Strategic retreat

The agreement between the Office of Personnel Management and the Bureau of Public Debt’s Administrative Resource Center to cancel their relationship under the financial-management Line of Business initiative is not a story of another failed government contract.

Just the opposite. It could prove to be a breakthrough in federal project management and a valuable lesson for other agencies.

OPM determined that ARC could not fully meet its requirements and decided to recompete the contract instead of spending millions of dollars to force the proverbial square peg into a round hole.

“Both organizations came to the understanding that, with the Bureau of Public Debt’s configuration of Oracle, it would be better for us to look at an alternative source,” said OPM chief financial officer Clarence Crawford. “This was just part of our due diligence. We saw issues, we talked to them and looked at alternatives.”

Developing an RFP

OPM will now hold a competition between other federal shared-services providers and the private sector, Crawford said. The agency is working with the Office of Management and Budget to develop a request for proposals. Crawford would not give a timetable for releasing the RFP.

OPM in August 2005 became the first large agency to sign with a shared-services provider. In the 14 months since they signed a contract, OPM has spent about $400,000 developing the requirements and conducting pilots with ARC, Crawford said.

OMB officials and others applauded the decision not to move forward. And some observers say it is a validation of OMB’s insistence that agencies fully compete financial-management services instead of just looking at the public-sector providers’ skills and choosing one.

An industry source said the Housing and Urban Development Department wanted to move to the Federal Aviation Administration for financial management, but OMB forced a competition. HUD issued an RFP Oct. 31 to integrate its accounting and financial-management functions by moving core legacy systems to Oracle’s PeopleSoft suite of financial-management applications. Proposals are due Jan. 8.

Karen Evans, OMB’s administrator for e-government and IT, said this is an example of good IT management.

“It is always the agency’s decision, and that is the way we structured the guidance,” Evans said after a breakfast meeting on the financial-management LOB sponsored by IBM Corp. and SAP of America Inc. of Newton Square, Pa. “OPM had enough information to make the right decision.”

Other agencies—the Labor Department, for instance—have gone down a similar path where their requirements were clearer, Evans said.

The Environmental Protection Agency, which is expected to make an award before Dec. 31, has been evaluating proposals since March to ensure it has its requirements right.

“As the model matures, we will see better and better procurements,” Evans said.
OPM officials still were defining their requirements after making the decision to hire ARC.

And it was during their requirements phase that both agencies realized there might be a problem, said Michelle Yanok, ARC’s director of franchise services. ARC’s other clients include the National Archives and Records Administration, the Mint and the Executive Office of the President.

OPM and ARC conducted “conference room” pilots to determine whether the system would work.

“The conference room pilot worked through the requirements and tested the system to see how it handled functions like accounts payable,” Yanok said. “We do this with every customer.”

Giselle Jones, OPM’s director of financial systems modernization, said the agencies conducted about 15 sessions in April and May, looking at functions such as procurement, requisition, posting to the general ledger, accounts receivable and reimburseable funds.

“We defined scenarios and brought in subject matter experts to evaluate the scenarios,” Jones said. “We looked at the outputs to see if the requirements were met.”

ARC’s Oracle Federal Financial System 11i did not meet OPM’s needs for reimbursables, meaning OPM would need a customized application. Crawford said a customized interface would be too costly because of development and maintenance costs.

Several years ago, OPM built a middleware interface to its mainframe financial system to move data.

“We want to buy a commercial application that would meet the lion’s share of our major requirements,” Crawford said. “With a custom application, every time it needs to be modified, the burden falls on us, as does the additional cost. We didn’t want that burden.”

Yanok added that she believes good things came out of the prework the two agencies did. “We helped the customer, and we helped ourselves.”