Federal version of Silicon Valley failing

WASHINGTON — The Obama administration’s “18F” program to create its own version of a high-tech startup for government digital projects has foundered since its launch in 2014, losing nearly $32 million as its staff spent most of its time on unbillable work, according to a new inspector general report published Monday.

The comparisons to some Silicon Valley startups were stark: Senior 18F managers overestimated the amount of money their projects would recoup; increased hiring using special rules every three months since April 2014; and devoted less than half the program’s staff time on projects for which it could bill other federal agencies, the report said.

It noted the 18F program has “struggled financially” and “has not developed a viable plan to achieve full cost recovery.”

In one case, 18F hired a full-time head of state and local government practice at an annual salary of $152,780, even though at the time, 18F was not authorized to work directly for state and local governments.

The program, named after its Washington street address, was intended to create an elite branch of the General Services Administration with creative, tech-savvy employees who could quickly re-engineer any government agency’s website or improve other digital projects. At a time when federal departments were cutting budgets, it was funded under a model that envisioned it would earn back more money than it cost to run. The 18F unit was informally related to the administration’s new U.S. Digital Service, which helps manage government technology projects.

In internal discussions, some senior 18F managers appeared cavalier about recouping costs, the report said.

It cited an exchange with the 18F director of operations, who told a GSA administrator, “To be frank, there are some of us that don’t give rip about the losses.” The administrator, identified as Andrew McMahon, responded, “Sure, in the end, I could care less.” McMahon declined to comment.

The acting director, Dave Zvenyach, said in a statement that like any startup, 18F grew quickly and is learning how to scale. In his comments defending 18F’s work, Zvenyach cited examples that appeared hard to tangibly account for since they dealt with government practices and culture.

Zvenyach said the organization has brought in an independent third party to review its financial processes and controls, and it has added more controls on unbillable work.