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How to take advantage of a growing world of federal aid to build an AI-ready government

The recent influx of federal aid has provided a tremendous opportunity for state and local governments to advance information technology and accelerate technology modernization. Several agencies have deployed federal funding to enable remote and mixed work within their organizations; Move mission-critical systems and workloads to the cloud to improve system performance, reliability, and resiliency; and enhancing security in the face of persistent cyber threats.

However, a recent national survey of state and local government leaders conducted by the Center for Digital Government (CDG) indicates that some states and localities still face challenges in increasing the federal funding available to improve technology.1

As governments transition to a new way of doing business in the wake of the pandemic, they will need to know how to maintain the technologies they have implemented and constantly update their infrastructure as their business needs evolve. As new federal funding streams begin to roll out — such as the $1.2 trillion Investments in Infrastructure and Jobs Act (IIJA) — state and local governments will also need to develop a framework for applying federal funding to its highest and best use. Doing so will allow them to adopt emerging technologies that will greatly improve the operational efficiency, mobility, equity, sustainability, and resilience of physical and digital infrastructure.

The current financing landscape

The CDG survey highlights many funding challenges and opportunities for state and local governments.

Of the state and local officials surveyed, nearly half said their organizations expect their budgets to increase in the next 12 months, and a quarter of respondents (24 percent) expect an increase of more than 5 percent.

Interestingly, while state and local governments face a positive budget outlook, it may not be because of federal funding: Only 25 percent of respondents reported using any federal stimulus funding to improve technology in the past two years. Among those who did, the money was used primarily for new devices (57 percent), followed by cybersecurity (36 percent) and network modernization (36 percent).

This slow adoption rate may be due to a significant lack of understanding of available funds. Survey respondents said that education and knowledge about available funds were their biggest challenges when trying to leverage funds for emerging technologies.

“There are a lot of funding programs hitting state and local agencies, and it’s hard to reconcile them,” said Samir Al-Saini, industry director for Microsoft’s critical infrastructure in the United States. “It is difficult to understand what is happening, when and how to track these funding flows. Even within them, it can be difficult to identify IT investments across data/AI, infrastructure, applications, security solutions or hardware.”

Competition with other jurisdictions for limited funding, difficulty applying for grants and proposal development, and problems identifying use cases for emerging technologies.

5 pillars to improve financing opportunities

To make the most of the funding opportunities available, state and local governments need to identify the outcomes they seek to achieve, the projects they need to launch to deliver and the funding sources required to fund them, particularly through federal funding opportunities. Saini said focusing on the five core pillars could help them develop a framework for identifying key technology investment areas, particularly in relation to maximizing the $1.2 trillion in IIJA funding.

1. Safe

State and local governments will need to focus on IT security and Operational Technology (OT) going forward. Adopting a framework of mistrust and investing in cybersecurity solutions can help mitigate the risks of cyberattacks. Zero Trust is now the de facto normative approach to enhancing an organization’s cybersecurity posture that focuses on the principle of least privileged access and continuous validation of trust. It allows organizations to design their architecture in a way that assumes that every device and user that requests access to their network, systems, and applications is a potential threat.

Zero Trust requires many enabling technologies – from ultimate threat detection tools to security, coordination, automation, and response (SOAR) solutions. State and local governments should consider implementing federal funding compliant with this No-Trust Framework to secure all components of their digital assets, including identity, devices, applications, infrastructure, networks and data — and OT systems and devices.

2. Recovery

Strengthening information technology, operational disaster recovery, and business continuity will be other important areas of investment for states and localities.

Saini said that many government organizations currently have mission-critical IT and automation systems in their local data centers without the need for effective backup and recovery controls. In the event of a cyber attack, data center equipment failure, connectivity problems, or a natural disaster, delays in restoring these systems could have detrimental effects on their operations and services to the public. Leveraging the cloud for reliable backup and recovery addresses this issue and greatly improves the resilience of these systems.

3. Maintenance

IIJA funding will lead to the most significant investment in infrastructure modernization in a single generation. When considering the scale and complexity of maintenance and modernization work that state and local agencies seek to complete, digital asset management and field service tools are essential to ensure these assets are returned to good repair and maintained over time. Applicable use cases include AI-powered asset health assessments, remote checks with digital twins, real-time asset health monitoring, and predictive/preventive maintenance.

4. Planning/Designing/Building

With money flowing in both from the IIJA and from existing capital budgets, states and localities are growing their own construction project portfolios. As such, there is a growing need to better manage project handling, prioritize projects, accurately estimate cost and return on investment, track progress and share it with stakeholders. This need is driving the demand for adoption of cloud-based Project Management Information Systems (PMIS) to easily share project documents, automate workflows and enable real-time collaboration for all stakeholders.

From an engineering design and construction point of view, there is a growing adoption of a digital as built (DAB) approach, which enables stakeholders to work collaboratively in a common model and effectively creates a single source of reality for a construction project. This increases data transparency and increases efficiencies throughout the project lifecycle. Ultimately, these digital planning, design, and construction tools ensure the right projects are approved, managed, and delivered as efficiently as possible – on schedule and on budget.

5. work

IIJA funds are not only applied to infrastructure modernization. They are also used to improve the operations of state and local agencies, particularly to address challenges related to mobility, safety, equity, sustainability and resilience. The key to this is the efficient use of data. Agencies will need to dissolve their data warehouses and build modern data platforms to gain comprehensive, intelligent insights into how to reduce congestion, improve road safety, reduce carbon dioxide emissions, and more.

To achieve these and other long-term goals, agencies can leverage modern cloud-based business applications to streamline their end-to-end operations and help turn data insights into action. For example, a modern data platform can inform transportation planners which parts of the road or intersections have the highest road safety risks. But a modern advanced traffic management system (ATMS) is needed to improve traffic lights at those locations to reduce collision risks or to automate vehicle accident detection and response.

Saini says that even low-code/no-code technologies can also quickly and easily help agencies streamline their manual and workflow processes. With these tools, organizations won’t be hampered by legacy systems that make it more difficult to achieve key strategic goals – whether it’s improving infrastructure monitoring and performance, enhancing safety or deploying more digital self-service applications for constituents.

Although this framework can help agencies set their technology priorities, they should also develop a clear understanding of where their organization’s technology priorities and goals align with permitted uses of federal funding, such as the IIJA, and any remaining funding from the 2021 U.S. Bailout Act. This may involve delegating specific stakeholders within the organization to monitor when guidelines are issued for various funding streams, especially competitive grants, and to ensure that the organization begins the application process for these grants as soon as possible.

Agencies can also rely on their technology partners to help identify use cases for artificial intelligence and other emerging technologies, and learn about eligible technology investments for many federal funding programs.

With the right funding framework in place, state and local governments have an opportunity to spread federal funding in a more strategic and long-term way. They can leverage funds for emerging technologies, such as artificial intelligence, that enhance cybersecurity, automate processes, and build resilience. By doing so, they will develop a future-ready digital and physical infrastructure that better meets the needs of constituents.

1 CDG/Microsoft National Survey of 248 State and Local Government Leaders on Finance, February 2022

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