Army has information on federal portfolio management.

The Environmental Protection Agency's Portfolio Manager is an interactive energy management tool that allows you to track and assess energy and water consumption across buildings in a secure online environment.

The CIO of the city of Roseville, Calif., reduced a $10 million budget by 6.8% by using a project and portfolio management application to align his department with his city council's strategic goals and objectives.

CIO Niel Nickolaisen shares his lessons learned in project and portfolio management

This was last updated in May 2010

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