Federal shared services
The federal government spends billions of dollars each year on non-mission-focused functions, processes and systems related to agencies’ back-ofﬁce operations — such as ﬁnance, HR, IT and acquisition. The absence of a government-wide, corporate view and supporting strategy for common back-ofﬁce services has resulted in widespread duplication of effort, resources and capital investments.
In order for government to work better for the people, the government needs to improve back-ofﬁce operations to run more efﬁciently and effectively. Many agencies operate in budgetary environments where funds are pulled away from mission programs in order to support the rising costs of back-ofﬁce operations. Additionally, the new Administration is asking agencies to evaluate opportunities for program and service consolidation and elimination of duplicative functions, with emphasis on back-ofﬁce functions.
All of these factors will increase demand for back-ofﬁce shared services across the federal landscape. To better manage their budgets and achieve cost savings, agencies will look to leverage the back-ofﬁce systems, business processes and staff of other agencies who can operate them at less cost. In addition, agencies will continue to look internally to consolidate duplicative or overlapping functions to achieve scale economies, and may look to low-cost operating locations in order to reduce expense.
Increasing challenges related to the current shared services operating model
The current supply of back-ofﬁce shared services in the government is limited and challenged to meet the existing demand, let alone the increased demand that is expected as agencies continue to divest back-ofﬁce operations.
Agencies are looking for opportunities to consolidate back-ofﬁce operations, but there are currently only a handful of Ofﬁce of Management and Budget (OMB)- and Ofﬁce of Personnel Management (OPM)-designated mission-focused agencies that are authorized to provide back-ofﬁce services and operations to other agencies. Additionally, these current models are constrained by their operating environment and have limited overall potential to expand in order to maximize the beneﬁts of federal wide back-ofﬁce consolidation.
The primary issue with the government’s current shared services model lies in positioning mission-focused agencies to provide non-mission-focused services to other agencies. This approach creates competing priorities between the parent agency and the shared services operations. As part of the parent agency, shared services enterprises are continually impacted by day-to-day issues and notiﬁcations, making shared services enterprise planning and incentives for improvement nearly impossible.
Alternative operating models to serve the federal government’s needs
The commercial industry has faced similar challenges and in response has pulled back-ofﬁce functions and processes outside of their businesses to centralize them into separate shared services operations. Government should consider a variety of operating models to increase the capacity in the market to support increasing demand for back-ofﬁce systems and processes. Potential beneﬁts include:
- Signiﬁcant cost savings and reduced size of government
- Increased agency focus on the core mission rather than back-ofﬁce operations
- Improved effectiveness of customer service and operations
- Improved controls and risk management
- Increased jobs outside of Washington, DC, as shared services migrate to lower-cost regions
Shared services operating model components
Vision and strategy
Define business drivers, strategic goals, guiding principles, scope, content for shared services sites, and engage stakeholders.
Sourcing and locations
Define organizational footprint to reach customer and realize scale efficiencies; define location restrictions, impact to org design, sourcing agreements by region.
Process and controls
Define operating model process and controls for in-scope business processes, activity placement analysis and requirements.
Technology and data
Define required enabling technologies and impacts to the current ERP/other systems.
Define ‘To Be’ organizational structure, governance, reporting, hierarchies, job leveling, human resources and people frameworks.
Develop and manage a transition action plan: resources, transition objectives and outcomes.
Communications and change management
Essential in a shared services project due to the potential complexity and people impact.
Translating new operating models into reality
The current shared services supply environment will be unable to meet the increasing demand for back-ofﬁce consolidation. The government needs to act now to get out ahead of increasing the shared services operations supply and eliminate the constraints that currently hold shared service enterprises back.
An evaluation across the federal landscape should be conducted to determine where alternative operating models should be considered. We recommend a variety of operating models be tested quickly and simultaneously in the federal market to drive innovation and meet demand.
Learn more in our full report, Evaluating alternative operating models for government-wide shared services