OMB mulls new shared-savings programs

To be successful, shared services must be scalable enough to accommodate a lot of additional users, said Brien Lorenze, a managing partner at BearingPoint Inc.

Henrik G. de Gyor

Contractors anticipate opportunities consolidating human resources, financial management systems

The Office of Management and Budget is evaluating proposals that would have federal agencies share services for financial management and human resources, a move that could create significant integration and outsourcing opportunities for contractors.

Shared services aren't new in the federal government, but consolidating all financial management and human resources systems would be an especially ambitious effort, industry executives and analysts said.

With shared services, the administrative functions would be consolidated under standalone organizations in several agencies, which would then provide those functions to other agencies.

Current shared services include several e-government projects, such as e-payroll and e-travel. With e-travel, for example, three private-sector companies provide federal agencies with travel services, such as airline ticketing and expense report processing.

Each agency chooses the provider it likes best, saving it from employing staff to handle travel arrangements and giving it a better price than if each contracted with a private-sector company.

In addition, a public-private competition for shared services at NASA is under way. The proposed NASA Shared Services Center will provide human resources, financial management, procurement and information technology services to agency organizations.

The full-and-open competition is in the pre-request for proposal stage. Its dollar value is unknown at this time.

Consolidating multiple systems that perform common business tasks can save agencies 10 percent to 30 percent, according to BearingPoint Inc. of McLean, Va., and Accenture Ltd. of Bermuda, Hamilton.

That's no small amount. Agencies are slated to spend $1.3 billon on financial management systems in fiscal 2004, and they've requested $1.4 billion for fiscal 2005, according to federal budget documents.

Agencies will spend $542 million on human resources systems in fiscal 2004, and they've asked for $440 million for fiscal 2005.

For industry, shared services brings opportunities in three areas: consolidating infrastructures, integrating systems and conducting business processes such as claims processing, said Suparno Banerjee, vice president of global government industry for EDS Corp. of Plano, Texas. Federal agency service centers also could compete for the work.

Tim Young, OMB's associate administrator for e-government and information technology, said OMB is evaluating business cases from two federal task forces that advocate shared services for financial management and human resources.

If they are approved, the shared services projects would be included in the administration's proposed fiscal 2006 budget, said Young, who outlined the proposal earlier this month at the Information Resources Management 2004 Conference in Cambridge, Md. The 2006 budget will be published in February 2005.

The task forces estimated that six service providers would be needed for both financial management and human resources shared services, though that number could be higher or lower, said Kirk Swann, a consultant with Touchstone Consulting Group Inc. of Washington, who supports OMB's e-government office.

"It's a very feasible model for the federal government," said Lisa Mascolo, managing partner of Accenture's federal client group. "On the civilian side, there is an aging workforce, and many people are going to retire. ... In the Defense Department, it would be nice to get people in uniform doing mission-related services. A lot of them are doing back-office stuff."

Agencies would not be required to move immediately to shared services , said John Sindelar, program manager for OMB's lines-of-business consolidation projects.

Instead, agencies will move to the shared services when their systems need upgrades. However, some agencies could move to shared services almost immediately, he said.

To be successful, shared services must be scalable enough to accommodate a lot of additional users, said Brien Lorenze, a managing partner at BearingPoint.

Shared services also must be configurable, so that they can meet the common needs of all agencies as well as the specific, customized needs of individual agencies, he said.

Meeting those twin goals is a difficult task, said Payton Smith, an analyst at market research firm Input Inc. of Reston, Va.

"As much as there is enormous potential for elimination of redundancy and savings, there is an equally huge barrier in terms of the complexity of implementing that type of solution," he said.

If OMB approves shared services for financial management and human resources, it will likely be two to three years before significant progress is made, and four to five years before the projects are complete, Smith said.

"Because of the complexity of the problem, it is likely going to be led by the integration community," he said.

Federal entities that also could compete for the work include the Interior Department's National Business Center and the Agriculture Department's National Finance Center. Both provide shared services to agencies.

Tim Vigotsky, director of the National Business Center, said shared services "gives us the opportunity to improve and standardize business practices across the federal government. This is where the most significant gains can be made."

Staff Writers Gail Repsher Emery and Jason Miller can be reached at gemery@postnewsweektech.com and jmiller@postnewsweektech.com.

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