Education taps IT partner

In a first-of-its-kind move, the Education Department last week chose Andersen Consulting to oversee a modernization project for the troubled computer systems the agency uses to manage billions of dollars in federal student aid programs.

As the modernization partner for Education's Office of Student Financial Assistance Programs (OSFAP), Andersen will manage the execution of the department's Modernization Blueprint, which outlines how Education should upgrade and integrate the maze of aging systems scattered throughout the department.

OSFAP has long been criticized by government auditors and Congress for the inefficient patchwork of systems it uses to oversee about $40 billion of student aid per year. Education's collection of disparate, "stovepiped" computer systems has emerged as new laws have created new student aid programs. The resulting situation is that many systems have inconsistent information. One computer system may approve a loan applicant, while another system has flagged the same borrower as not having paid existing education debts.

To improve the systems and management of student loans, Congress passed the Higher Education Amendments of 1998, turning the OSFAP into a performance-based organization. As a PBO, the office must focus on setting and meeting goals for performance. To do that, the PBO gets more management flexibility and procurement flexibility.

"The blueprint is our plan for process re-engineering and introducing technologies to realize the promise that we have in the PBO: to improve service and reduce costs," said Greg Woods, the chief operating officer for OSFAP and a former top manager of the Clinton administration's then-National Performance Review.Woods said the goal of the program is to cut the ratio of the office's total expenses to the number of loans and grants the office manages, a ratio called unit cost. He said Education officials are calculating unit costs for the office's programs and setting goals for unit costs after modernization.

Woods declined to provide a figure for how much the agreement with Andersen is worth, but he said the office expects to spend $38 million on modernization in fiscal 2000. Woods said OSFAP chose Andersen because of its experience in the technology used in the financial industry. "They proposed what we thought sounded most like a true partnership," Woods said.

Education chose Andersen from a group of three finalists that also included Computer Sciences Corp. and Electronic Data Systems Corp. (EDS).

"This effort at the Department of Education marks a pivotal point in the reinvention of government, as the Office of Student Financial Assistance [Programs] adopts new business models," said Steve Rohleder, Andersen's managing partner for the Americas Federal Government operating unit. "Andersen Consulting is committed to making this new performance-based model work for government."

Steve Shane, managing partner at Andersen, said he did not know the value of Andersen's business under the Modernization Partner program. OSFAP manages nearly 80 percent of the department's annual information technology dollars - about $450 million worth of technology goods and services that support billions of dollars in student aid programs .

Shane said Andersen will not undertake all of the modernization work itself. "It's important that we really play to all the strengths of the contractors that exist at Education today," he said. "This is not a sole execution by Andersen."

Andersen officials have tapped firms including EDS, Affiliated Computer Services Inc., AFSA Data Corp., Critical Path Consulting, Information Control System and Exolve Inc. to help them plan and manage the modernization program. Andersen officials also have chosen consulting rival KPMG LLP to be a member of Andersen's modernization team at Education. "It is unusual, but in this case we obviously wanted to build the best team we could," said Andersen managing partner Stan Gutkowski.

But a congressional staff member questioned Education's plan. After studying the statement of work for the Modernization Partner program, the staff member said the plans so far appear to be "too open-ended." "It doesn't specify specific tasks. It seems like [Education officials] are giving [Andersen] carte blanche," said a staff member at the House of Representative's Education and the Workforce Committee. On Thursday, Andersen submitted its proposal for the first task order under the program.