Procurement

Financial management and freedom of choice

Michael Hettinger

Mike Hettinger is vice president of the Public Sector Innovation Group at the Software and Information Industry Association.

At a time when governments are increasingly looking to private-sector solutions to improve efficiency and solve complex challenges, the Treasury Department appears to be headed in the opposite direction when it comes to shared services, with potentially disastrous results.

In April, the CIO Council published the Federal Shared Services Implementation Guide, which establishes a strategy for moving agencies to shared-services environments for business areas such as budget formulation, human resources and, notably, financial management. Charged by the Obama administration with developing an implementation strategy, Treasury's Office of Financial Innovation and Transformation (FIT) developed a plan to streamline and consolidate financial management systems by tapping federal shared service providers (FSSPs) almost exclusively.

Although consolidation might be a good idea, major concerns exist about the viability of the chosen approach.

Representatives from the Software and Information Industry Association and its member companies met with Office of Management and Budget and FIT officials to understand how their effort would improve upon previous attempts, such as the Lines of Business initiative, which ultimately failed in 2006. So far, however, those conversations have led to more questions than answers, particularly concerning the role of commercial providers in the new shared-services arrangement.

Consolidation is a noble goal but not when it flies in the face of efficiency and rationality.

In fact, OMB and Treasury recently announced plans to "assign" all agencies to an existing FSSP, deviating from the April memo and leaving commercial providers completely out of the picture. That action makes little sense in theory and is not feasible in practice. It fails to recognize the complexity of the current federal financial management system environment.

Today only a handful of the agencies covered by the Chief Financial Officers Act receive their core financial management services from an FSSP, and most of those agencies are themselves FSSPs. Even Treasury, which is implementing the initiative and has its own shared-services center, does not host the core financial management systems of three of its largest bureaus. Presumably, those bureaus were deemed too large or complex to use Treasury’s center or another FSSP.

Most agencies are running their own financial management systems powered by commercial software, and those systems largely work as intended. And we know that commercial software has the right capabilities because even the FSSPs use commercial software as their backbone.

By virtue of their size, large federal agencies cannot simply pick up their financial systems and move them to an FSSP. If the Department of Homeland Security or Defense Department tried, the provider would be completely overwhelmed by the complexity and number of financial transactions generated on a daily basis. The cost of migration would far outweigh any projected cost savings.

Consolidation is a noble goal but not when it flies in the face of efficiency and rationality. The administration needs to wake up to the fact that an agency like DHS, with a $40 billion budget and 22 component agencies, is already operating at such a large and complex scale that moving it to a new FSSP would be an unwieldy, expensive mess.

Instead, the administration should take a step back and focus on its original objectives of boosting efficiency and saving money. To start, officials must determine whether there is any evidence that we are currently wasting significant money on our financial management systems. And because commercial software powers the federal government's financial systems -- even the FSSPs -- the private sector must be included in the reform process.

Ultimately, agencies need the freedom to choose the financial management solution that is best for them. They should not be bullied into switching to an FSSP that likely won't meet their needs.

2014 Rising Star Awards

Help us find the next generation of leaders in federal IT.

Reader comments

Fri, Dec 6, 2013 Peter G. Tuttle, CPCM

Mr. Hettinger's article is on target. The sentence about OMB and FIT assigning agencies to Federal SSPs is very disturbing since commercial providers would be frozen out of the marketplace. If true, this move on the part of the Administration would essentially equate to the creation of government-sponsored monopoly or something very much like it. I sincerely doubt narrowing sources to only a very few Federal SSP’s (and their back office system providers, who would be locked in to lengthy contracts) would actually create any “real” savings for the taxpayer. Mr. Hettinger’s suggestion to “…take a step back and focus on its original objectives of boosting efficiency and saving money” is appropriate. We can’t afford any more large programmatic disasters.

Fri, Dec 6, 2013

Great article and right on point. It's really important not to forget the fact that the FMLoB directive already attempted to do this. Reinventing the wheel doesn't make sense, especially when it didn't work in the first place. This issue is a solution in search of a problem. Small agencies are already leveraging FSSPs and will continue to do so with or without the mandate -- simply because it makes sense. If it made sense for larger Departments to move, they'd have done it already. Treasury would be better served by focusing on the implementation of GTAS.

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above