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OMB urges 'healthy competition' in shared services

Goal is to report data on cost, performance

Jul. 10, 2013 - 06:00AM   |  
By NICOLE BLAKE JOHNSON   |   Comments

When agencies want outside help with financial management, human resources or other business functions, one option is to turn to another agency that acts as a so-called shared service provider. But the challenge can be determining which provider offers the best price and performance.

Much of that information comes by word of mouth because there is little available data with which to compare services or prices.

But the Office of Management and Budget aims to change that, specifically in the area of financial management services. The Treasury Department is leading the effort to review providers’ cost and performance data, such as their timeliness in making payments for agency customers, and to report that information to providers and their customers. Treasury has not said how it will present performance data to customers or how that data will be updated.

Meanwhile, OMB has stood up an internal database and portal called Uncle Sam’s List, where agencies can search for shared services, such as data center space, Lisa Schlosser, deputy administrator for e-government and information technology, said at a conference last month. Another project called Prices Paid Portal will provide an agency-by-agency comparison of prices paid for similar services, she said.

“What we’ve been hearing from agency customers is they want a sense of how a provider is performing relative to other providers,” Norman Dong, deputy controller at OMB, said in an interview. “We are trying to create a little healthy competition here.”

The hope is that greater transparency into the operations and performance of federal shared service providers will lure more business to them — at a time when agencies are enduring sequester budget cuts and looking for ways to reduce costs.

“Agencies are finally coming to the conclusion that they don’t have the resources or subject matter experts to handle mission support functions,” said Joe Ward, director of the Interior Department’s Business Center.

Interior’s Business Center is one of four OMB-designated financial shared service providers. The others are the Health and Human Services Department’s Program Support Center, Transportation Department’s Enterprise Services Center and Treasury’s Administrative Resource Center in the Bureau of the Public Debt.

OMB’s Shared Services Executive Steering Board is in the early stages of defining the current size of the federal shared services market, said Paul Bartley, who runs HHS’ Program Support Center and is co-chair of the board. Bartley estimates 80 to 90 percent of the activity that should be considered shared services is not being performed under that model, but that can only be determined once OMB defines what activities are shared services activities, he said.

Instead of competing for the current business, shared service providers should focus on convincing the agencies that are not using shared services, Bartley said.

OMB is hoping its move to make the shared services market more transparent will prod shared service providers to further enhance their services.

“If I’m not performing as well as the next provider, in theory, our customer would be able to walk,” Dong said.

David Fitz, a partner in KPMG’s management consulting group, said there have been federal efforts to provide basic performance data, through a process called the Due Diligence Checklist. Metrics such as the volume and dollar amount of transactions that are processed and the ability to handle customization and change requests are included in the checklist, but Fitz said the data are not comprehensive.

“Getting to that ability to compare apples to apples would be helpful,” he said.

The Nuclear Regulatory Commission last year ended its agreement with Interior’s Business Center and moved to commercial provider CGI, following Interior’s decision to stop providing the CGI solution as one of its financial shared services options. NRC considered similar services provided by other agencies but determined CGI offered a more robust solution that could accommodate NRC’s needs to collect fees from agency licensees, said Jim Dyer, NRC’s chief financial officer.

“I don’t know that I’m getting the best deal, [but] I know that I’m getting a better deal than I was getting,” Dyer said of the cost.

Interior’s Ward said he welcomes more transparent metrics but cautioned that any new metrics provide standard comparisons. Customers should be empowered to ask and understand why one provider’s prices may be higher than another, Ward said, but “if the question is, I want the cheapest vehicle, you get what you pay for.”

OMB’s Dong agreed.

“You may have a provider that is low cost, but if [it’s] not performing in terms of minimum standards, that does not help,” he said.

Ward said the Business Center supports more than a dozen small and medium agencies using Oracle’s federal financial solution, but it is in talks with large agencies considering using the shared service.

HHS’ Bartley said shared services providers need to do a better job of publicizing what they do and how well they do it for agencies that, under the sequester, are focused on saving money.

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