OMB begins to clarify industry’s role in shared services

In the almost three weeks since the Office of Management and Budget released its shared services strategy, one of the bigger questions that remains has been how does industry fit in the equation?

Under the Bush administration’s Lines of Business initiative, contractors could qualify to be a shared service provider and bid on solicitations for financial management or human resources services.

While the Obama administration’s shared services strategy tries to reinvigorate the agency-side of LOB effort, vendor participation remains unclear.

Tim Young, a senior manager with Deloitte federal services and a former OMB official, said the new strategy is more about changing the culture of agencies and industry than changing technology. But he said something is missing from the document.

“There doesn’t seem to be clarity in my view as to how this strategy will be executed and institutionalized,” he said. “In essence, how will it be enforced governmentwide for consistency?”

That consistency across agencies is dependent, at least partly, on the incentives or disincentives for vendors to willingly participate. If industry doesn’t see or understand its role, institutionalizing shared services will not happen.

Industry’s role gaining clarity

As agency deadlines begin to ramp up over the next three months, OMB is beginning to clarify industry’s role.

Unlike the former LOB initiatives where public and private sector providers existed, OMB is not differentiating between the two, said Scott Bernard, the federal chief architect at OMB.

Bernard said the strategy breaks down the roles in a shared service set up: the managing partner, the consumer or agency and the supplier.

“It’s my opinion in many cases, not all, but in many cases the supplier role will be filled by an industry provider,” Bernard said Thursday during a panel discussion sponsored by AFFIRM in Washington. “There is an increased emphasis on shared service approaches to commodity IT, support IT and mission IT and as we do more in the shared services sector, there’s, I think, an increase in opportunity for industry.”

He said vendors need to look holistically at the opportunities to provide shared services and not just in the context of their current contracts. Bernard said the relationships with government will be different under the shared services approach.

Federal Chief Information Officer Steven VanRoekel is working with the Office of Federal Procurement Policy to develop contracting templates or approaches that give departments more agility to opt in or opt out. Bernard said this would help agencies switch from poorly performing contractors more easily.

Andrew McMahon, the PortfolioStat lead for OMB, said the administration is not only agnostic about who provides the shared services, but with the new technology that has come about over the last three or four years there could be different levels of providers. This also is the reason vendors have more opportunities.

“Within the technology space right now, we have a unique opportunity where we are presented with new technologies — cloud computing, APIs and Web services — where we can provide shared services and not lock ourselves into a solution that is a prescribed set of requirements for every single agency,” he said. “The sharing doesn’t have to occur at the services level. It can occur at the platform or infrastructure level as well.”

He said some of the challenges agencies have had in the past were with developing and adhering to the requirements of the shared service. But with cloud or APIs or Web services, McMahon said agencies will overcome the problems of the past because the new technologies are more agile.

PortoflioStat sessions are the tool

Agencies will use the PortfolioStat sessions to figure out where the opportunities exist.

Bernard said the strategy is the guidance and PortfolioStat is the tool to implement the guidance.

“We are just in the data collection phase,” McMahon said. “We will meet with deputy secretaries and the C-Level executives to discuss the direction the agency is going and where are the opportunities to share.”

In the PortfolioStat memo issued in April, OMB set out a series of deadlines to begin the move to shared services.

OMB’s first deadline, however, came before PortfolioStat or it issued the shared services strategy. In the 2012 IT budget passback language sent to agencies in December, the White House told agencies to pick by March 31 two commodity IT functions to move to a shared service provider by Dec. 31.

Bernard said OMB received every agency’s plans, but it had to go back to some and ask them to reconsider as the agency already had migrated to the provider so they weren’t new or they weren’t what OMB was looking for.

Bernard said in a month or two OMB will make public the list of agency’s functions to be migrated to shared service providers.

Four deadlines this summer

Agencies have until the end of May to submit to OMB a high level portfolio survey of their internal lines of business, where they can identify potential opportunities for consolidation to a shared service provider.

Then by June 15, agencies must send to OMB a list of commodity IT areas ripe for consolidation and by June 29 a draft plan to consolidate commodity IT.

McMahon said OMB will meet with agencies about their plans in July and by Aug. 31 issue a final consolidation plan.

“We expect this to be a reoccurring annual process,” he said. “We expect agencies to evaluate where they were the year before so they can measure where they are in the current year and point toward becoming a more mature enterprise as they manage their IT portfolio.”

McMahon said getting participation and support from the deputy secretary and CXO community is the biggest factor in success.

“By elevating the conversation to the highest levels of the agency, and when I say that I mean the deputy secretary, the official who is in charge of managing the operations of the agency, and highlighting the inefficiencies and duplications and asking the agency to do the work to tighten the bolts in their own house will be a really useful tool,” McMahon said. “Having a meeting with Steve [VanRoekel] and the other policy officials in OMB and the deputy secretaries and C-Level executives that will be a really unique and amazing opportunity to bring visibility to show how IT can be used as a strategic asset. I think the deputy secretaries once they see this work, they’re going to be extremely excited about executing on it because it makes a lot of sense to do this work.”

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