Paper Cuts

If it's going in your permanent record, then it's going online.

The average federal employee has worked for the government for about 17 years and has a 150-page personnel file, including performance reviews, pay and benefits information, and other personal data. If that file is lost, which happens about 45,000 times a year, then the government has to pay between $12,000 and $15,000 to create a new file, according to Northrop Grumman Corp., the company hired to help federal agencies save that cost.

In January, Integic Corp. of Chantilly, Va., which has since been acquired by Northrop Grumman, won a contract with the Office of Personnel Management to transfer federal employees' personnel folders into a Web-based system. OPM estimates the arrangement will save agencies $72 million a year. Northrop Grumman says that's conservative.

The contract is the latest step in moving paper-based systems online-a Bush administration initiative that's been denounced by federal employee unions concerned about privacy. The contract also incorporates a second goal on the Bush agenda: boosting the use of performance-based contracts.

Agencies will pay OPM to get their files digitized. The agreements are performance-based-agencies tell Northrop the outcomes they seek instead of how to achieve them. The company faces penalties for not delivering within a specific time, and it sometimes is rewarded for quicker-than-expected delivery, says Jim Fraley, vice president for Northrop's civilian federal practice. "It makes sure everybody is in coordination and there's not a lot of wasted time," he adds.

The contract with OPM could be extended for up to five years and is worth up to $60 million, depending on the extent of agencies' use of the company's services. So far, the Health and Human Services and Homeland Security departments and the Agriculture Department's Forest Service and Agricultural Research Service have signed up. OPM hopes to have all of the 1.8 million executive branch employees on the system by the end of fiscal 2007.

Federal unions oppose the shift, and their position has been strengthened by recent losses of employee data. During the past six months, thefts of personal information about Federal Deposit Insurance Corporation and Justice Department employees have been announced. Charge card information for 1.2 million federal employees was lost during a transfer by Bank of America.

"We need to see exactly how they plan to protect the personnel files," says Matthew Biggs, legislative and political director for the International Federation of Professional and Technical Engineers. He has not yet been convinced the security is sufficient.

The new system is safer than the old one, according to Rhonda Diaz, manager of OPM's electronic human resources program. "It's very easy for someone to see a paper document somewhere in the process. Electronic systems are secure," she says. In the Web-based system, an agency can specify who is allowed to view certain documents. The Northrop Grumman software also uses a secure Internet connection, similar to the one used by online banks. What's more, employees will be notified by e-mail immediately of any changes made to their files, so they can check for errors.

Employee information will be hosted on two identical servers by the Interior Department's National Business Center at a secure location in Denver. If one fails for any reason, the other will compensate.

Marcia Marsh, vice president for government transformation at the nonprofit Partnership for Public Service in Washington, says moving to a Web-based system helps employees by letting them update their information more easily and access their records from home. The risks are minimal, she says. "Who would think we can't protect our own employee records if we can protect taxpayers' [records]?" she says.