Federal shared services: Why legislation is necessary

Why is legislation necessary to advance shared services? Doesn't the executive branch have all the authority it needs?

The best answer is captured in Comptroller General Gene Dodaro's observation: "Successful management reforms in the federal government need to have legislative underpinnings so they have permanence and consistency over time, no matter who's in the White House or who's leading departments and agencies."

The history of shared services proves his point. In 1983, the Agriculture Department's National Finance Center opened its doors to government customers outside USDA for payroll services, but it wasn't until 2009 that the Office of Personnel Management declared victory when the entire government was served by four cross-government e-payroll providers.

Five presidential administrations spanned those 26 years, each with its own management agenda. Shared services and e-payroll were dropped, rebranded or lost in the shuffle at each transition. Without legislation providing a bridge from one administration to another, shared services languished as a non-priority.

Management legislation drives progress by giving agencies permission to do things and by pushing the bureaucracy to get things done. Pushes are often more important than permissions. Landmark bills such as the Chief Financial Officers Act and the Clinger-Cohen Act empowered CFOs and CIOs, respectively, by giving them new structures and authorities, but most of the power was in the push to implement best practices defined in the legislation.

Legislation can accelerate shared services by creating a vision of a modern future state and directing the executive branch to pick up the pace in defining key roles and responsibilities, improving governance, executing a road map and schedule, setting service standards and metrics, creating a real shared-services marketplace, encouraging private investment, promoting competition to drive scale and innovation, commercializing commodity transactions, and empowering customer agencies to choose their providers.

The good news is that the Obama administration is already doing many of those things. Putting the requirements into law would ensure continuity and sustainability under future presidents.

The administration needs permissions, too. Federal Shared Service Provider business models date back to the 1930s and 1940s and were last updated in legislation in 1994. FSSPs are intended to operate on a cost-recovery basis, and they cannot charge customers more than their own cost. Although most have authorities (on paper) to accrue reserves for contingencies and future modernization needs, congressional appropriators tend to oppose the use of reserves, which they view as hoarding money for unauthorized purposes.

Without the ability to finance modernization organically -- and without the clout to compete with the higher-priority mission needs of their host agencies for scarce appropriated funds -- FSSPs get stuck in antiquated, sub-standard platforms with unhappy, captive customers. Legislation should authorize business-like investment practices by all FSSPs and encourage their responsible use. Concerns about abuse of reserves could be addressed by transparent business practices, reporting, audits and oversight.

Another good question is: Why now? The stars are aligned as never before. The Obama administration appears supportive. Strong advocates at the Office of Management and Budget and key agencies are pushing the envelope and want to ensure a clean hand-off at full speed to the next administration. The Republican majority in Congress needs to show that it can govern. There's palpable energy in the industry and good-government community around a vision of a dynamic, competitive, public/private marketplace in which competition drives commercial investment, scale and innovation. And there's hunger in the country for bipartisan action on big national challenges.

Last questions: If not now, when? If not us, who?