Shared services: Getting past the sticking points

Shared services have long been touted for their potential cost savings and operational efficiencies, though the approach has been slow to gain traction in the federal government. However, the Trump administration's executive order on cybersecurity and the recently passed Modernizing Government Technology Act both emphasize the use of shared services, and those mandates, coupled with advancements in technology, are starting to intensify the discussion.

By pooling the procurement of common support services, agencies could free up money for mission-critical activities, but shared services raise thorny questions about governance, budgets, acquisition policies and the role of industry.

On Dec. 6, FCW gathered a group of federal leaders to talk about how agencies can move to the next phase of shared services. The discussion was on the record but not for individual attribution (see below for a list of participants), and the quotes have been edited for length and clarity. Here's what the group had to say.

Can agencies be successful service providers?

One executive noted that the government started using shared services back in the 1950s, and the concept has been gaining ground lately despite the challenges. "Right now, we have a perfect storm happening, which is the right catalyst for talking about what those challenges are if we're going to move forward in an effective way. We now have everybody in the conversation, which we haven't had before."

However, others were quick to point out just how daunting some of those challenges are. "We in government spend a lot of time selling the concept to make sure that agencies jump on board," one participant said. "We're already on board. We want to do it. But I don't believe that we, as a government, are mechanically prepared to do it."

Others cited the government's acquisition system as a serious impediment. "The acquisition framework today does not allow the flexibility of a service‑based model," a participant said. "For example, one of the key values of shared services or software as a service are the ebbs and flows of economy. If I'm paying $25 today for a license but tomorrow it drops to $7, why can't I renegotiate without re‑competing and embrace those economies of scale? Granted, there are risks to ebbs and flows, but at the end, technically everything prospers."

Another participant agreed, saying: "In my opinion, agencies don't have the freedom and flexibility to behave like the private sector would. A federal shared-services provider has to go through the same personnel process that I have to. There are rules and regulations about acquiring products. They have to manage their budget the same way I do. They don't have multi‑year budget systems."

The participant added that "if the government, through statute, would give the shared-services providers even two‑year funding and the ability to hire outside Title 5, they could staff up and down and invest through a procurement process in their infrastructure."

Indeed, many participants commented on the need to have more flexibility built into their budgets — or perhaps a whole new way of approaching the budget-formulating process.

"If we can buy HR systems and we can buy finance systems, I don't need money to build them," one participant said. "Why can't we leverage industry dollars to make the investments and move the government off a capital expenditure model to an operating expense model? We can avoid the one‑time spikes if we distribute that investment over time into an opex model."

Another executive added: "We need to develop a unified formulation methodology for IT planning and, more important, shared-services adoption. The idea that we're going to claim $100 million in savings by one agency is unrealistic. However, if we look at it in the consolidated buying power of the federal government, that's where the savings are going to fall out."

Ultimately, one executive said agencies have no choice but to overcome those obstacles. "If you're going to be a self servicing agency, then you have to be measured at the same level of service performance and expectation as any other vendor. Being able to perform at a handicap because we're government is no longer an excuse."

However, others challenged the notion that agencies don't have the flexibility to become shared-services providers and said the problem instead is that there is no consistent approach to franchise funds, which support the consolidation of common administrative support services.

"What I as an owner of a franchise fund define as my operating cost is different than what you as the owner of a franchise fund define as your operating cost," one executive said. "Who is the responsible party for normalizing the definition of 'operating'?"

A standard service catalog

The question of who is in charge was a recurring one. Some argued that the Office of Management and Budget is the logical choice, though its role is not clear. One executive said it was a matter of "requiring versus advising, mandating versus suggesting, standardizing versus guidelining. Right now, shared services are thriving because of the tolerance and the vision of the agency leadership today."

The executive went on to say OMB, the General Services Administration and the Office of Personnel Management must continue working together to define policy, mandates and standards for the adoption and funding of governmentwide shared services.

"If you want to push your services, then you have to define those words and those activities in a flexible way that protects the agencies that take advantage of them," the executive said. "You don't want to have GAO do an audit and find you are not in compliance with something. You should be able to say, 'Well, here's the definition from OMB. We're in compliance.'"

The group agreed on the need for standardization and baselines for shared services, with one saying his agency's needs are not unique, "yet when we come to the table, we have to have everything exactly the way we want it. We need to take a hard look at ourselves and say, 'If I can get 80 percent through a standard process, do I really need that extra 20 percent? Can I just buy that part by the drink?'"

That might be easier said than done. "We have systems in whatever area — whether it's HR, finance, procurement — where we have grown our own unique processes that become cemented in," the executive said. "We need to bring people in who are willing to break that mold and challenge the expectation and do things a little bit differently."

Many participants cited the work of the Unified Shared Services Management office in developing flexible baselines in the form of the Federal Integrated Business Framework, which is a default governmentwide service catalog "developed by the agencies, for the agencies," as one participant put it.

"When the government gets out of the business of giving industry 700 IT requirements, we can let the vendors worry about infrastructure, platform and software," another participant said. "All we do is start measuring success based on the expected services vendors are supposed to be delivering. There's no reason we can't standardize a service catalog across supporting functions in the governmentwide value chain."

Another executive added that "agencies should be enabled to focus on their core competencies. We should be getting out of the infrastructure business. We should be getting out of the platform business. We should be getting out of the software business and purely focus on being a consumer or customer of said services. The question is how do we do that without releasing the reins?"

Other participants expressed similar concerns, with one saying, "The operating governance is the long pole in the tent that's a new line of business. The question is: Can someone from the federal government come to the table as a center of excellence to do operational change management for a shared-services environment?"

Allowing 'procedural chaos'

In addition, some participants cautioned that technology is moving so quickly that agencies might end up automating a process regardless of whether it is well designed or adheres to agreed-upon standards.

"In my experience, we automate poorly designed processes all the time," one participant said. "My fear is that at some point, when that process gets stressed, the process breaks."

Another executive had a different take on the issue. "There's no such thing as a perfect process. Things change. Two years in, that process will not be perfect. If you get it fundamentally right, then you could move forward."

Furthermore, emphasizing perfection and avoiding criticism at all costs can be counterproductive. "I've been personally blasted for rolling out stuff that doesn't meet every single key performance parameter," the executive said. "Instead of blasting the 10 percent shortfall, why don't you celebrate the 90 percent success? Even if you got to 100 percent, by then the rules have changed. You're already behind somewhere else."

Others agreed, but one executive advocated letting go of the focus on processes altogether. "The reality is that for effective shared services and effective service delivery to become institutionalized, we've got to allow a little bit of procedural chaos to ensue based on the baseline. Transformation is driven by chaos. If we get to a point where we're no longer focused on process, we can tell vendors, 'Produce this service.' Then whether Step A comes after Step B but after Decision C is no longer relevant to the service being delivered or its output."

A new public/private partnership

Many participants noted that shared services require a different kind of support from industry. "There's a balance between the role that industry plays and the role that government plays. Those roles have to be clarified," one executive said, adding that companies need to "stop letting us tell them what we think we want because we never really know."

Another participant agreed. "We need somebody to be able to say, 'Are you sure? Why is that a need? What are you not going to accomplish if you don't have that?'"

Some members of the group said they'd like to see companies work together to meet the government's needs. "What I ask is that industry starts talking to industry," one executive said. "Figure out who's already made investments in things and what's working today, and partner in a way that's going to bring value to the federal government."

One executive, however, pointed out that "the acquisition model that all of us contributed to drives toward a winner‑take‑all, me-versus-you mentality. There's not an incentive to create this kind of discussion."

Therefore, another participant concluded, "the only possible way around the dilemma is to figure out a different public/private partnership model because money is simply not going to be available."

"Companies don't have to build a core finance system because they already exist," one executive said. Agencies could tell companies what they need that doesn't already exist, "then businesses partner together and say, 'This company's going to offer the core. I can build the federal thing you need, and together we actually have a solution.'"