Shared Services Save Money, With One Caveat

Interagency pooling of routine purchases under the rubric of shared services saves money and improves quality, according to a survey of 300 public and private-sector organizations, newly published in a trio of reports from Deloitte and the nonprofit Partnership for Public Service.

More than 90 percent of those interviewed about shared services saw cost reductions from the practice and 70 percent witnessed sharper service, according to the researchers, who surveyed acquisition officials in government concentrated in six agencies.

The reports reinforce the Obama administration’s move this October to create a new centralized body to coordinate shared services at the Office of Management and Budget and the General Services Administration. That is projected to save $1 billion over the next decade.

The Deloitte/Partnership report noted that more than 500 departments and agencies across the government in fiscal year 2014 spent more than “$420 billion in purchases with only occasional collaboration across organizational lines.” But too often employees are performing acquisition work “that isn’t part of their core mission.” For example, in fiscal 2014 less than 10 percent of contract spending governmentwide went toward purchases of less than $150,000, yet these purchases accounted for a whopping 87 percent of transactions.

To achieve the efficiencies of shared services and the strategy of grouping products called category management, however, “organizations must cede control of components of their operations to others and deal with the fact that they will face major change-management challenges in doing so.”

One model profiled in a case study is the Agriculture Department, were managers beginning in 2009 noticed that it had 30 different staff offices and agencies with human resources offices that used more than 200 information technology systems. “Over the course of 10 weeks in 2010, the department gathered 150 subject-matter experts who focused on functional areas of the Office of Personnel Management’s Business Reference Model, which provided an end-to-end depiction of the human resources business processes taking place in government agencies,” the report said. “These experts agreed that there was no reason for USDA offices to have different human resources processes and systems.”

The eventual implementation of “One USDA” for shared purchasing has been saving $3 million a year, the department said. Similar progress has been documented at the Housing and Urban Development Department, subject to a case study, and the Commerce Department.

Long-established shared services units the researchers examined include the Defense Department’s Defense Civilian Personnel Advisory Services, the Health and Human Services Department’s Program Support Center, the Interior Department’s Interior Business Center, the Treasury Department’s Administrative Resource Center and Shared Services Programs and the GSA’s Business Management Office.

“An enterprise-wide approach to tackling government missions and administrative functions will require significant change,” the reports said. “Most significantly it requires a fundamental shift from an inward-focused agency perspective to a broader, whole-government view. Now, administration officials need to focus on getting greater buy-in from agencies and career leaders to help sustain progress and achieve results.”

(Image via MJTH / Shutterstock.com)