Agencies facing tight budgets and limited resources have tried many strategies to reduce costs while simultaneously meeting agency priorities and service delivery expectations — strategies which typically fall short of achieving sustainable and dramatic results.
Successful cost reduction techniques should align with the modernization of solutions that also improve citizen value. To achieve this goal, however, improvements and efficiency initiatives that enable change must be the driving force behind cost reduction efforts. In other words, reducing costs just for the sake of reducing costs, without a strategy in place, isn’t effective. Agencies can draw on some best practices that have proven effective in the public and private sector.
1. Strategic sourcing
Procuring products and services and successfully negotiating agreements are critical elements in budget management. Better buying may also lead to more satisfied customers. To adopt strategic sourcing, engage other agencies to find and apply fact-based information about vendor selection and performance. This provides a shared environment for agencies and suppliers to communicate and coordinate. Modernizing the procurement process from legacy methods to secure, web-based applications will provide a significant reduction in operational costs. These strategic solutions integrate and streamline the entire procurement process, from buyer to supplier and back again.
2. Shared services
Shared services requires much more than simple centralization. A shared services operating model has a defined governance structure, with defined processes to manage the entity like a high-performing business, applying a customer-centric mindset. Ultimately, shared services can decrease administrative costs up to 25% and shift cost savings to citizen-facing front-office programs, increasing user and citizen value.
3. IT rationalization and consolidation
Many government organizations operate in a decentralized fashion, which can lead to components within an agency making duplicative technology purchases. IT rationalization and consolidation can reduce this duplication by evaluating capacity, requirements, redundancy and standardization across the IT portfolio. This includes server virtualization and consolidation, data center rationalization and applications rationalization. By selecting key systems to keep and turning others off, government agencies will eliminate obsolete inadequate applications, thereby reducing application support costs.
4. Managed application services
As budgets get tighter, organizations defer more and more maintenance, delaying key initiatives — sometimes indefinitely. This puts aging legacy systems and the users who depend on them at risk. With managed application services, government agencies can transfer the day-to-day operational management of select applications to a proven service provider, thus reducing costs while increasing the value derived from limited IT investments. This strategy allows an agency to focus its most experienced and highly skilled resources on developing new applications to drive improved agency performance.
Rapid process improvement focuses on reducing complexity, critical constraints and solving systemic issues to increase performance
5. Facilities optimization
Facilities optimization reduces the cost of facilities through process improvements in several areas: facility automation, monitoring and management; hybrid work models and efficient real estate portfolio management. Enterprise energy management is also part of the strategy. Using a comprehensive energy management system that encompasses procurement and strategic sourcing, government agencies can analyze energy usage in real time, allowing them to improve energy efficiency across the enterprise and improve their responsiveness to price signals and demand peaks.
6. Rapid process improvement
To shorten the time to value in business process reengineering projects, government agencies can apply rapid process improvement techniques including fast innovation methodologies. With rapid process improvement, governments can reduce costs while improving service effectiveness by evaluating and improving, and moving to standardized processes. This approach focuses on reducing complexity, critical constraints and solving systemic issues to increase performance (cost, speed, quality, and risk reduction). Rapid improvement brings together cross-functional teams within agencies to perform a focused, accelerated process improvement effort.
7. Citizen services portal
One way federal leaders in customer service can increase customer experience is by implementing citizen services portals. In these portals, agencies can provide increased services to citizens by making services support information available and accessible. Online portals provide citizens with a single place of entry enrollment and application for services, enable them to update their case file and request benefits from other programs. This gives agencies valuable insight into what citizens want collectively while enabling them to measure their ability to meet those needs. With the data collected from portals, agencies gain deeper insights into their performance — data they can use to ensure that they are meeting users’ quality of service expectations.
In these changing times, it is critical that government agencies take action to address their current fiscal challenges, making changes that will contribute to their long-term efficiency. Federal agencies need to think strategically about the outcomes of cost reduction. Cost reduction while increasing performance improvements can occur through effective structural and sustainable changes that reduce back-office costs, improve program efficiencies within and across agencies, and optimize revenue generation.
To succeed, agency decision-makers must keep an enterprise-level perspective. Strategies for cost containment require a coordinated, crossboundary approach to implementation. To ensure agency-wide synergies and maximum benefit, government leadership must collaborate and work together to ensure that they prioritize, manage, measure and track modernization initiatives at the enterprise level. Government agencies are discovering new ways to implement strategic financial management programs that drive value throughout their agencies. Utilizing proven techniques to reduce operational costs while improving service delivery is the key to today’s successful modernization.
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