Following the Path to Shared Services

The federal government’s business infrastructure is broken and highly vulnerable to cyberattack, to the point that Michael Daniel, the White House cybersecurity coordinator, has called its condition “indefensible.”

This state of affairs is a result of decades of neglect, but it can be repaired. It would be wasteful and counter-productive to modernize every last mile of our far-flung and fragmented business infrastructure.

Instead, the government would be smart to rearchitect around a modern vision of the government’s needs, leveraging shared-service models to the fullest extent possible for administrative and mission-related support activities.

Shared Services Are a Welcomed Change

Government lags far behind leading public and private sector organizations in its use of shared services. Outside of payroll, the government has a long way to go to catch up.

A growing community of government leaders understands the imperative and is pushing for change.

Dave Mader, acting deputy director for management at the Office of Management and Budget, is a strong shared-services advocate and has announced a “two-minute drill” to accelerate its implementation during the remainder of President Obama’s second term.

As welcome and necessary as stepped-up efforts are, the challenges extend well beyond the administration’s runway and are far weightier than the executive branch can shoulder alone. Congress must flex its muscles to broaden the scope and extend the reach of modernization beyond 2016.

Since the 1980s, shared services have been conceived and managed mostly in ad hoc program management structures that have varied from one administration to another.

A single federal official has never been assigned permanent responsibility for driving implementation across the government. Governance structures have shifted and morphed along with leadership changes, with the result that core competencies and capabilities necessary to sustain progress have never been institutionalized.

The Mader Plan strengthens enterprise governance capabilities — an important step for improving efficiency and effectiveness in implementation across the government for the remainder of the administration — but it does not address structural deficiencies that require statutory changes.

Federal Shared Service Providers remain stuck in stepchild status in host departments with vastly different mission interests, where they have limited access to capital necessary to modernize and grow their businesses and are subject to varying whims of different congressional committees that view FSSP business interests skeptically. The Shared Services Leadership Coalition is proposing legislation to drive shared-services implementation further. The proposed legislation will:

1. Create a dynamic shared-services marketplace wherein government and private shared-services providers invest, compete and collaborate in providing common services to customer agencies, while maximizing the number of service providers

2. Designate the OMB Deputy Director for Management as the Federal Shared Services Officer (FSSO), with responsibility and authority to make the marketplace a reality

3. Establish an Office of Federal Shared Services in the General Services Administration to lead the acquisition, performance management and other governance requirements directed by the FSSO

4. Establish goals, timetables, incentives and action-forcing mechanisms to encourage and direct agencies to migrate to shared-service providers

5. Modernize the financial model for Federal Shared Service Providers to enable them to scale and compete in the marketplace self-sufficiently and transparently

Transforming the FSSP financial model is crucial to creating a viable marketplace. Meaningful competition and customer choice cannot happen when some providers operate with more permissive authorities.

Why a Separate Fund for Shared Services Is Necessary

A single Federal Shared Services Enterprise Fund is needed, similar to existing working capital and franchise funds but with standard terms and business practices for all providers. The fund would be capitalized organically from cost savings realized from successful agency migrations, and reserve premiums captured in FSSP pricing to customer agencies.

Access to appropriated funds would be available only for startup expenses and extraordinary needs justified by business case analysis and approved by the FSSO. If implemented, this new model would:

1. Eliminate “level playing field” issues caused by varying FSSP authorities and business practices in the current nonstandard environment

2. Improve transparency, accountability and auditability by capturing all FSSP activities within a single fund, subject to active OMB oversight and annual audit

3. Empower FSSPs to operate in more businesslike ways and earn greater autonomy and flexibility in business operations, based on their performance

4. Provide organic funding for self-sustaining shared services, thereby eliminating future dependence on appropriations

It has been estimated that full implementation of shared services can produce billions in cost savings by consolidating and eliminating redundant organizations, technologies and business processes.

A large part of the savings will come from reduced labor costs and can be realized in ways that are beneficial to the career interests of federal em- ployees. Better jobs will result from eliminating low-value transaction processing and paperwork; remaining jobs will be higher value “knowledge jobs” that leverage improved information to enhance mission performance. Retraining can help employees learn new, higher value roles.

Retirement statistics suggest that attrition can take up much of the slack, and soft landings and favorable separation packages can be provided for employees close to retirement — likely a popular option, given the high and growing number of retirement-eligible employees.

The stars are aligned for bipartisan legislative action. Industry and good-government groups are energized and united around a powerful, nonpartisan vision of shared-services transformation. Transition initiatives are already at work defining management and technology agendas for the next administration — and shared services is high on their list. The executive branch is heading in the right direction and appears open to accepting supportive legislation. It’s time for Congress to act.