Does Consolidating Programs Pay Off?

As Yogi Berra once said, "It's deja vu all over again." After a long, roiling debate and seven continuing resolutions, Congress in April finally passed the fiscal 2011 omnibus spending bill. The mammoth appropriation, which funds the government for the rest of the fiscal year, cuts $38.5 billion from current spending levels. If you think this finally means all sides have reached agreement, think again.

Before the bill was even presented to President Obama, questions about the savings had already surfaced from the Congressional Budget Office. Its analysis found that the bill would reduce federal outlays only by a fraction of the advertised amount -- only $352 million below 2010 spending rates.

Today's intensified concern about spending inevitably leads to a call for large-scale government reorganizations, ambitious efforts that seldom come about without a major precipitating cause. Reorganizations are resource-intensive (at least at the outset) and require bold action and carefully crafted integration processes. They also require cooperation between Congress and the executive branch.

The security concerns in the aftermath of 9/11 provided sufficient impetus for the largest U.S. agency consolidation in recent history -- the creation of the Homeland Security Department. To achieve that, new security legislation was rolled out at a record pace, combining 22 agencies to meet pressing needs for heightened national security. Transformations occurred at a pace that arguably would have been unreachable without the impetus of an imminent, unpredictable national security threat.

More recently, the bailouts and excessive risks taken in the financial sector led to passage of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. This law calls for increased collaboration across agencies and in some cases agency convergence, as with the merging the Office of the Comptroller of the Currency with the Office of Thrift Supervision.

Now the ballooning deficit prompts lawmakers to plan similarly bold action. They are considering measures that will likely require federal agencies to operate within more constrained budgets. Part of this plan as outlined by Obama in his 2011 State of the Union address involves program consolidation. According to a recent Government Accountability Office report titled "Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars and Enhance Revenue," a new, concerted effort to curb overlap and fragmentations among government programs will reduce duplication, save billions of taxpayer dollars annually, and help agencies to provide more effective and efficient services.

In 2009, the Office of Personnel Management claimed victory when its managers assimilated 26 payroll systems into four shared service centers. This move is expected to save agencies more than $1 billion during the next 10 years. The process, however, took seven years and called for a very disciplined approach. In 2011, the Office of Management and Budget's 25-point mandate for governmentwide reform is defining the roadmap for consolidating initiatives. To realize a successful outcome in consolidation efforts, however, we should leverage the straightforward demonstrated ways to duplicate previous successes. I would recommend the following:

• Prioritize based on potential for gained efficiencies and do them as quickly as possible.Large-scale initiatives can be a major drain on an organization's capacity, so be mindful of the potential impact on mission programs. Rather than try to consolidate at every potential opportunity, pick the most important targets and merge them in a coordinated approach. This was most recently reflected in the OMB Policy Memo M-10-26 and its treatment of evaluating financial management IT systems. The memo suggests that systems should be evaluated based on the merit that specific installments return over a more immediate time horizon. For example, rather than trying to consolidate 47 programs at once, it may be more beneficial to integrate 20 percent of the most significant ones. In addition to potential savings, implementation costs that might be associated with the consolidations are important factors that could affect the decision to be taken and the potential resulting savings.
• Change the nature of the discussion. If you attempt to address consolidation on a program-by-program basis, the agencies, program managers and stakeholders -- and they can be formidable foes -- will vigorously argue for their programs. Rather, reformers should change the nature of the discussion from one that concentrates on individual programs to one that focuses on how the government can better spend its funds to achieve important outcomes. Align interests around a shared goal of improving government efficiency.
• Merge programs that have similar goals, services, delivery strategies and recipients. Combine initiatives that are funded in similar ways, i.e., join together those that deliver funding through nonprofits rather than combining those programs with others that directly distribute funding to individuals.
• Acknowledge committee jurisdictions. Congress' government reform committees have jurisdiction over reorganizations and consolidations. Understand what they will find acceptable and to the extent possible, base your action plan around assimilating programs within individual committee jurisdictions first. This saves time in achieving the desired outcome.

The goal of achieving greater efficiencies through consolidation of selected programs is a familiar one. Success in the current era will come in evaluating what has worked effectively in the past to reduce unnecessary, duplicative costs. Agencies taking on the task will not pull it off without sustained oversight by the administration and Congress.

Clarence Crawford, a former chief financial officer of the Office of Personnel Management, is director of the Deloitte Federal Financial Management Solutions Center.