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Yes, the federal government launched a shared payroll services operation in 1973 – the National Finance Center – in the Department of Agriculture. Initially, it served only Agriculture agencies. Today, it provides payroll services and more for more than 650,000 federal employees in 170 agencies.
Background. Shared services – where agencies move their common administrative or operating functions to a provider that already performs those functions for other agencies – started several decades ago in the federal government. Typically, they focus on administrative services that are common across agencies – financial management, human resources, payroll, travel, etc.
According to a 2015 study by the Partnership for Public Service, Congress authorized pilot projects in the 1990s, and in 2002 it authorized sharing technology to improve support functions. In 2004, the Office of Management and Budget (OMB) created task forces to identify opportunities to reduce costs and improve services across common functions. These task forces were called “Lines of Business” – which later evolved into “shared services.” In 2014, Shared Services was designated as a top management objective for the Obama Administration, as one of its Cross-Agency Priority (CAP) Goals. As a consequence, progress in transitioning to a shared services environment is reviewed quarterly by top government officials, which has created momentum for the initiative.
There are currently six “Lines of Business” that are at different stages of implementation, each with its own managing partner:
Financial management and human resources services are the two that are farthest along. In addition, there are other areas where shared service arrangements are used as well, such as travel, payroll (part of federal HR framework), procurement, grants management, real estate, assisted acquisition, and components of IT, such as the newly launched Data Centers Consolidation Initiative
Historically, agencies have been reluctant to give up the operation of their own mission support functions. But recent trends have changed the environment. According to a 2015 report by the Shared Services Roundtable, the level of OMB and agency leadership interest, the budget constraints facing agencies, the availability of technology that makes shared services easier such as cloud services, the loss of agency-level administrative talent as a result of retirements, and the successful track record of existing shared services providers have collectively created momentum to undertake the transition.
Interestingly, there is also a private-sector advocacy group, the Shared Services Leadership Coalition, that is promoting legislation to accelerate the transition by removing administrative and financial barriers that currently slow or discourage a transition. For example, it took 26 years to move from 50 payroll systems to 4. Legislation could speed these kinds of transition. The incentive may be that savings of up to $47 billion may be possible over the coming decade, according to the 2015 Roundtable report.
Governance Framework. Shared services and Lines of Business had started as a series of independent initiatives over the years. David Mader, the controller at OMB, has been a key champion for expanding the use of shared services, and is the co-lead for the CAP Goal, along with Denise Turner Roth, head of the General Services Administration (GSA). He recently remarked: “This is no longer a pet project. It is going to scale. This is how government is going to do its business from now on.”
In furtherance of this, he created an overarching governance framework that would serve as both the executive champion of the initiative as well as the convener of stakeholders to create standardized approaches. He announced the creation of a 17-member Shared Services Governance Board in October 2015, that would provide a unified cross-agency approach to implementing and managing shared services. He also created a “project management office” to support it – the Unified Shared Services Management Office at the General Services Administration. This office, led by Beth Angerman, convenes both providers and customers across the shared services ecosystem to resolve specific issues. For example, the office encourages more consistent definitions of services and levels of services for different functions, so agencies can better compare and so they are more interoperable across agency boundaries.
Strategies. In addition to institutionalizing a governance framework, the CAP Goal leads developed policy guidance that institutionalizes migration strategies for agencies, and ensures there are metrics to assess progress, manage performance, and give a voice to customers. They’ve also created a framework that outlines best practices for successful migrations to shared services and includes a tollgate review process with both the management and budget sides of OMB. Currently more than 30 agencies are going through a system and/or service migration.
In addition, they’ve created a performance management framework for service providers, known as ProviderStat, which oversees the progress and performance of service providers of shared services. It also assesses the maturity of the capabilities of the various providers as well transparency in their operations. And finally, the Unified Shared Services Management Office has recently completed a customer survey that gauges the quality of services being provided by the various shared services.
Taken together, these efforts provide a foundation to scale shared services initiatives in coming years.
Case Examples. There are a number of different models of how shared services are organized and delivered. Some provide multiple mission-support services but only within their own agency. Some provide multiple mission-support services, but allow other agencies to purchase from them as well. And some focus on a single line of business, such as payroll, finance, or human resources, and offer those services to a wide range of government customers. There are instances of shared services focused on the delivery of mission performance, but that tends to be less common.
Lessons Learned. OMB sponsored a study in late 2015 to develop an “as-is” baseline description of shared services initiatives in five areas (information technology, human resources, acquisition, financial management, and grants management). The objective was to paint a “to-be” picture of what the shared services ecosystem could look like in the future, as well as the migration strategy for getting there in order to tee up such initiatives for the next Administration.
The study engaged over 160 individuals from 26 different agencies to glean their insights on what elements need to be in place and what it would take to go to scale. The key priorities expressed were the importance of ensuring consistency, quality and levels of service. Agencies also expressed the importance of developing integrated, not point, solutions. Some highlights of the interviews include:
Next Steps. While there has been significant progress in recent years expanding the use of shared services, some key challenges remain in order to scale shared services initiatives. For example, there are legislative constraints on “retained earnings” by shared service organizations, which are needed to support infrastructure investments and the capabilities needed to go to scale. However, there are opportunities to expand the shared services approach from mission support to mission delivery functions, for example joint call centers or joint benefit determination processes, or joint healthcare insurance fraud detection initiatives. So, the next administration has a foundation to build upon, if it wishes, and a set of plans to follow!
Note: This is the fourth in a series of blog posts about the status of the 15 Cross-Agency Priority Goals initially established in 2014.
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