If failure brings an organization one step closer to success, the Office of Personnel Management is nearer to achieving its goal of outsourcing the agency’s financial management operations. OPM signed an outsourcing agreement with a government service provider in 2005 that it later canceled after both parties realized the arrangement was not going to work.
Now OPM is preparing to issue a new solicitation for financial management services. Later this month, it will ask government and commercial financial services providers for information about their capabilities before soliciting bids in the fall.
OPM officials said lessons they learned from their initial outsourcing attempt could be helpful to other agencies. All federal agencies are required to move to a public or private shared services provider under the Office of Management and Budget’s Financial Management Line of Business consolidation initiative. Its purpose is to enable agencies to more efficiently and uniformly account for taxpayers’ money.
In August 2005, OPM awarded a contract to the Treasury Department’s Bureau of Public Debt to provide financial-management services to OPM. At the time, OPM officials thought the agency’s financial and accounting activities were not so unusual that another federal agency could not handle them. But late last year, OPM terminated its agreement with the Treasury bureau after realizing that the bureau couldn’t handle its requirements, especially its revolving-fund activity.
From that failed arrangement, OPM learned that precisely documenting its financial operations and methodically testing how well a new provider can do the work are essential to a successful outsourcing agreement.
“We had described our processes in what we thought were detailed terms, but there was not nearly enough detail for the Bureau of Public Debt and ourselves to judge whether they could do our work,” said Mark Reger, OPM’s chief financial officer. Going a step further, OPM and the Bureau of Public Debt met in conference rooms to test the capabilities of the bureau’s financial systems. They used OPM’s data and applications to see how well the bureau’s financial management systems could handle them.
“It became apparent during that process that their software in its current version was not going to be able to accommodate some of OPM’s needs — its revolving-fund activity, for example, which for OPM is huge,” Reger said.
Validation through testing is an essential step in moving to a financial services provider, even if it slows the process, Reger added.
If validation efforts show that outsourcing is not going to work, agencies must make a decision. Reger said the most difficult decision for agencies to make is deciding when to cancel an agreement.
Throughout its initial outsourcing attempt, OPM kept the General Services Administration informed about its progress. GSA is the lead agency for OMB’s Financial Management Line of Business initiative. GSA supports OPM in its new direction, said Mary Mitchell, program manager for the initiative and executive director of the Financial Systems Integration Office at GSA.
Andrew McLauchlin, executive consultant at CGI, an information technology outsourcing company, said there are lessons to be learned from the experience of OPM’s outsourcing agreement with the Bureau of Public Debt.
McLauchlin said agencies should be identifying their objectives, linking those to specific outcomes and connecting those outcomes to performance measures that define what a successful outsourcing agreement is.
