OPM selects five human resources service centers

Five federal agencies can start competing next fiscal year to provide human resources back office functions to other agencies, the Office of Personnel Management has announced.

The five agencies are the Agriculture Department’s National Finance Center, the Defense Department, Health and Human Services, the Interior Department’s National Business Center, and the Treasury Department.

Consolidating execution of three commonly performed human resources functions within just a handful of service providers will produce $1.1 billion worth of savings over 10 years, according to government officials.

The functions set for migration are keeping track of updates of workers’ personnel files, payroll, and benefits administration, said Norm Enger, OPM director for e-government initiatives. He headed one of six existing OMB-formed task forces, each tasked with finding areas of possible consolidation within a particular line of business.

OPM’s announcement is the latest step in an ongoing effort instigated by the Office of Management and Budget to shift to third party providers a variety of back office functions currently being performed within an agency. Phased transition to a human resources service center is set to begin in fiscal 2006, although the number of agencies will “really accelerate in 2007 and beyond,” Enger said.

The agency is planning an October forum to introduce potential agency customers to representatives of the five newly-selected government service centers.

OMB e-government administrators have said that competition among federal agencies for back office work and participation in that competition by the private sector will ensure that third party providers deliver good service.

Policy for involving industry as a human resources service provider is being developed now at OMB, Enger said. “At the moment, we don’t have a finalized framework of how that will take place,” he added.

As a result, companies interested in competing against federal agencies will not be able to participate in the October forum. The potential loss of business “is not going to be that significant,” Enger said. Agency migration to third party providers will not begin in earnest until 2007, and private sector companies themselves will need to invest time in readying themselves, he added. “At the moment we don’t have private sector firms that are aligned in that manner,” he said.