HUD's move to a center of excellence for human resources sets a template for other agencies to follow
- By Jason Miller
- Apr 21, 2006
HUD's Sharman Lancefield flanked by Charles Butler, left, and Denis McGurin.
On the surface, it seemed an easy decision for officials at the Department of Housing and Urban Development: Migrate to a shared-services provider for human resources instead of spending $15 million to $18 million over a six-year period to build their own system.
The reasons were obvious. Considering time required to implement a new system, its total cost and the unspoken pressure from the Office of Management and Budget to use shared services, it clearly made more sense to outsource instead of going ahead with the PeopleSoft HR system they were six months into. But as many agencies will find out over the next few years, it's not that simple. No matter how many times you draw the line down the middle of the paper and list the pros on one side, cons on the other'and fill up the pros side'the path from paper to reality is full of hidden pitfalls.
But with OMB expecting more agencies to migrate over the next few years to shared-services providers'otherwise known as centers of excellence'for HR and financial management, HUD's successful migration to the Treasury Department's HR Connect presents a valuable case study.A long six months
'This was a daunting task,' said Sharman Lancefield, HUD's deputy assistant secretary for operations. 'It was a long six months and a lot of work to get there. We hit a lot of roadblocks, but nothing we couldn't overcome.'
Karen Evans, OMB's administrator for IT and e-government, has said at least two major departments will migrate in fiscal 2006 to a financial COE. The Labor Department and the Environmental Protection Agency currently are reviewing proposals from private- and public-sector COEs, and are expected to make a decision in the coming months.
Government officials said the Justice Department is considering issuing an RFP for financial management, and Labor is expected to issue an RFP for HR management later this year as well.
While OMB will not mandate that agencies move to COEs'Evans has said it is up to them when their systems need to be refreshed'department CIOs, chief financial officers and human capital officers will have to make a strong case to the administration to build their own systems.
HUD, with 10,000 employees, is the only major agency to migrate its entire HR management system to a public-sector COE.
Its decision to give control of hardware, software and day-to-day operations and maintenance of its HR system to Treasury came from necessity. Denis McGurin, director of HUD's office of administrative services, IT support division, described the agency's situation as '17 stovepipe systems, some so small they were more like little hibachis than stoves' that did not integrate data and relied on far too many manual processes.
After hiring a systems integrator to implement a Peoplesoft HR system in 2003, HUD officials were concerned that they would lose money or be forced by OMB to stop the project in midstream and move to a COE as the Lines of Business concept emerged, Lancefield said.
By April 2004, HUD officials approached Treasury about becoming their shared-services provider.
'We were designed with a lot of capability, and they were looking, and we were too,' said Lynn Eddy, associate CIO for HR Connect.
'We already were doing interagency HR work for the Secret Service and the Bureau of Alcohol, Tobacco, Firearms and Explosives, which put us ahead of the curve to be well-positioned to meet their needs and be [a COE] as the program matured,' Eddy said.
By Oct. 2004, HUD and Treasury senior executives and, most important, OMB gave their blessings for the interagency agreement to move forward. OMB did stipulate that the project must come within 10 percent of cost and schedule plans.
There were a number of reasons to consider Treasury, said Charles Butler, director of HUD's Office of Field Coordination and Technical Support.
'They had a proven track record with HR Connect,' he said. 'They had a project management team and a deployment track record in six months, which is was our time frame.'
And, Lancefield said, Treasury already had developed a data exchange interface with HUD's payroll provider, Agriculture's National Finance Center.Shaping the data
'HUD was on a different database platform than we are, so we had to configure the file, but that is all done automatically by the system,' Eddy said. 'We have a daily feed to NFC and then we get a file back and compare it to the information we sent. And then we resolve any errors if necessary.'
Another important factor for choosing Treasury was that it ran PeopleSoft software, on which HUD had just spent a few hundred thousand dollars for licenses earlier in 2003, McGurin said.
'HR Connect also is federalized, so the policy is there, and we weren't going to be a beta site for them,' Butler added.
In fact, the experience of HR Connect eased HUD officials' concerns, Lancefield said. 'They told us how to go about it and how to do it in six months,' she said. 'We were comfortable we would have a successful project, which we did.'
Eddy said that is a key point for any agency customer looking for a COE. She said most shared-services providers are required to offer basic capabilities and some discretionary ones, but what will differentiate the COEs will be how they help their customers migrate to the new system.
'We have a full-time staff member that walked HUD through their current business processes to understand how they operated and how they will operate in the new environment,' Eddy said. 'Then we looked at how the investment delivered on what we said it would and, if not, what is needed to make it complete.'
Treasury also provided HUD with a set of processes and methodologies for data conversion, data cleanup, and business process reengineering and training.
'For us, this is pretty turnkey,' Eddy said.
Butler added that in two to three weeks, HUD and Treasury created a skeleton project plan that gave them confidence about the migration.
Another confidence builder was that both agencies created parallel project teams with members from the CIO, CFO and HR offices. This ensured that the right people were talking about the same topics.Check and double check
Treasury asked Lancefield's group to fill out a questionnaire addressing technical and administrative matters such as the agency's network, target architecture, how much bandwidth it had, desktop PC configurations, points of communication and privacy issues. This gave Treasury the details its employees needed to make certain the system would run on HUD's desktops and network.
Throughout the emergence of the LOB concept, many agencies have expressed concern about developing the correct service level agreement metrics and what would happen if one party didn't live up to its end of the bargain.
Both Lancefield and Eddy said this issue proved to be not that big a deal. McGurin said it was more important to enforce SLAs 10 to 15 years ago, but that system latency is not a big problem anymore.
Treasury has an internal metrics program that does self-assessments to develop performance standards, which then go into the SLAs, Eddy said.
'It was relatively easy to put together something that was credible,' she said. 'As the LOB matures, SLAs will be driven by OMB. We provided our SLA to OMB as a model to be used by others.'
As the implementation progressed, HUD worked on several paths at once. From training to communication to data conversion to figuring out how to securely communicate with Treasury, Lancefield said her office tracked the timeline closely. While they never felt the project wouldn't succeed, they did a lot of 'praying that one day it would all come together.'
The final pieces, McGurin said, involved figuring out how to securely exchange data between HR Connect's and HUD's systems. He said Treasury had a lot of experience exchanging information within their Intranet, but not a lot outside it.
'It took a lot of testing, because if someone on either end change[d] a switch or a router it could bring us down for the day,' McGurin said.Down the stretch
Treasury and HUD began acceptance testing and went through 10 to 12 mock data exchanges with NFC and HR Connect leading up to the 'go-live' date, Lancefield said.
HUD officials turned on the new HR system one day earlier than expected and spent 2 percent over budget, which Lancefield said was due to a change order asked for by agency management.
'It went so smoothly when we turned on the system, we were wondering if we forgot something,' McGurin said.
In all, it cost HUD just under $1 million to migrate to HR Connect in six months, and it will cost the agency about $1.6 million a year for operations and maintenance.
And what about those 17 hibachis?
HUD had to keep them running, but McGurin said he expects to turn at least seven of them off completely by April 2007 and slowly shut down the rest of them over the next few years.
'If you compare where we are now, a year later, to where we would have been if we had done our own system, there is no comparison,' McGurin said. 'We could have paid more than $10 million and taken several years to develop a HUD-unique system, or paid less than $1 million and taken six months to implement an already-built system.'