Agencies should embrace private outsourcing of HR services: panel

Federal agencies should get out of the human resources business and focus more exclusively and intensely on performing their core missions, according to some government and private-sector officials.

Speaking at the FOSE trade show in Washington, a panel of Bush administration and private-sector representatives said agencies could free up considerable amounts of time and money if they outsourced their HR services to either the private sector or another agency under the Lines of Business consolidation initiative.

'The government shouldn't really be in the HR/payroll business,' said Jeffrey Zack, director of enterprise solutions at Northrop Grumman Corp., which performs HR functions for the Homeland Security and Treasury departments, as well as an agency within the Defense Department.

Tim Young, associate administrator of E-government and IT at the Office of Management and Budget, said OMB is urging agencies to consider conducting competitions for the acquisition of IT services for HR and financial management services functions, and should consider both public- and private-sector providers to select the most cost-effective alternative.

Through its Lines of Business consolidation initiative, OMB is selecting public and private organizations to serve as centers of excellence and perform certain administrative tasks for other agencies. Young said OMB wants agencies to conduct fair and open competitions for these services so they can then focus attention on their core missions.

'We want improved focus on agency core missions,' Young said. Agencies should spend 'more time and resources on fulfilling' their own responsibilities.

While most federal agencies are familiar with the public centers of excellence under the LOB initiative, Young said they also should look outward to the private sector as well. While admitting that the public-private competitive framework 'is not the most popular model,' he said the government 'is not in a position to sustain unnecessary duplication of back office IT investments.'

OMB is employing a 'carrot and stick' approach as it encourages agencies to embrace the LOB initiative, according to Young. The carrot, he said, is that agencies will have more options, access to higher quality service, decreased overall cost and lower risk if they sign up with a public or private center of excellence.

The stick, Young said, is OMB's budget authority. When agencies submit their budget requests and business cases, if certain programs 'are not aligned in a way that supports the LOBs,' OMB will have something to say about it. 'We want agencies to adopt this,' Young said.

Zack said it will take time for many agencies to get comfortable with outsourcing processes such as HR and financial management because they've been doing it for so long. Some of the newer agencies, such as DHS and its Transportation Security Administration, are quicker to embrace the concept because the agencies themselves were established on short notice, he said after his speech.

'Over time, agencies can get better service at a lower price' if they outsource, Zack said. 'I think it'll happen over time, but it'll take awhile.'

TSA, for example, signed a multiyear contract with Accenture LLP of Chicago in 2002 to operate a significant chunk of the new agency's HR services, including personnel actions, payroll processing, benefits and leave, said Lisa Johnson, executive director, processing systems at Accenture.

Johnson said TSA still performs human capital strategy and policy planning, work design and other functions, but the bulk of the day-to-day, routine HR tasks are now serviced by her company.

'What TSA has done is very much in the spirit of the Lines of Business initiative,' she said.

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