Is the financial LOB ready for prime time?

Labor's deal preceded OMB guidance; Rep. Platts questions compliance

Depending on who you talk to, the Labor Department’s decision to tap the private sector for financial-management hosting services is a clear example either of what is right or wrong with the way the White House has pursued the
Financial Management Line of Business initiative.

For the agency and the Office of Management and Budget, Labor’s deal with Mythics Inc. of Virginia Beach, Va., personifies the crux of the LOB concept: By outsourcing a nongovernmental function, Labor can refocus both money and staff on mission-specific needs.

For critics on Capitol Hill, it’s an example of moving too fast, too soon.

Even though Labor signed the deal before OMB finalized its migration guidance, Labor officials said they have no regrets.

“We’re glad we selected the approach we did,” said Valerie Harris, Labor’s associate deputy CFO for financial systems. “We did meet the letter of the requirements of what OMB is trying to do.”

But Rep. Todd Platts (R-Pa.), questions whether the administration, and agencies, are prepared to make the switch.

While supportive of the concept, Platts, chairman of the Government Reform Subcommittee on Government Management, Finance and Accountability, has repeatedly raised concerns that OMB is moving too quickly, forcing agencies to assess their financial-management systems and either become a shared-services provider or migrate to one if their systems need an overhaul.

This is problematic, he has said, because OMB has yet to finalize its migration guidelines that spell out specifics on whether and how an agency should move to either a federal SSP or the private sector.

“The situation with Labor was a new wrinkle for this whole thing,” said Mike Hettinger, subcommittee staff director. “Everybody admits that there is merit to consolidating financial management, [but] what we have to do is say look, the guidance is incomplete, but we’re asking agencies to consider migrations.”

OMB’s draft migration memorandum, released in May, stated that, with limited exceptions, an agency only could rely on its in-house financial-management system if officials can demonstrate that it represents the best value and lowest risk.

The draft also requires agencies to release a single request for proposals for both public and private shared-services providers to respond to, publish it on and follow the Federal Acquisition Regulations as much as possible. If the task is performed by 10 or more agency employees, the competitions must comply with OMB Circular A-76, which details how agencies compete inherently commercial federal positions with the private sector.

But just before OMB issued the memo, Labor awarded Mythics a five-year, $5.3 million contract in March.

The contract raised eyebrows because Mythics has not been designated a shared-services provider, causing Platts to wonder if Labor’s contract would be in compliance with OMB’s migration guidance, when finalized.

During a hearing, Platts questioned if Labor’s deal would comply with the FM LOB migration guidelines. “We do a migration and we haven’t finalized the terms,” he said.

Mary Mitchell, GSA deputy associate administrator and FM LOB program manager, said Labor had the administration’s blessings to move forward.

“You’ve got an agency that had a specific need now. They decided with OMB to use the best available guidance,” she said. “Those tools will never be perfect and we can’t stop these improvements while waiting for perfection.”

An administration official, who requested anonymity, admitted that the Labor contract “was the horse that got out before we closed the barn door,” but said that when the migration document is finalized, Labor will be in compliance.

That’s because the agency listed all the qualifications it considered essential for a financial-management provider in its solicitation—qualifications that will likely meet OMB’s approval.

Right place

“What Labor said was, ‘We’ve already got our own plans, but we’ll move into an SSP later,’ ” the administration official said. “Through the competition, they ended up in an Oracle On Demand facility, a huge facility. They ended up in the right place, even if they got there on a bit of a rocky road.”

Harris said the agency was in constant contact with OMB while putting together its solicitation. Labor used OMB’s FM LOB checklist to set up the request for proposals, and the contract meets the administration’s standards, she said.

“We’re out in the forefront [of the FM LOB policy] as opposed to being in the back of it,” she said. “I’m very confident that we will be very successful with what we’ve done.”

OMB officials at the hearing said that the Labor deal would not be altered once the FM LOB migration document is finalized.

“When the agency determines that if a private provider can do this work for them, they’d do an open competition,” said Linda Combs, OMB’s controller. “The point of not stopping something before starting something else is important. We are offering flexibility, and some exceptions.”

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