Florida case offers lessons-learned for outsourcing

Editor's note: This story was first published in the April 24 print issue of Washington Technology's sister publication, Government Computer News.

While Florida's contract with Convergys Corp. of Cincinnati to consolidate and process human resource services for 32 state agencies has produced substantial benefits, it also serves as a stark example of what can go wrong when a government agency outsources certain functions to the private sector.

Even though the partnership has resulted in some success and saved Florida at least $60 million, the state, Convergys and one of its subcontractors are embroiled in a lawsuit and on watch for potential security breaches.

Colleen Englert, spokeswoman for the Florida Department of Management Services, which manages the Convergys deal, said the problems can be boiled down to three words: "Planning, planning and planning."

Florida signed a $280 million, seven-year contract with Convergys in August 2002. The deal was extended recently for two more years and will expire in 2011.

Under the contract, Convergys consolidated the HR functions for approximately 210,000 state employees, resulting in a central system called People First! that supports about 70 percent of the state's HR workload.

Brian Andrew, general director of Convergys' public-sector division, said Florida's legacy systems were manual and paper intensive, with the state's HR workers "awash in paperwork functions."

Convergys revamped these processes and implemented call centers and an online self-service system for employees who have questions about issues ranging from vacations to payroll.

Both Florida and Convergys estimate that the state has saved between $60 million and $80 million through the consolidation contract because the upgrades were done governmentwide and not on an agency-by-agency basis.

But when it was revealed that one of Convergys' subcontractors?GDXdata Inc. of Denver?hired two companies in India to index scanned state employee personnel files, the contract became a prime example of what can go wrong on such an ambitious project.

"This contract is the first of its kind, and it's not been without its challenges," Englert said.

For one, the contract barred Convergys and its subcontractors from "offshoring"?hiring an overseas company for?any of the work associated with the deal.

This news resulted in two false-claims lawsuits and a potential security breach currently being investigated by the state.

The offshoring took place about two years ago, and DMS said it has not found any cases of credit fraud or identity theft resulting from the situation, although its probe is continuing.

Nonetheless, Florida has set up a Web site and a 1-800 number for its employees who may have been affected by the offshoring, and Convergys has agreed to provide a one-year credit protection program for them.

Convergys said in a statement that the state has found no evidence that the company has performed any wrongdoing, and GDXdata officials did not respond for comment.

The offshoring has not been the only problem dogging the contract.

Englert said Florida moved too quickly and aggressively in paring down the state's varied HR services into the consolidated system. DMS did not engage the other state agencies as much as it should and underestimated how difficult several employees would find the changes, Englert said.

"There has been a tremendous learning curve," Englert said, adding that the problems are both the state's and Convergys' responsibilities.

"The state underestimated the vastness of this project, and to some extent Convergys did too," she said. "This is a very young system and with any change of this magnitude, there's a constant need to upgrade and improve."

Convergys' Andrew said his company's performance has improved tremendously in recent months, and as a result questions are being answered sooner and payroll mistakes?a common problem under Florida's legacy system?are being rectified faster.

People First! "is continually being enhanced," Andrew said. "It wasn't perfect the first time," but in working with the state and other stakeholders, "we've accommodated changes and suggestions on how to make the system more user friendly."

Rob Thormeyer is a staff writer for Washington Technology's sister publication, Government Computer News.

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