MFG Archive, Opinion

Why the DATA Act Matters

CURATOR’S NOTE: Thanks to Hudson Hollister for his detailed and insightful account of the process and what it means. Time will tell how pivotal this act will become, but it is certainly a great step towards a more open, data transparent world.

On May 9, President Obama signed the U.S. Digital Accountability and Transparency Act, or DATA Act. The new law is a bold bid to transform the U.S. federal government’s spending information, in all its complexity, from disconnected documents into open data. Today, we present what it says, how it passed, and why it matters.

The DATA Act emerged from a nearly four-year path through Congress. Vox.com‘s Andrew Prokop masterfully told its long legislative story last week in Vox.com, complete with a contemporary spin on the famous Schoolhouse Rock “I’m Just a Bill” cartoon.

The global open data movement enjoys an enthusiastic U.S. following and explicit support from the Obama Administration. On May 9, 2013, President Obama issued his landmark Open Data Policy, declaring open data the default for all government information. But the U.S. government shows scant progress in opening its own finances, grants, and contracts to its citizens. The primary spending transparency website, USASpending.gov, is limited to external grants and contracts, ignoring internal spending, and according to the Sunlight Foundation its accuracy rate has long hovered around 33%. The DATA Act seeks to change this.

What It Says

First, it requires the Treasury Department and the White House Office of Management and Budget (OMB) to establish government-wide data standards. Today’s government lacks common data identifiers for essential elements. Grantees, contractors, awards, programs, and even agencies are identified inconsistently. Government-wide data standards, once they are applied across the existing landscape of financial, budget, payment, assistance, and procurement reports, will create the first enterprise-wide views of federal spending.

The DATA Act requires all agencies to apply the new standards to the information they are already reporting to government-wide compilations at Treasury, OMB, and the General Services Administration. Agencies need not redesign their existing internal systems to use the standards. For the most part, agencies can simply translate what’s already being transmitted. But if agencies voluntarily adopt the standards in their financial management, budgeting, grant-writing and contracting systems, the standards will enable new management tools and automatic processing.

The DATA Act does not directly require grantees and contractors to conform their existing accountability reports to the new standards. Instead, OMB is directed to run a pilot program testing whether standardized reporting can help grantees and contractors automate their compliance work – just as TurboTax and similar interfaces help individual taxpayers deal with the complexities of the U.S. tax code.

Second, the new law directs Treasury and OMB to expand USASpending.gov. The new USASpending.gov will include internal spending as well as external grants and contracts, offer breakdowns by appropriation, program, and purpose, and make the whole corpus of federal spending downloadable in bulk. The law does not require USASpending.gov to offer transaction-level transparency, but the Treasury Department has separately promised such transparency to Congress.

How It Passed

From the start, the DATA Act enjoyed the support of nonprofit transparency groups like the Sunlight Foundation, the Project on Government Oversight, and Citizens for Responsibility and Ethics in Washington. But it attracted little interest from the tech industry – even though open data, once standardized and published, offers profitable private-sector opportunities to republish, analyze, and automate information. To build industry support, I resigned from my job as a Congressional staffer in 2012 to found the Data Transparency Coalition. The Coalition represents the tech industry to call for the publication of all government information as machine-readable data rather than as disconnected documents.

Thanks to early support from Teradata and further contributions by WebFilings, PwC, and other companies, our Coalition was able to spend over two years lobbying Congress. We ran demonstration events to showcase how the tech industry could use open spending data to detect waste and fraud. We hosted conferences to make sure the legislative supporters and would-be executive implementers met each other. We sounded the alarm when amendments that would have ruined the bill were proposed.

Surprisingly, despite President Obama’s commitment to open data, the strongest opposition to the DATA Act came from the White House. To its credit, the Senate rejected a January 2014 OMB proposal to eliminate the crucial standardization and publication mandates. Perhaps as a result, when President Obama finally did signed the bill into law, he did so very quietly. The signing happened to coincide with the one-year anniversary of the Open Data Policy. Yet the White House’s commemorative Open Data Policy announcement did not mention that the President was, that same day, signing the nation’s first open data law.

Beyond the transparency advocates and the tech industry, the DATA Act also benefited from support by groups with other reasons to like open data in spending. State governments, which receive a large proportion of federal grants, supported the final bill because they hope to be able to save money by automating the accountability reports they must submit on those grants. Political groups on both the right and left favored it because each side believes open data will help validate its point of view.

Why It Matters

If federal spending is successfully transformed from disconnected documents into open data, U.S. citizens and civil society will enjoy three key benefits.

First, open spending data will improve democratic accountability. Taxpayers trace dollars from their elected Congressional representatives’ votes all the way through the complex life cycle of federal spending. Today, it is impossible to match appropriation to allocation to obligation to final expenditure, because at each stage pools of money are separated and recombined by Treasury and agencies. Data standards can deliver visibility to inform the electorate.

Second, open spending data will help the federal government manage itself. Though “big data” is as common a buzzword in Washington as everywhere else, data analytics are expensive to deploy against federal spending because any such project requires time-consuming transformations before its insights are reliable. Data standards will allow agency leaders, program managers, inspectors general, and even Congressional appropriators to use cheaper analytics to illuminate, and eliminate, waste and fraud.

Third, open spending data can be automated. Data standards will allow grantees’ and contractors’ existing financial software to automatically generate the reports they must submit to agencies. Data standards will allow agencies to spend less time manually matching accounts to obligations and more time doing their day jobs. Layers of lawyers will be replaced by lines of code. The end result is greater efficiency throughout the public sector.

All three of these benefits are also business opportunities for tech entrepreneurs. Some of our Coalition members, like Govini and FindTheBest and Enigma, republish government information to create new value for consumers and companies. Some, like Teradata, uReveal, and Elder Research, are eager to deploy analytics against newly-standardized spending data. And a third category, including WebFilings, RDG Filings, StreamLink Software, and Level One Technologies, will build TurboTax-style interfaces to automate compliance reports that today require manual labor.

All these benefits and businesses will only realized if the Treasury Department and the White House OMB show leadership for the crucial first phase of DATA Act implementation. These agencies must establish robust, flexible, nonproprietary data standards for the whole structure of U.S. federal spending. Thanks to the tech industry’s support, our Coalition’s next challenge is to make sure they do it.

The DATA Act is only the beginning. For one thing, U.S. financial regulation is an even less transparent domain than spending, if such a thing is possible. We hope to soon persuade Congress to pass an open data mandate directing financial regulators to coordinate their data standards and consistently publish the information they collect under the securities, commodities, and banking laws.

Beyond financial regulation, performance data, legislative actions, judicial filings, and many more areas remain trapped in disconnected documents. These areas won’t change unless policymakers want them to. Open data advocates must persuade the policymakers. Join us and let’s get to work.