Cashing In

nquire about government's CASUs and you're likely to receive a blank stare. "Cashews?" says one dumbfounded federal employee. "Kazoos?" says another. But the term, which stands for cooperative administrative support units, is likely to become better known this year as those involved with the 13-year-old fee-for-service program work to revitalize the network. While some of the once-tiny administrative mergers have evolved into booming multimillion-dollar ventures, CASUs still operate largely in obscurity and at half the number of units that existed in the early 1990s.

Jan Faulkner, director of the Rocky Mountain Regional CASU, says the units have existed without notice for years because of their autonomy. "I think we purposely stayed below the radar because everyone was doing their own thing," she says. "Now we've come full circle and we want the national [office] to give us something that shows a united front."

Born out of President Reagan's Grace Commission, which studied how to improve administrative operations, CASUs are multiagency units that provide reimbursable services for government operations. They began in 1986 mostly as combined copy centers and mail rooms in federal buildings but now provide more than 80 types of services ranging from child care, computer training and design engineering to hurricane preparedness, recycling and wellness programs.

"I thought much of the steam had gone out of CASUs because I talked to assistant secretaries here who had never heard of them," says David O. Cooke, chairman of the national CASU board and the Pentagon's director of administration and management. "But out in the field, people are invigorated and ready to go."

Run by local directors and interagency boards, the government's CASUs operate autonomously, with oversight and assistance from a national board of federal executives. About 96 percent of CASU work is contracted to private companies that specialize in the services being offered, which local directors say is necessary to keep costs down.

Among their accomplishments last year:

• $1.5 million in revenues for the Fort Worth, Texas, CASU, which spearheaded a major recycling program at no cost to the government.

• $20 million in revenues for the Greater Hampton Roads CASU in Norfolk, Va., which provides various support services to 75 agencies in 20 states and five foreign countries.

• $7.5 million in revenues for the Rocky Mountain Regional CASU in Denver, where 17 administrative services are provided to 168 agencies, a 17 percent increase over fiscal 1997.

Holly Mason, director of the Greater Hampton Roads CASU, says her unit has allowed its 200 customers to avoid about $6 million in costs over six years with the services it provides. "Our customers come to us because, No. 1, they can get a savings, but also because of our streamlining," which allows them to go to one office instead of several to get information such as costs, savings and revenues on contracted services, Mason says.

The Norfolk-based CASU's services, provided mostly to the Navy, include a refurbishment project for the Fleet and Industrial Supply Center's aviation parts containers, as well as a hazardous materials consolidation and resell service to the center. The CASU also contracted for clerical workers to obtain information for government-issued credit cards for the Defense Automated Printing Office and coordinated a welfare-to-work program with a contractor to supply military identification badges at a Navy exchange store, Mason says.

Savvy Start-Ups

The launch of a CASU usually begins when an agency approaches other agencies about merging some functions. The lead agency sends a proposal, signed by participating agencies, to the national board to receive a charter to provide specific services. The lead agency agrees to provide up-front costs out of its own budget and typically keeps the local CASU director and staff on its payroll. Since the program is self-supporting, the lead agency gets reimbursed for all costs, including the salaries of the employees it provides. Fees, usually 2 percent to 5 percent of the cost of providing a service, are charged to customers to cover CASU salaries and expenses.

CASU directors work not for their host agency, but for the local board. Agency participation is voluntary, and receiving services can be as easy as faxing a request for temporary help to the CASU office one day and receiving a temporary worker the next, says Rocky Mountain director Faulkner. The unit fulfills the request by seeking temporary services from its vendors, she says.

"Most CASUs can get anybody from a secretary to an attorney with security clearance to doctors," says Faulkner, a former Denver city employee who was hired by the local CASU board in 1997.

When the concept began, most CASUs stayed within their geographical regions and had as customers only other federal agencies in their home and neighboring states. Now most have customers in different parts of the country, and some CASUs deal with agencies overseas. Hundreds of federal agencies make up most of CASU customers, but 44 state and local agencies also participate, program officials say.

Sticky Business

Edward Donnelly, director of the Southeast Regional CASU, has little patience for CASUs that have struggled to break even. "If you can't support yourself in the first year, you shouldn't be in business," Donnelly says. "In all honesty, there's no reason to be small. We have people clamoring" to speed up contracts by going through the unit.

Donnelly, a Navy employee before becoming a CASU director, speeds up contracts for the Southeast Regional CASU by bypassing the contracting office at the host agency-the Navy-because he says the agency is too busy and would take too long. Instead, Donnelly sends requests to a Veterans Affairs contracting office in Temple, Texas, which can produce contracts faster by having CASU paperwork already in place. The VA, in return, receives one-fifth of the 5 percent markup.

"We're an agent, or broker, for others," Donnelly says. "We're very fast. We don't have to reinvent the wheel. People come to us because we're like 9-1-1. We can get a contract in a couple of days."

But the Southeast CASU, which has three federal agencies and seven state and local officials on the local CASU board, ran into legal trouble after selling services to state and local customers off the General Services Administration supply schedule. CASUs were permitted to buy off the supply schedule for state and local customers following the 1996 Cooperative Purchasing Act, but Congress repealed the law in 1997 after complaints that CASUs were competing with private businesses.

While some say the new law is vague, GSA was clear with its interpretation last fall to CASUs: Nothing is to be bought off the supply schedule for state and local governments. The rules could become even more stringent under a proposed Office of Management and Budget policy revision that would further limit the federal government's ability to do business with states and localities, CASU officials say. The revision (Circular A-97), which is expected to be issued this year, would mean that the Southeast Regional CASU "may have to draw back some" on its state and local business and that other CASUs should restrict any plans to branch into the area, says Mike Sneed, director of the national CASU program in Washington.

The legal change has had a chilling effect on CASUs that otherwise would have pursued state and local contracts, says Mariley Ferens, a member of the national CASU staff and director of the first CASU, which began in Seattle in 1986. "Everybody got a little nervous because they took that as a sign that they were not supposed to do business with state and local governments at all," she says.

Fewer Charters

While few dispute the merits of the CASU concept, there have been implementation problems. At their high point in the early 1990s, about 50 CASUs were in business, although some were loosely defined, according to national board members and staff. The board last year decertified 21 CASUs that either had merged with other units or franchises, had ceased operating or were being subsidized by their lead agency because they were losing money.

"Some didn't live up to their promises," says Cooke. "They oversold the local demand." By 1998, the number of CASUs had shrunk to 18. Two more were chartered this year, however, bringing the total to 20.

Of the 20, seven are franchise business activities, a spinoff of CASUs that were created by Vice President Gore's National Performance Review in 1994. Unlike most CASUs, the franchise activities operate under a revolving fund that may be carried over from year to year. They are exempt from some regulations, giving them more business freedoms. The seven franchises in the CASU network are all former CASUs now under the Treasury Department's direction. Six other franchises operate outside the network at the Treasury, Commerce, Health and Human Services, Veterans Affairs and Interior departments and the Environmental Protection Agency.

CASU officials say the decline in the number of units belies their success. While more than half of the CASUs merged or folded, the remaining units have flourished, resulting in $100 million of business in fiscal 1997 and $135 million in fiscal 1998. Subsidized CASUs drew criticism from both inside and outside the program, so the board's decision to shut them down was welcome. "I'm glad they decertified," Donnelly says.

And there have been other problems.

With pressure from Congress to cut costs and stick to mission-critical programs, some lead agencies abandoned their CASUs because the units were not part of their missions, Faulkner says.

Also, federal unions have viewed CASUs as a threat to jobs, particularly in procurement. The American Federation of Government Employees, in a May 1998 letter to Cooke, complained that "CASUs are actively marketing services aimed at helping agencies outsource functions currently performed by federal employees."

Thomas Tucker, director of the Pentagon's management support division of the Washington Headquarters Services, who works with Cooke on CASUs, says that after the union complained, the San Antonio CASU "had to back off" a notice it placed on the Internet saying it could provide temporary services. "That entrepreneurial spirit can get you in trouble," Tucker says.

Cooke, though, says CASUs adhere to contracting requirements.

Another challenge is getting federal officials to adopt the entrepreneurial spirit upon which CASUs were founded. Faulkner says he sometimes finds his customers applying their department's rules when they shouldn't. "I tell them to take off their bureaucratic goggles, take off that department hat," he says.

Mostly, though, the obstacle since the beginning of CASUs has been the concept of interagency cooperation, Ferens says. "It's always sort of been out there on the fringes of being a great idea," she says. "But just imagine trying to get agencies to work together [at all]."

Raising Standards

The remaining CASUs, invigorated by booming success and a mandate for more national interaction, are banking on a CASU revitalization.

Following last year's review, the national board drafted specific standards for CASUs requiring each to fully meet 15 operating principles to remain full-service units. Under the rules, the units must, among other things, be self-sustaining, serve at least two customers other than their host agency and maintain cost and performance benchmarks against competitors. Seven CASUs were found to meet all the principles, while four were deemed "developmental," having met only some of them.

The board hired Sneed, a former Pentagon procurement analyst, as its full-time executive director-a position that had been vacant for nearly two years-to help with oversight, support and awareness. Sneed heads a staff of two full-time employees and a part-timer in Washington to provide support for CASUs.

The national board also is developing performance measurements, a strategic plan and annual goals, and is reviewing results of customer surveys, all in an effort to improve oversight and leadership of the network. CASU officials say the climate is ripe for expansion.

So why aren't CASUs better known? As is often the case with changing administrations, CASUs suffered from "benign neglect" early in the Clinton administration, Cooke says.

Still, the birth of business franchises under the National Performance Review, as part of the 1994 Government Management Reform Act, has shown that the administration at least supports the concept. Six franchises, most of them former CASUs, were created as pilot projects through 2001. As the business ventures grow, CASUs have become increasingly competitive with each other and with franchises.

Franchise Rivals

"CASUs can be a worry because they can undercut us," says Barry Hudson, director of the Treasury Department franchise in Washington. "That's why we go after their customers."

Six original franchise pilots have grown to 11, and total revenues increased from $39 million in 1997 to $80 million last year, Hudson says. The franchises have increased their individual revenues by at least 50 percent, he says. "The franchising fund is the next evolution of CASUs," Hudson says.

As with CASUs, many in government have not heard of franchises. But Hudson says he's not concerned. "We're not advertising," he says. "We're getting more and more business without advertising. Managing growth is the hardest part."

The rivalry between some CASU and franchise directors is apparent. Treasury's Hudson and CASU Director Donnelly accuse each other of using inferior business practices. "They're just not at the same level of sophistication" as franchises, Hudson says. "Some that were the cream of the crop of CASUs stepped up to the plate and took the challenge to be a franchise."

"These Treasury franchises can't even spell finance. All of Barry's franchises came from CASUs, and he picked up some losers," Donnelly says. "He can't compete with me."

If the friendly scrapping between Hudson and Donnelly sounds like high-stakes corporate competition, it is a trait common among CASU directors and one they believe can only help business. "The bottom line is, we're supposed to help the taxpayer," Donnelly says. "We're all in competition because reimbursable government is moving forward."

Lisa Daniel is a Washington area freelance journalist.