OMB issued something similar in 2004 called a due diligence checklist that covered everything from the type of software the shared service provider was running to their planned upgrades to their business model including their pricing structure to their corporate stability.
Sources say this new list will address similar things.
Beth Angerman, OFIT’s director, said her organization has been working on these qualifications since March when Office of Management and Budget issued the memo requiring agencies to look at federal shared service providers first when they are ready to update their financial systems.
“We will be designating those federal shared service providers after an application process, which will happen this fall,” Angerman said Wednesday during a panel discussion hosted by AFCEA’s Bethesda Maryland chapter. “The application process will ensure that those shared service providers meet a list of mandatory criteria to be able to do that.”
She said Treasury and OMB haven’t decided yet how the new qualifications will impact the four current financial management shared service providers: the Interior Business Center, Treasury’s ARC, the General Services Administration and the Transportation Department.
There are several options, from making the four current providers meet only the new functionality requirements to requiring them to prove their worthiness all over again. Sources say other agencies are interested in becoming a shared service provider including the Environmental Protection Agency, the Veterans Affairs Department and NASA.
Sources say the challenge for these possible new entrants into the market is a lack of past performance beyond providing services to their own agency.
Angerman also said agencies that are considered internal providers, such as NASA, which provides shared services only to other parts of the space agency, may still have to consider moving to one of the federal shared service providers.
Now to be clear, this qualification guide is just for federal shared service providers. There is no mention of private sector providers, which leaves many in the community uneasy for a number of reasons.
Private sector must wait
One industry source says there is a growing frustration with the lack of opportunity for industry in the shared services arena, especially since most federal shared services providers depend on industry for a lot of support.
Angerman said the private sector initial role in this consolidation effort will be behind the scenes.
“I think there are a lot of good opportunities for the private sector to help compliment that,” she said. “There are some technologies that we need to address the technology problem. We’d love for the federal shared service providers to be offering the latest and greatest in terms of technology. There’s the whole migration challenge, getting from point A to point B, and helping to lower costs.”
Angerman added OFIT will develop a prices paid list for financial management services. She said it will be ready in April in PDF form.
“What we will be doing is exposing the pricing of federal shared services providers for each of those products and services in that catalog,” she said. “What we think that will be doing, in the spirit of transparency, is helping to identify areas for improvement when it comes to cost. Where can we target to help these federal shared service providers to reduce cost and are there solutions to help us do that?”
As for private sector companies offering services, Angerman said there will be another phase in the future to identify those vendors, but after naming the updated group of federal shared service providers.
Beyond the question of which agencies will provide shared services for financial management, OFIT must answer several other questions, especially around governance and the process to choose and migrate from a provider.
And for some agencies, those answers can come soon enough.
Labor making plans, needs answers
Take the Labor Department. It plans on recompeting its financial management contract, making an award and possibly migrating to a new provider in 2016. GCE currently provides the agency with financial management services in the cloud.
Myrian Myer, the associate deputy CFO for Labor, said the department wants to look at both public and private sector providers for the new contract. But before Labor can look at the public sector they need more information about how the process will work.
“If the price for which [the federal shared service provider] are providing services goes up, you are stuck. If you have a contract with the private sector, you have a say,” Myer said. “With sequestration and funding, there are some things they are working through on what the rules are for funding. But that’s also a major question. We can fund the contracts we deem essential. But if it is another federal agency, what are the rules there? Who gets a say? How’s it going to work? Those things need to be figured out. I know it can be. But they just haven’t yet. I know it’s all in the process of trying to get it done, but it’s not there yet. We need to proceed now or we will be in very deep trouble in 2016.”
She added Labor is looking for the best value, not necessarily the cheapest provider.
Steps to a decision
Angerman said OFIT is working on many of the governance questions Myer and others raised. She said, for example, OFIT already developed a multi-step process any agency looking to move to a shared service provider should go through.
“In the beginning, they need to justify their need. So that needs to be something that based on a whole series of a decision model that has been laid out, and is that need something that is imminent or something that we could plan for and extend over the next five years,” she said. “So assuming that need is granted, they have an imminent need to modernize today, the next step is they need to look at the federal shared service provider market. They need to understand if there is a federal shared service provider who can accommodate them within the timeframe they’ve established. Is there a federal shared service provider who is a good match? That is the first target audience for this whole agency shared service provider pairings.”
If there are no federal shared service providers which meet their needs, then Angerman said customer agencies can look at private sector options. The intent of OMB, however, is to minimize the move to the private sector as much as possible.
The other challenge that needs more attention is moving shared services out of being viewed as an IT project, and under the oversight of the agency’s CXO. The idea is a new financial management system doesn’t just impact the CFO and budget people, but the entire agency.