Labor's deal could prove financial LOB's worth
Five-year contract is first award of its kind to a major agency
- By Jason Miller
- May 01, 2006
The theory behind the Financial Management Line of Business Consolidation initiative is that an agency could outsource, at a minimum, the hosting of its hardware and software, save money and focus on its core mission. But until now, a major agency had yet to prove this premise.
The Labor Department became the first large agency to jump in with both feet when it awarded a five-year contract to Mythics Inc. of Virginia Beach, Va., to provide financial-management hosting, operation and maintenance services, which includes hardware, software, network and patching. The firm fixed-price contract is worth $5.3 million over the one base year and four one-year options.
'The contract includes everything up to transaction processing,' said Valerie Harris, Labor's acting associate deputy chief financial officer. 'We always had a company providing hosting services, but we are buying update and upgrading services for the hardware and software.'
Mythics beat out two other offerers, the Transportation Department and IBM Corp., Harris said.
'When we looked across the board at the three vendors' offers, the services were equal so we looked at other issues,' Harris said. 'Price then played a big role.'
Another factor was that Labor set up the service-level agreement so that if Mythics did not meet its performance metrics, it would have to rebate part of its fees.
Labor will upgrade to Oracle Corp.'s Federal Financials software from a decades-old mainframe system run by Sungard Data Systems Inc. of Wayne, Pa., Harris said. Labor will begin transitioning to the new system immediately, and officials want to be finished Sept. 30.
The department's decision to outsource the hosting will save it a lot of money compared with similar agencies and demonstrates the value of the LOB, according to one government official familiar with the financial management LOB.
'Labor will pay less than one agency running a similar, modern financial management system in-house, even though Labor has six times the employees and 100 times the budget,' said the official, who requested anonymity. 'Another larger agency also running a modern system in-house is spending 10 to 20 times what Labor will spend.'
Besides Labor, the Environmental Protection Agency will award a financial management contract to a public- or private-sector center of excellence this summer.