Efficiency is not just a word for me, it is a way of life. I focus on it in everything I do, much to the dismay of my family and colleagues. I view efficiency not as an anathema to effectiveness but as a tool to free up time to maximize effectiveness. I have always supported government shared services for the same reason: they allow agencies to conduct business efficiently, focusing on effectiveness and better outcomes for the taxpayers, rather than back-office tasks. In the federal government today, shared services have become a strategic enabler for agencies to meet rising workforce and citizen expectations.
The COVID-19 pandemic provides an inflection point--an opportunity to reframe and reinvent who we are, what we do, and most importantly, how we do it. This offers a similar opportunity for shared services—to re-examine the desired impact and long-term vision. It is a time to set even more ambitious goals for the delivery of services, empowerment of the government workforce, data sharing, security and overall modernization.
Shared service marketplaces naturally create themselves when certain scenarios exist:
- Active, competitive markets: These markets govern themselves--where supply and demand naturally adjust for each other, where barriers are low to people moving between service providers. As a result, suppliers invest to gain customers. These markets are transparent and accessible; people can compare services, outcomes and costs, and make the appropriate tradeoffs.
- Centers of Expertise: These pop up where there are highly specialized and/or low frequency services. For example, you pay taxes once a year, and a professional accountant has the expertise to prepare complex returns more easily than most taxpayers can. In the government, services like travel and relocation are good candidates for such expertise.
- Benign Monopolies: Large organizations create these shared services as a way to drive standards and efficiencies. Use of these is generally mandated, and the goals of the shared service provider and customer are aligned. Often, there are incentives to reflect that alignment.
Some shared services in government, such as running payroll, disbursing funds, managing health clinics and processing FOIA requests, work easily. We have also made significant progress in areas like cyber shared services because of the Department of Homeland Security Continuous Diagnostics and Mitigation Program.
Creating an unnatural market
Mission support services, such as financial management, HR and grants, bring more stops and starts because they don’t naturally create markets. That does not mean it is not possible, but these “unnatural markets” require more hard work to cultivate.
To that end, The Office of Management and Budget has designated (or is in pre-qualification of) Quality Service Management Offices (QSMOs) for cybersecurity services, financial management, grants and civilian HR, and tasked them with creating the market. Each QSMO is achieving early success on the first three key elements that we need to make this work:
- We need to create standards. Standards give us common ground to develop shared services and common expectations of what outcomes that shared services should provide. Standards are in process for contract writing systems, travel and electronic records management.
- Supply must match demand. Each of the QSMOs is tasked with creating contract vehicles with the right number of providers, based on the service they are going to provide and the expected demand for that service. Keeping these in balance will be one of the biggest challenges for the QSMOs.
- We must define outcomes. Rather than detailed business and system requirements, defined outcomes give providers room to innovate.
To really accelerate shared services and stay on this path, there is more we need to do:
- Ensure a balance of supply and demand. That provides incentive for service providers to continuously innovate in order to gain customers.
- Limit the barriers to entry for suppliers. Some of these barriers are unavoidable—supporting the government is inherently different than supporting other industries. However, we should minimize the barriers that are not providing value and not meeting the needs of the government.
- Lower the barriers to changing providers. Under the federal contracting process, it can cost an agency tens of millions of dollars and take years to shift from one provider to another, which disincentivizes ongoing investment.
- Require transparency. Industry and government should be in constant communication throughout the market creation process. While each QSMO has engagement plans, the transparency must increase for us to be successful.
To build on our successes and create vibrant market places that drive efficiency, effectiveness and outcomes, we have to be alert and take advantage of inflection points such as the one we are going through now. Much of the time, growth comes from building incrementally on what is already in place; in times like this, we can step back and truly assess how we do things and where we can redesign core processes for greater gains.
As we do that, we also need to finish and govern our standards, manage our supply and demand and focus on desired outcomes. We must eliminate barriers to supplier entry and supplier switching, and create full transparency in the market.
Once we have these hybrid (unnatural) markets created, we need to govern them and adjust as circumstances and realities change; since we created the market instead of it forming by itself, we need to manage it actively.
The trend to shared services is going to continue regardless of administration. Moreover, we have learned so much over the years. As we shape and define these markets, we must stay agile and adjust. The shared service initiative has made solid progress. Now we need to propel it forward.
To learn more, visit our Federal Shared Services pages.