MA

OMB Mandates Shared Services for Financial Systems

Published: March 27, 2013

Acquisition ReformCloud ComputingOMBShared ServicesStrategic Sourcing

On March 25, the Office of Management and Budget (OMB) released a memo directing all executive agencies to use shared service solutions for future modernizations of financial systems. The guidance outlines the evaluation process the Treasury Department will use to assess existing Federal Shared Service Providers (FSSP). It also describes the steps the Treasury’s Office of Financial Innovation and Transformation (FIT) will take to review new agency proposals for aligning with this mandate.

Building on the Federal Information TechnologyShared Services Strategy (as well as OMB’s review of financial systems from June 2010), the memo from federal controller Danny Werfel explains that “the cost, quality and performance of Federal financial systems can be improved by focusing government resources on fewer, more standardized solutions that are implemented and operated by experienced staff.” In addition to streamlining the variety of solutions currently deployed across the government, the use of FSSPs will help to reduce the time it takes to implement systems and to improve data quality. As part of this guidance, OMB is encouraging agencies complete market research to evaluate solutions and complete analysis of alternatives from both FSSPs and commercial SSPs. Werfel suggests taking vendor past performance and advantages of existing partnerships into consideration when assessing solutions.
The guidance makes it clear that agency-specific solutions will be discouraged. Still, there is some room for “rare” exceptions. Agencies would need to demonstrate exceptional circumstances (e.g. unique requirements or adequate scale) through alternatives analysis that establish the agency-specific approach is clearly preferable in terms of best value for the Federal Government. Should an agency be approved for an agency-specific solution, they still need to participate in government-wide benchmarking and governance. 
Moving forward, OMB will work with agencies to explore modular updates for financial system, to target enhancements and to prioritize funding for modernization proposals. OMB will be working with agency Chief Financial Officers (CFOs), Chief Information Officers (CIOs) and FSSPs to identify common standards and requirements. Two offices within OMB, the Office of Federal Financial Management and the Office of Federal Procurement Policy, will work with agencies to align acquisition strategies to promote the Cloud First policy and strategic sourcing goals. Agencies with near-term modernization needs are advised to plan for adopting a shared services approach. In the coming months, OMB will issue new guidance on technology and business requirements for financial systems.
This mandate from OMB comes on the heels of the Government Accountability Office removing management of interagency contracts from its 2013 High Risk List. This list calls attention to agencies and program areas that are particularly vulnerable to fraud, waste, abuse and mismanagement. GAO removed the high risk designation for interagency contract due to improvements in several areas including: progress addressing identified deficiencies, adding management controls, creating a policy framework for new contracts, and taking steps to provide better data.
While agencies aim to improve efficiency and deliver greater return on investments, they are looking increasingly to strategic sourcing and shared services a means of leveraging the government's buying power.  Tracking spending through agency mandated contract vehicles, we tend to end up with piecemeal impression of the impact these acquisition trends are having on the market. As luck would have it, the Office of Federal Procurement Policy (OFPP) has a registry of interagency contracts. However, according to Jack Kelly, Senior Policy Analyst for OFPP, the status has not been recently updated.  The current extent to which agencies are leveraging shared service contract vehicles isn’t entirely clear, but Kelly suggested that the Strategic Sourcing Leadership Council (SSLC) is likely to get engaged in activities to review and update the interagency contract registry. In short, we can expect strategic sourcing and shared services to continue shaping federal spending.