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Federal procurement of shared services

Creating efficiencies for all parties.

Overview

Shared services can provide efficiencies for all parties, but despite pressure from above, many agency leaders have been slow to adopt shared services for fear of losing control, fear that the shared service provider will stop supporting their agency’s critical business functions or that their agency will be locked into a single provider.

At the federal level, Federal Shared Service Providers offer services to other agencies. For example, the Interior Business Center provides services to more than 150 government offices and federal agencies, including both internal and external clients.

At the federal, state and regional level, Internal Shared Service Providers offer services just for their internal agency. Two examples are: the Commander, Naval Installations Command (CNIC), which provides shore infrastructure support for the U.S. Navy; and the New York Metropolitan Transit Authority (NYMTA), which provides HR, payroll and financial management services to its nine agencies.

As deadlines approach, whether federal, state and local organizations decide to become shared service providers themselves or use the services of another organization, shared services can bring efficiencies for all who are involved.

Background

The Office of Management and Budget has long been an advocate of federal shared services, urging agencies and departments to look at existing systems and services before considering new IT investments. Three roles in particular are especially large supporters of shared services: the U.S. Chief Information Officer is concerned about duplicative spending; the Chief Acquisition Officer wants to reform procurement; and the Comptroller seeks to improve government-wide financial management.

Despite this pressure from above, many agency leaders have been slow to adopt shared services for fear of losing control. A recent survey by Government Business Council reveals that 60 percent of more than 422 federal respondents are concerned that shared service providers could stop supporting their agency’s critical business functions.

While some agency leaders are nervous, many organizations are realizing enormous efficiencies through shared services. Federal shared service providers operate fee-for-service, full cost recovery business models that are efficient for the government as a whole, but shared services also offer efficiencies to their partner agencies. Users of shared services are better able to focus on their missions and core competencies, leaving the administrative and back-office functions to shared service providers.

Analysis

Organizations that provide services for other agencies are labeled as “Federal Shared Service Providers” (FSSP). This group includes agencies such as the Department of Transportation’s Enterprise Services Center (ESC), Department of the Treasury’s Administrative Resource Center (ARC), Department of Health and Human Services’ Program Support Center (PSC) and Department of the Interior’s Interior Business Center (IBC).

The IBC is a successful case study of interagency shared services, providing services that include acquisition, financial management, human resources, information technology, customer support center and indirect cost services.

Other shared service providers offer services just for their internal agency. These providers are known as Internal Shared Service Providers (ISSP), and they appear not just at the federal level, but also at the state and regional level. Two examples are: the Commander, Naval Installations Command (CNIC), which provides shore infrastructure support for the U.S. Navy; and the New York Metropolitan Transit Authority (NYMTA), which provides HR, payroll and financial management services to its nine agencies.

Recommendations

As deadlines approach, agencies must decide whether to become shared service providers themselves or to consolidate and use the services of another organization. For those who opt to use another’s services, an essential first step is understanding the unique processes, procedures and requirements of the organization. This inventory step helps the agency identify which functions and services might be candidates for moving to a shared model.

Next, agencies should evaluate their core competencies to determine which services should remain within the organization. Back-office and commodity functions are typically the best candidates to send to outside parties, but performing a business case analysis can help determine savings and outcomes for each unique organization.

After determining which functions to transition to shared services, it is recommended that organizations survey the market and compare the different options available from providers, including shared service providers within the same organization, those outside of its borders and commercial entities.

Finally, organizations moving to shared services must carefully plan for the transition. A strategically piloted implementation strategy that anticipates and prepares for challenges tends to produce the best results.

While using shared services from another provider creates efficiencies for many, it may not be the best fit for every organization. However, if a department or agency excels in a particular type of service delivery, becoming a shared service provider can offer different opportunities to increase efficiency through specialization.