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As tighter budgets loom, government will have to be smarter about contracting and sonsolidating adminstrative services.

As tighter budgets loom, government will have to be smarter about contracting and sonsolidating adminstrative services.

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  • 1. ELECTRONICALLY REPRINTED FROM MARCH 2012 achieve. The federal government spends draw up an agreement or memorandumanalysis about $80 billion on IT, and the esti- of understanding specifying the servicesShare mated outlay for federal administrative to be delivered, the requirements and services is at least that large. Cost sav- parameters, the unit cost and total cost, ings from financial management and HR the cost assessment methodology, andTactics systems consolidation projects alone is the time frame for delivery. estimated at $5 billion over 10 years.  Federal agencies have not typically Another material difference between used traditional chargeback mecha- the public and private sectors is the con- nisms, which measure actual spending, stituencies they serve. Both sectors are to develop budgets and to pay serviceAs tighter budgets loom, called on to maximize value while mini- providers, instead relying on demandgovernment will have to be smarter mizing costs, but for commercial enter- management. Executives and manag-about contracting and consolidating prises the path is more straightforward ers across government, however, areadministrative services. and far less mired in consensus building. seeking more effective and accurate Government initiatives are subject to methodologies for managing serviceBy Kristine Rohls and Dave Mader the vagaries of election cycles and shift- relationships and costs in a way thatT ing political agendas. Federal officials drives measurable standards. Service- he idea that federal agencies are obliged to appease many masters— level agreements, for example, are a fine should be run more like business- legislators, regulators, industry and the thing, but are enforceable only when es has been around for a long time. electorate—all of whom have some con- pre-defined financial incentives and Like lots of management princi- trol over the purse strings and many of penalties are in place. ples it goes in and out of vogue. It’s whom advance contradictory agendas. Once the ink is dry on a new businessback in, but this time along with a looming The parameters imposed on sourc- relationship with the provider agency or$14.3 trillion national debt and imminent ing decisions are far stricter in the commercial firm, the real work of imple-budget cuts across government.     public sector than in menting the agreement The specifics of managing down the the commercial sector. and monitoring progressnational debt will continue to be the sub- Offshoring, for example, begins. Successful agree- $80ject of vociferous debate, but one thing is simply not an option ments start at the topnearly everyone can agree on—regardless for government. and remain a priority forof political stripe—is that agencies are In addition, in indus- senior leaders.going to face substantial budget cuts. try there are incentives Performance indica- If past is prologue, then the concept of for hitting revenue tar- tors must be identified,optimizing costs through various sourc- gets and fulfilling terms tracked and communi-ing models such as shared services willbe an important part of the prescription.The reasoning is it’s more cost-effective of service agreements. But considerably less latitude is available in BILLION cated, and benchmarks and best practices moni- tored routinely. Thewhen another agency under the depart- designing such incentive notion of measuring themental umbrella provides services such schemes in government, Annual federal spending cost of specific servicesas financial, human resources and infor- although some models on information technology is relatively new to fed-mation technology management, or are emerging.  A more eral agencies, but it iswhen outside government entities serve realistic approach would essential in determiningas third-party providers.  be to modify the annual performance whether the organization is best served Is the shared-services model really assessment review process to measure by insourcing or outsourcing.doable, or is it merely a theoretical pursuit competencies that align with the objec- There is no doubt that governmentthat has little relevance in the real world? tives of shared-services initiatives. To is starting down the road to optimiz-It can work—and it gets agencies closer put it plainly, this would mean structur- ing administrative services from a dif-to the long-vaunted commercial model— ing the review process to reward execu- ficult position. Agencies are rife withbut only if the entities involved recognize tives for budget reductions and shedding nonstandardized and manual processescritical differences between public and functions that can be managed more supported by a patchwork of legacy ITprivate sector operations, and how those effectively elsewhere. The status quo, applications in multiple locations. Manydifferences affect outcomes. although not intended, rewards empire are decentralized, where bureaus and Agencies and Congress not only must building, which in a larger head count offices operate as separate businessesbe cognizant of these differences, but they and broader portfolio of functions often with their own budgets.also must have a strategy for managing equates to career advancement. But an immense prize awaits thesethem. It’s not so much a matter of gov- Understa nding the dif ferences agencies, and by extension their tax-ernment’s unique objectives, processes between government and industry is paying constituents, if they take the nec-or expected results, but rather the con- only a start. Sourcing decisions require essary steps to set out on the right path.text. Sometimes this complexity presents getting the mechanics right.challenges, but it also can be positive. Agencies identified as centers of excel- Kristine Rohls and Dave Mader are leads The cost-savings opportunity, for lence act as fee-for-service providers to at Booz Allen Hamilton who work withexample, is orders of magnitude larger other agencies. Together, the customer federal agencies to streamline technologythan even the largest corporations could agency and the service provider agency and administrative operations. Posted with permission from the March 2012 issue of Government Executive ® Copyright 2012. All rights reserved. For more information on the use of this content, contact Wright’s Media at 877-652-5295 88446