OPM restarts its financial migration

Agency vows to avoid the mistakes it made in its initial attempt at financial outsourcing

OPM cancels contract after requirements test fails

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.
How to document financial services needsAgencies need not produce from scratch the financial management documentation they provide prospective outsourcing partners. They can reuse reports they compile for other requirements, said Mark Reger, the Office of Personnel Management’s chief financial officer.

Reger recommended that agencies use their Performance and Accountability Report to document what a service provider must be able to do. The information in those accountability reports is clear, inclusive and transparent, he said.

And the work is done. “None of us — from programming staff to accountants — likes to do documentation. It’s a nightmare,” Reger said.

Another useful source for documenting financial management requirements is Circular A-123, OMB’s guidance on internal controls for financial reporting. A-123 reports typically contain policies and procedures and are reasonably up-to-date, Reger said.

— Mary Mosquera

FCW in Print

In the latest issue: Looking back on three decades of big stories in federal IT.


  • Anne Rung -- Commerce Department Photo

    Exit interview with Anne Rung

    The government's departing top acquisition official said she leaves behind a solid foundation on which to build more effective and efficient federal IT.

  • Charles Phalen

    Administration appoints first head of NBIB

    The National Background Investigations Bureau announced the appointment of its first director as the agency prepares to take over processing government background checks.

  • Sen. James Lankford (R-Okla.)

    Senator: Rigid hiring process pushes millennials from federal work

    Sen. James Lankford (R-Okla.) said agencies are missing out on younger workers because of the government's rigidity, particularly its protracted hiring process.

  • FCW @ 30 GPS

    FCW @ 30

    Since 1987, FCW has covered it all -- the major contracts, the disruptive technologies, the picayune scandals and the many, many people who make federal IT function. Here's a look back at six of the most significant stories.

  • Shutterstock image.

    A 'minibus' appropriations package could be in the cards

    A short-term funding bill is expected by Sept. 30 to keep the federal government operating through early December, but after that the options get more complicated.

  • Defense Secretary Ash Carter speaks at the TechCrunch Disrupt conference in San Francisco

    DOD launches new tech hub in Austin

    The DOD is opening a new Defense Innovation Unit Experimental office in Austin, Texas, while Congress debates legislation that could defund DIUx.

Reader comments

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

More from 1105 Public Sector Media Group