Human Capital
Selected Agencies' Use of Alternative Service Delivery Options for Human Capital Activities Gao ID: GAO-04-679 June 25, 2004Human capital offices have traditionally used alternative service delivery (ASD)--the use of other than internal staff to provide a service or to deliver a product--as a way to reduce costs for transaction-based services. GAO was asked to identify which human capital activities agencies were selecting for ASD, the reasons why, how they were managing the process, and some of the lessons they had learned. Eight agencies were selected to provide illustrative examples of ASD use.
The selected agencies were using ASD for the full range of their human capital activities. Agencies generally approached their management of ASD in similar ways. They conceptually agreed that human capital activities that did not require an intimate knowledge of the agency, oversight, or decision-making authority could be considered for ASD, although in practice they showed differences in their choices of ASD activities. GAO identified several lessons the agencies had learned about ASD management, such as the importance of understanding the complexity and requirements of an activity before making an ASD decision. As the President's agent and adviser for human capital activities, OPM also has a central role in assisting agencies' management of ASD. Several agencies noted that they used OPM's Training and Management Assistance program, which provides human capital contract assistance. However, the officials also cited the need for sharing information about specific ASD efforts, useful metrics, and lessons learned.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-679, Human Capital: Selected Agencies' Use of Alternative Service Delivery Options for Human Capital Activities
This is the accessible text file for GAO report number GAO-04-679
entitled 'Human Capital: Selected Agencies' Use of Alternative Service
Delivery Options for Human Capital Activities' which was released on
July 16, 2004.
This text file was formatted by the U.S. General Accounting Office
(GAO) to be accessible to users with visual impairments, as part of a
longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to Congressional Requesters:
June 2004:
HUMAN CAPITAL:
Selected Agencies' Use of Alternative Service Delivery Options for
Human Capital Activities:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-679]:
GAO Highlights:
Highlights of GAO-04-679, a report to congressional requesters
Why GAO Did This Study:
Human capital offices have traditionally used alternative service
delivery (ASD)”the use of other than internal staff to provide a
service or to deliver a product”as a way to reduce costs for
transaction-based services.
GAO was asked to identify which human capital activities agencies were
selecting for ASD, the reasons why, how they were managing the process,
and some of the lessons they had learned. Eight agencies were selected
to provide illustrative examples of ASD use.
What GAO Found:
The selected agencies were using ASD for the full range of their human
capital activities. The figure below groups like human capital
activities that the agencies provided through ASD into three
overlapping tiers and identifies their associated drivers and the
options used.
Summary of Selected Agencies‘ ASD Characteristics for Three Tiers of
Human Capital Activities:
[See PDF for image]
[End of figure]
Agencies generally approached their management of ASD in similar ways.
They conceptually agreed that human capital activities that did not
require an intimate knowledge of the agency, oversight, or decision-
making authority could be considered for ASD, although in practice they
showed differences in their choices of ASD activities. GAO identified
several lessons the agencies had learned about ASD management, such as
the importance of understanding the complexity and requirements of an
activity before making an ASD decision. As the President‘s agent and
adviser for human capital activities, OPM also has a central role in
assisting agencies‘ management of ASD. Several agencies noted that they
used OPM‘s Training and Management Assistance program, which provides
human capital contract assistance. However, the officials also cited
the need for sharing information about specific ASD efforts, useful
metrics, and lessons learned.
What GAO Recommends:
GAO is making a recommendation to the Director of the Office of
Personnel Management (OPM) to work with the Chief Human Capital
Officers Council to share and distribute information about ASD. OPM
stated that the recommendation is consistent with their concern for
overseeing human capital contracting, for which OPM has the lead. OPM
expressed concern about two issues it believes were not sufficiently
covered in the report”OPM‘s support for agencies‘ ASD efforts and
agency accountability issues when using ASD providers. GAO believes
that both issues are covered by this recommendation.
www.gao.gov/cgi-bin/getrpt?GAO-04-679.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact J. Christopher Mihm at
(202) 512-6806 or mihmj@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Selected Agencies Reported Using ASD for the Full Range of Their Human
Capital Activities:
Selected Agencies Approached Their Management of ASD in Similar Ways
and Shared Similar Lessons Learned:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Examples of Alternative Service Delivery Options Available
to Federal Agencies for Accomplishing Human Capital Activities:
Intragovernmental Revolving Fund Services:
Franchise Fund Services:
Cooperative Administrative Support Unit Services:
Interagency Contract Service Programs:
Contracting for Services:
Partnerships:
Appendix III: Comments from the Office of Personnel Management:
Appendix IV: Comments from the Department of the Interior:
Appendix V: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Figures Figures:
Figure 1: Summary of Selected Agencies' ASD Characteristics for Three
Tiers of Human Capital Activities:
Figure 2: Description of OPM's Training and Management Assistance
Program:
Abbreviations:
ASD: alternative service delivery:
CASU: cooperative administrative support unit:
CHCO: Chief Human Capital Officers:
COTR: contracting officer's technical representative:
DOE: Department of Energy:
EEO: equal employment opportunity:
FWS: U.S. Fish and Wildlife Service:
GSA: General Services Administration:
IR: intragovernmental revolving:
IT: information technology:
MMS: Minerals Management Service:
NAPA: National Academy of Public Administration:
NFC: National Finance Center:
NGA: National Geospatial-Intelligence Agency:
NIMA: National Imagery and Mapping Agency:
OMB: Office of Management and Budget:
OPM: Office of Personnel Management:
SER-CASU: Southeast Regional Cooperative Administrative Support Unit:
TMA: Training and Management Assistance:
USCG: United States Coast Guard:
USDA: United States Department of Agriculture:
USITC: United States International Trade Commission:
Letter June 25, 2004:
The Honorable George V. Voinovich:
Chairman, Subcommittee on Oversight of Government Management, the
Federal Workforce, and the District of Columbia:
Committee on Governmental Affairs:
United States Senate:
The Honorable Jo Ann Davis:
Chairwoman:
Subcommittee on Civil Service and Agency Organization:
Committee on Government Reform:
House of Representatives:
In an April 2003 report on selected agencies' use of human capital
strategies to attain mission results, we noted that improved ways of
providing services can enable agencies' human capital offices to
reallocate their resources to better meet expanded roles as strategic
partners.[Footnote 1] As part of this, agencies need to consider how
best to accomplish their human capital activities, including who the
service provider should be. Alternative service delivery (ASD)--the use
of other than internal staff to provide a service or to deliver a
product--has traditionally been used for transaction-based services,
such as payroll administration, as a way to reduce costs. However, many
public and private sector human capital leaders are now advancing it as
an approach that can also help free their staff to focus on core
strategic activities and expand their access to expertise. As the
number, scope, and quality of ASD options, such as reimbursable
services from other agencies and private sector providers, continue to
increase and the experience of agencies continues to mature, human
capital leaders expect that ASD will become an increasingly significant
consideration in the delivery of human capital products and services.
For a broader discussion of the federal government's sourcing policies
and procedures, see the final report of the Commercial Activities
Panel released in April 2002.[Footnote 2]
To obtain a better understanding of federal agencies' use of ASD for
accomplishing their human capital activities, you asked us to report on
how federal agencies determine the human capital activities to retain
and those for which they would consider using outside providers.
Specifically, you asked that we identify (1) the human capital
activities selected agencies are accomplishing through the use of ASD
optionsand the basis on which they decided to use ASD and (2) how the
use of ASD is being managed and the lessons learned by the selected
agencies. The agencies we selected were the Department of Energy (DOE),
the Department of the Interior's U.S. Fish and Wildlife Service (FWS)
and Minerals Management Service (MMS), the National Geospatial-
Intelligence Agency (NGA),[Footnote 3] the U.S. Coast Guard (USCG), the
U.S. Department of Agriculture's (USDA) headquarters, the U.S.
International Trade Commission (USITC), and the U.S. Mint's
headquarters. Agencies were selected through research that identified
them as using ASD for some human capital activities and based on the
recommendations of human capital experts from the National Academy of
Public Administration (NAPA), George Washington University, and a
private sector consultant for federal contract management. The agency
selection process was not designed to produce findings that could be
considered representative of the use of ASD for human capital
activities in the federal government as a whole, but rather to provide
illustrative examples of how selected agencies were using ASD.
To meet our objectives, we analyzed information from a review of the
literature on the use of ASD for human capital activities in both
public and private sector organizations. We then interviewed human
capital officials from the selected agencies to identify the activities
for which they were using ASD, the basis on which they decided to use
it, how the selected agencies managed their use of ASD, and the lessons
learned from the agencies' experiences. Some of the agencies provided
supporting documentation, such as contracts and project plans, for
review. We did not verify the agencies' cost savings estimates. After
reviewing and analyzing the agencies' responses, we developed a
framework for organizing and discussing their use of ASD for human
capital activities. Our review was conducted in accordance with
generally accepted government auditing standards from August 2003
through February 2004. Appendix I provides additional information on
our scope and methodology.
Results in Brief:
The selected agencies reported using ASD for the full range of their
human capital efforts including their transaction-based,
administrative, and strategy and policy support activities. For the
purposes of this report, we grouped the activities the agencies
provided through ASD into three tiers and identified the primary
drivers and options associated with each tier.[Footnote 4]
Figure 1: Summary of Selected Agencies' ASD Characteristics for Three
Tiers of Human Capital Activities:
[See PDF for image]
[End of figure]
All of the agencies said they used ASD for some activities in tier I,
such as payroll administration and employee assistance programs. In
addition to freeing staff to focus more on core activities,[Footnote 5]
agency officials regarded purchasing services, such as payroll, from
specialized providers as a way to reduce costs through economies of
scale. All of the agencies used ASD for some activities in tier II,
such as components of their training development and delivery, often to
focus on core activities and respond to reductions in human capital
staffing. They used a mix of options to accomplish both tier I and tier
II activities, including interagency reimbursable services and private
sector contracts. In a more recent development in the use of ASD,
agencies reported gaining access to expertise as a primary driver for
activities in tier III. These included projects such as workforce
planning and organizational development, which involved the formulation
of human capital strategy and policy support. Almost all of the eight
agencies used ASD for a tier III activity and generally used the
private sector as their ASD option for these developmental and
consulting services. Of the selected agencies, the Mint was the only
one engaged in a competitive sourcing initiative involving most of its
human capital functions.
The selected agencies approached their management of ASD in similar
ways and shared similar lessons learned about the process. The
approaches and lessons are consistent with those we have identified as
part of our larger body of work on sourcing practices.[Footnote 6]
Agency officials generally agreed that any human capital activity that
did not require an intimate knowledge of the agency, oversight, or
decision-making authority could be a suitable ASD candidate. In
practice, however, there were differences in their choices of
activities for which they used ASD. A lesson learned about making ASD
decisions included the need to understand the complexity and
requirements of an activity prior to making a decision. Human capital
officials said that they used a number of different methods to develop
their ASD contracts and select their providers, and several emphasized
specifying flexible terms with measurable performance standards in
their contracts as essential requirements for meeting ASD objectives.
Agencies used both formal and informal ways of monitoring their
contracts. They noted using similar types of performance measures to
assess their ASD use depending on the type of activity. For example,
several said they used customer satisfaction surveys to check the
effectiveness of their ASD efforts for their employee services and used
established models to evaluate their training efforts. Agency officials
said that finding an ASD provider with whom they could build a
relationship was an important aspect of monitoring. Agencies noted that
they used the Office of Personnel Management's (OPM) Training and
Management Assistance (TMA) program to aid their management of ASD,
which provided them with access to a pool of professionals who could
help them select providers and negotiate and monitor agreements. As the
President's agent and adviser for human capital activities, OPM also
has a central role in agencies' management of ASD through its authority
to oversee management of human capital activities.
Agency officials pointed to the need for partnering with other federal
agencies to learn from each other about effective ways to use ASD for
their human capital activities. OPM sees as part of its role the need
to develop tools and provide support to agencies in their human capital
transformation efforts and to assist in making the federal government a
high-performing workplace. In addition, OPM has expressed a desire to
improve oversight of human capital contracts. In light of this, this
report contains a recommendation to the Director of OPM to work with
the Chief Human Capital Officers (CHCO) Council[Footnote 7] to serve as
a resource in sharing and distributing information, such as metrics and
lessons learned, about agencies' use of ASD for human capital
activities.
We provided a draft of this report to the Director of OPM and the
departments representing the eight agencies for their review and
comment. We received written comments from OPM and the Department of
the Interior, which are included in appendixes III and IV. OPM stated
that the report contained a good model for looking at human capital ASD
use and that the recommendation was consistent with the agency's
concern for human capital contracting, for which OPM has the lead.
However, they expressed concerns that the report did not address the
efforts of their human capital officers in helping agencies improve
their human capital practices or how agencies ensure that their ASD
providers comply with regulatory and statutory requirements. We did not
assess the actions of the OPM human capital officers because their role
did not surface in our interviews with agency officials. Regarding the
concern of ensuring functions provided through ASD meet appropriate
federal regulatory and statutory requirements, we agree with OPM's
concern and believe our recommendation can help address this important
issue OPM raises. The Department of the Interior suggested that GAO or
OPM conduct an additional study that would examine the quality and
value of various ASD products and providers to allow agencies an
objective comparison of providers for similar services. The other
agencies generally had no comments on the report or technical
corrections.
Background:
Recent research on private sector companies indicates that many
companies are using ASD, generally referred to in the private sector as
"outsourcing," as an integral and permanent part of their human capital
strategies. Along with extensive use of technology and consolidation of
service delivery units, outsourcing accompanies the desire of many
human capital offices to move their focus from transaction-based
activities toward becoming more of a strategic partner. A 2002
Conference Board study, based on responses from 125 surveyed companies,
found that two-thirds currently outsource a major human capital
activity and most of these companies are seeking to expand their
outsourcing activities.[Footnote 8] The study reported that pressure to
cut costs, improve the quality of human capital services, gain access
to specialist expertise and technology, and free staff to concentrate
on core business activities drove the companies' outsourcing decisions.
Slightly more than 50 percent of survey respondents reported that they
had fully achieved their outsourcing objectives, 42 percent had
partially achieved them, and less than 1 percent of outsourced human
capital functions had been brought back in-house. A December 2003 study
from the Corporate Leadership Council found, from a survey of 162 of
its member organizations, that most human capital activities continue
to be largely performed in-house, although aspects of almost every
activity are outsourced.[Footnote 9]
The research on the private sector's use of outsourcing also indicates
that the range of human capital activities outsourced is increasing.
According to a 2003 report from the University of Southern California,
the large corporations they surveyed were most likely to outsource
employee assistance and benefits administration.[Footnote 10] This
report noted that compensation, benefits, employee training, human
resource information systems, recruitment, performance appraisal,
affirmative action, and legal affairs all showed statistically
significant increases in the use of outsourcing from 1995 to 2001. No
activity was less likely to be outsourced in 2001 than it was in 1995.
In addition, some organizations are following a path where they
transfer the majority of their human capital activities to a single
contractor.
Research on the federal government's use of human capital ASD includes
a 1997 NAPA report that was intended to provide federal managers and
human capital staff with a practical guide to the issues that must be
addressed in approaching ASD for human capital functions.[Footnote 11]
The report recommended that because of the risks involved with ASD,
including a potentially negative effect on the general workforce,
agencies must recognize that its use requires careful planning. It
maintained, however, that as in the private sector, federal government
executives were in a position of managing a decrease in resources along
with increased performance expectations and that ASD was a viable
approach to help meet this challenge.
Federal agencies have a number of ASD options available to them.
Examples include human capital services offered by other federal
agencies, contracts with private sector and nonprofit organization
providers, and partnerships with other organizations. USDA's National
Finance Center is an example of an interagency service provider,
supporting a number of other federal agencies, including GAO, with
automated information systems services for personnel and payroll.
Private sector providers of human capital services have increased in
both their number and the range of their services geared toward the
federal human capital community. For instance, in 2000 the General
Services Administration (GSA) introduced a new schedule of contracts
from more than 50 different contractors for activities such as
recruitment and position classification. Another ASD option includes
the use of partnerships with other organizations, which may not
necessarily involve exchanges of funds. The Bureau of the Census, for
example, partnered with national, state, and local organizations to
help the agency recruit census takers for the 2000 Census.[Footnote 12]
Appendix II has more detail on ASD options available to federal
agencies.
Selected Agencies Reported Using ASD for the Full Range of Their Human
Capital Activities:
Human capital officials from the selected agencies reported using ASD
for a variety of specific human capital activities that we grouped into
"tiers," a construct we created to discuss how agencies use ASD for
similar types of human capital activities; they are not discrete
categories, but rather groups of activities that overlap. All of the
agencies used ASD for at least some tier I activities, such as payroll
and employee assistance programs, and tier II human capital activities
involving the implementation of human capital policy and strategy. Most
of the agencies had contracted for assistance, generally with the
private sector, for tier III activities, such as special projects
involving workforce planning and organizational assessments. Of the
eight agencies, the Mint was the only agency currently engaged in a
competitive sourcing initiative involving most of its human capital
functions.
Agencies Regarded ASD Use for Tier I Activities as a Way to Reduce
Costs in Some Cases and to Free Staff to Focus on Core Activities:
Similar to private sector experience, agency officials regarded the use
of ASD for some of the tier I activities involving transactional human
capital functions, the acquisition and maintenance of technology, and
specialized services as a way to reduce or avoid costs. Agencies have
been using ASD for these activities for a number of years, and updated
cost savings estimates were not available. In general, however, using
ASD for more standardized, transactional activities allows human
capital offices to make use of high-volume providers' investments and
capabilities that realize economies of scale. For instance, OPM is
leading the effort to collapse the operations of 22 executive branch
agencies that currently run payroll systems into what will eventually
be only two systems at a projected savings of $1.1 billion through
fiscal year 2012.[Footnote 13] We reported that it is evident that cost
savings can be found by reducing the number of payroll systems operated
and maintained by the federal government and avoiding the costs of
updating or modernizing those systems, but have noted the significant
challenges in realistically estimating the financial savings from this
initiative.[Footnote 14] Likewise, although cost savings estimates were
not available, agency officials regarded consolidating the purchase of
human resource information systems and specialized services that would
be expensive to duplicate internally, such as purchasing commercial-
off-the-shelf software or using a specialized provider of employee
assistance programs, as a way to reduce individual costs to the agency.
In prior work on how companies were taking strategic approaches to
acquiring services, we noted one tactic involved using a companywide
approach to procuring services. When the companies analyzed their
spending on services, they realized that individual units of the
company were buying similar services from numerous providers, often at
greatly varying prices. In some cases, after this analysis, thousands
of suppliers were reduced to a few, enabling the companies to negotiate
lower rates.[Footnote 15]
Common examples of the types of tier I activities for which the eight
agencies used ASD are:
* payroll processing,
* components of human resource information technology,
* employee assistance programs,
* health screening and wellness services,
* employee fitness programs, and:
* drug and alcohol testing.[Footnote 16]
As previously noted, federal agencies have used ASD for tier I human
capital activities for a number of years. NAPA reported in 1997 that
human capital outsourcing by federal agencies was already substantial
in these areas.[Footnote 17] All of the agencies used ASD for some of
their tier I activities, and most of the agencies reported using ASD
for their payroll administration and at least some component of their
information technology. NGA, for example, partnered with another agency
to share contracts for human capital information technology development
and maintenance. NGA said that the arrangement allowed it to access
expertise not resident in-house and promoted knowledge transfers
between the two agencies. Using ASD for traditional employee services
was also common among the selected agencies. Many of them used ASD for
their employee assistance programs, wellness and fitness centers,
health units, or drug and alcohol testing, often using interagency
services to provide these functions. By going to outside providers for
these specialized services, agency officials believed that they were
able to focus more on core activities in addition to gaining
efficiencies by joining other agencies' efforts. A DOE official, for
example, said that the department used ASD for its fitness centers to
avoid liability issues so that, for example, if an employee were
injured using the center it would not be the responsibility of the
department. DOE also reported joining another department's large
contract for drug and alcohol testing to reduce its workload by not
having to commit resources to contracting for the service itself.
Officials also said they gained the benefit of having a neutral third-
party provider, which was believed to be important because employees
may be less likely to use services such as employee assistance programs
when internally provided due to confidentiality issues.
Agencies Regarded ASD Use for Tier II Activities as a Way to Free Staff
to Focus on Core Activities:
All of the selected agencies used ASD for at least one of their tier II
activities, which involve the implementation of human capital policy
and strategy, including advisory services. Common examples of the
agencies' ASD tier II activities are:
* training development and delivery,
* classification and staffing support,
* classification appeals and reviews,
* equal employment opportunity (EEO) and administrative investigations,
* recruitment, and:
* mediation.[Footnote 18]
Many of these activities entail services dealing with recruiting,
developing, and retaining employees, and they occupy the middle ground
between the primarily technical work in tier I and the increased
strategic focus needed for tier III activities. Drivers for this tier
of activities included freeing staff to focus on core activities and
supplementing a lack of staff to perform the activity. Tier II
activities often involve partial outsourcing, using ASD for only a
component of the human capital function, whereas a tier I activity such
as drug testing may be completely outsourced. NGA's Training and
Doctrine Directorate, for example, used OPM's TMA program to select and
evaluate providers for its Leadership Program. The agency used a
combination of in-house expertise and contractors to design and deliver
the leadership training.
Within tier II activities, components of training development and
delivery were the most frequently cited human capital activities for
which the agencies used ASD. NAPA's 1997 report also noted outsourcing
of training by federal agencies as substantial.[Footnote 19] As one
example, USDA turned to a private sector contractor to help develop the
design for a corporate leadership development program to prepare upper-
level managers for future leadership roles at USDA. One of the
rationales for relying on a contractor was that the contractor had the
research edge on best practices gleaned from completing needs
assessments with other organizations. In addition to using the private
sector, several agencies used the training services of providers such
as the USDA Graduate School and the Federal Executive Institute. OPM is
also working on another training tool for federal agencies to use. E-
Training, one of OPM's e-government initiatives, is designed to create
a governmentwide e-Training environment to support the development of
the federal workforce and provide a single source for on-line training
and strategic human capital development for all federal employees. OPM
expects that its initiative will allow agencies to focus their own
training efforts on unique needs, thus maximizing the effectiveness of
their expenditures on workforce performance.
Agencies also used ASD for tier II activities such as investigations,
mediation, classification and staffing, and recruiting. FWS, for
example, contracted for classification appeals and studies, EEO and
administrative investigations, and mediations. The agency maintained
that ASD was useful in this case because, given the sporadic nature of
some of these activities, it could contract for services only when it
needed them. MMS contracted with a retired employee to perform
staffing, classification, and employee relations functions. Two of the
agencies used ASD for some component of their recruitment function. For
example, although the contract is new and NGA has not yet directly
tracked changes due to this initiative, the agency anticipates that
contracting for some of its recruitment activities will provide better
customer service and help confront reduced human capital staffing.
Agencies Regarded ASD Use for Tier III Activities as a Way to Gain
Access to Expertise:
Tier III activities, which involve the formulation of human capital
strategy and policy support, represent a more recent application of ASD
for human capital activities. Examples of the agencies' tier III ASD
activities are:
* strategic workforce planning,
* skills gap analysis,
* strategic human capital management planning,
* organizational assessment survey,
* performance management system,
* pay compensation, and:
* benchmarking.[Footnote 20]
These activities involved expanding their base of expertise and gaining
access to new ideas and methodologies. All but one of the agencies
reported using ASD for some activities within tier III, often using
private sector providers.
Several agencies noted that the use of ASD for tier III activities
enabled their human capital offices to obtain access to the right mix
of skills quickly in order to meet critical deadlines, thereby
providing the agency with new tools and capabilities. USITC, for
example, through OPM's TMA program, contracted for initiatives in
strategic workforce planning. The agency used contractors to help
define its human capital vision and models and to develop occupation
guides and a human capital plan. USDA teamed with a contractor to
conduct a skills gap analysis to identify critical workforce skills and
analyze skills gaps. USDA reported that the contractor provided third-
party objectivity in retrieving and assessing information, used its own
technology to analyze data, and produced a model based on its own
scientific expertise that assisted USDA managers in determining
workforce skills needs for closing the gaps in the next 5 years. USCG
contracted for the use of OPM's Organizational Assessment Survey after
sporadic, unsatisfactory in-house attempts to manage the survey
development, administration, data collection, analysis, and required
reporting. Instead of investing in three full-time employees
supplemented by six part-time employees that USCG believed would be
needed to manage an annual survey, it reduced the resources needed to
manage the survey effort to one full-time employee supplemented by two
part-time employees. According to an agency official, the estimated
annual cost for the project was reduced by approximately $300,000.
The Mint Is Engaged in a Human Capital Competitive Sourcing Initiative:
All of the above examples of ASD for the three tiers of activities
concerned were specific activities that were outsourced to a variety of
different providers. Within private sector human capital offices,
however, there is a beginning trend toward aggregating multiple human
capital activities into one ASD contract. The 2002 Conference Board
report on human resources outsourcing trends found that although most
of the companies they surveyed used more than one source provider, 12
percent of the companies surveyed outsourced the bulk of their human
capital functions to a single provider and 9 percent were in the
process of doing so or plan to over the next 3 years.[Footnote 21]
Aggregating activities into one contract can result in better
contracting leverage. This is riskier, however, in terms of the
complexity of the arrangement and the assumption that one vendor can
deliver and maintain the same level of service previously provided in-
house or by a variety of different providers.
The Mint was the only one of the eight selected agencies currently
considering using one ASD provider for the majority of its human
capital activities through a competitive sourcing initiative governed
by the Office of Management and Budget's (OMB) Circular No. A-76. The
initiative involves all of the Mint's human capital functions except
employee and labor relations and policy, and the agency expects to
complete the competitive sourcing study no later than February 2005.
Although a Mint official reported challenges maintaining morale and
staff during the formal cost comparison, the agency expects that the
study will eventually result in reduced costs. Our work looking at the
progress selected agencies were making in establishing competitive
sourcing programs also found that ensuring and maintaining morale was a
challenge for those agencies.[Footnote 22] NAPA reported that trust
between agency leaders and employees can be shaken by the consideration
of nontraditional staffing.[Footnote 23] In addition, employees may
suffer stress-induced illness, increased absenteeism, hostility, and
depression, other symptoms of changed organizations. The report noted
that providing an authoritative source for employees to get accurate
information minimizes the unknown and helps control rumors and
miscommunication.
Selected Agencies Approached Their Management of ASD in Similar Ways
and Shared Similar Lessons Learned:
We examined the agencies' management of ASD by looking at their
approaches to three phases of contract management. The phases included
(1) making the sourcing decision, (2) developing the contract and
selecting the provider, and (3) monitoring the provider's performance.
Our review also identified some of the lessons the agencies learned and
the role that OPM plays in assisting agencies with their management of
ASD.
Agencies Approached Sourcing Decisions in a Similar Way on a Conceptual
Level but Showed Differences in Practice:
To make a sourcing decision, organizations need to determine whether
internal capability or external expertise can more effectively meet
their needs. The Commercial Activities Panel, chaired by the
Comptroller General of the United States, noted that determining
whether the public or the private sector would be the most appropriate
provider of the services the government needs is an important, and
often highly charged, question.[Footnote 24] The report also stated
that determining whether internal or external sources should be used
has proved difficult for agencies because of systems and budgeting
practices that (1) do not adequately account for total costs and (2)
inhibit the government's ability to manage its activities in the most
effective manner possible. In prior work examining the competitive
sourcing initiatives of selected agencies, we reported that several
agencies had developed strategic and transparent sourcing
approaches.[Footnote 25] The approaches included the comprehensive
analysis of factors such as mission impact, potential savings, risks,
current level of efficiency, market conditions, and current and
projected workforce profiles. To make good human capital sourcing
decisions, NAPA's ASD report also suggested identifying constraints on
the process, such as the lack of capacity within the organization to
manage the ASD contract and the legal, regulatory, and ethical issues
related to the governmental nature of the work.[Footnote 26]
The selected agencies reported similarities on a conceptual level in
how they made their sourcing decisions. Officials generally agreed
about which human capital activities were suitable candidates for ASD.
Their considerations were consistent with the Commercial Activities
Panel sourcing principles. For example, agency officials recognized
that some activities are inherently governmental[Footnote 27] or are
functions that should be performed by federal workers and that both
quality and cost factors should be considered.[Footnote 28] The general
consensus was that virtually any activity could be an ASD candidate as
long as it did not require an intimate knowledge of the agency or
involve oversight or decision-making authority that should belong with
the agency. There was also general consensus that ASD should be
considered in situations where it could improve quality without
increasing costs or keep the same quality at a lower cost and in
situations where activities cannot be accomplished with the agency's
current skills and resources. Some of the agencies excluded from ASD
any activity directly related to policy, while one official maintained
that policy development, as opposed to policy decision making, was
appropriate for ASD.
Notwithstanding the broad conceptual agreement among the agencies, they
showed differences in their choices of human capital ASD activities.
This may be partially due to differences in the activities they deemed
to be essential to the agency or to the human capital office. The USITC
Human Resources Director, for example, noted that USITC staffing was a
function that required intimate knowledge of the agency and one that it
would not consider for ASD. Private sector research also indicates that
some companies are reluctant to outsource activities such as employee
communications, assessment, and recruiting because they are critical to
the company's corporate culture and provide a "personal
touch."[Footnote 29] The differences may also be due to variations in
existing capacity and in how ASD was used in the agencies' overall
human capital strategy. FWS, for example, noted that as the agency
continues to identify areas for consolidation and efficiency, it sees
its use of ASD increasing as a means to provide better customer service
and supplement human capital skills not present in the current
workforce. Several of the agencies, NGA and USITC in particular,
remarked that ASD was integral to their overall human capital strategy.
In fact, an NGA official said that the agency was established in 1996
with a design that encouraged the use of ASD. On the other hand, USDA
stated that it used ASD primarily to meet critical deadlines.
Lesson learned: Understand the complexity and requirements of the
activity prior to making an ASD decision. In order to strategically and
objectively make a sourcing decision, several agency officials
emphasized the importance of laying out ASD requirements and goals and
letting these expectations guide the process. In order to do this and
to manage for results, they underscored the importance of knowing as
much as possible about the complexity and requirements of the activity
before making an ASD decision. As a USCG human capital official
expressed it, throwing a "problem" over the transom to a provider and
waiting for a "solution" to be thrown back is not a viable model.
Similarly, a human capital official from MMS said that in cases where
ASD did not work well, there was a lack of a clear vision about the
work to be done, and a NAPA panel report examining human capital
outsourcing experiences noted that from the contractor's viewpoint,
poorly defined requirements are a major flaw in government management
of outsourcing.[Footnote 30] To help solve this problem, one of the
leading commercial practices for outsourcing of information technology
(IT) services includes incorporating lessons learned from peers who
have engaged in similar sourcing decisions.[Footnote 31]
Agencies Approached Developing Their Contracts and Selecting Their
Providers Similarly:
The ASD contract defines the legal terms of the relationship between
the agency and the provider and sets the expectations for service
levels and delivery of essential services. These critical requirements
are captured in the contract as fundamental expectations. The
development of the contract is the foundation on which the relationship
with the provider is built, and once the agency understands the
essential contractual requirements, it can begin to identify providers
that can meet its needs.[Footnote 32] According to the NAPA human
capital ASD report, the scope of the activity being converted to ASD
and its relative criticality to the agency mission should determine the
level of effort needed to develop the contracts and select the
providers.[Footnote 33]
Human capital officials from the agencies reported using similar
methods to develop their ASD contracts and select their providers.
Officials said that they followed the guidance provided by the contract
and procurement office representative who solicited the bids and
awarded the contract. NGA stated that its general strategy was to rely
on agency subject matter experts who created detailed statements of
work. For example, the agency expert in the interpreting field provided
the expertise needed for cost comparison, evaluation, and program
management for NGA's interpreting services. Officials listed reputation
and experience of the provider as important factors in the selection
process. Some agencies noted using the panel award approach to select
providers. To select its employee assistance program provider, for
example, NGA assembled a panel comprised of agency officials who
conducted interviews with each of the candidates and required the
finalists to make presentations. Some officials stressed the importance
of using established contract vehicles, such as GSA's contract schedule
or OPM's TMA program, because it made the procurement process easier.
Agencies also noted that joining other agencies' contracts reduced the
administrative effort needed on their part in terms of contract
development.
Lesson learned: Articulating ASD contract terms that are flexible but
include identified outcomes and measurable performance standards is an
essential requirement for meeting ASD objectives. After determining
what the use of ASD should accomplish, several agencies shared the
importance of translating these expectations in the ASD contract into
flexible terms with measurable outcomes. Accordingly, an essential part
of the contract is to define the level and quality of service required
of the ASD provider as well as specific evaluation criteria. A Mint
official said that performance-based contracts with metrics and quality
assurance plans helped the agency ensure that expectations were met.
Congress and OMB have also encouraged greater use of performance-based
contracting, which emphasizes spelling out the desired end result,
while leaving the manner in which the work is to be performed up to the
contractor. Other attributes of performance-based contracting include
measurable performance standards; quality assurance plans that describe
how the contractor's performance will be evaluated; and positive and
negative incentives, when appropriate.[Footnote 34] In developing
contracts and selecting providers, leading commercial practices for
acquiring IT services also suggest that the contract must be flexible
enough to adapt to changes.[Footnote 35] The practices note that the
contract should include clauses for issues such as resolving disputes
promptly, conducting regularly scheduled meetings, and declaring a
significant event that can lead to a change in the contract. A Mint
contract, for example, specified how the contract would be changed if
access to desired data was not an option.
Agencies Also Approached Monitoring Performance in Similar Ways:
The monitoring phase of ASD management involves ensuring that the ASD
provider is meeting performance requirements. The previous phases
addressed the extensive preparation that must precede the ASD
provider's assuming responsibility for an activity. Monitoring includes
examining performance data for specific activities and making sure that
the overall objectives for using ASD are being met. According to
commercial practices, organizations need to examine internal service
levels as well as maintain an external view of the performance of other
ASD providers to make certain that their current relationship is still
advantageous to the organization.[Footnote 36]
The agencies reported both formal and informal ways of monitoring their
ASD contracts. A contracting officer's technical representative (COTR)
or a designee generally performed the formal oversight on an ongoing
basis with line managers being in position to perform the informal
monitoring. DOE, for example, described monitoring its human capital
processing functions by having a COTR work in conjunction with the
program or technical monitors, DOE's office of procurement, and the
direct customers to ensure that problems were resolved and needs and
expectations met. NGA looked at the measures built into its quality
assurance plans, which included descriptions of the deliverables,
performance standards, acceptable quality levels, and methods used to
assure quality, such as random testing. The agency also noted that it
periodically checks prices with outside service providers to make sure
it is not paying more than the market rate for the contracted services.
An MMS human capital official said that accountability for monitoring
the overall success of the ASD strategy for a particular function
belongs to the line manager responsible for that function, who
determines if program goals are being met.
Many of the agencies said that they used performance measures as part
of their ASD monitoring process. The types of metrics used varied with
the types of ASD human capital activities, but generally included
elements of quality or timeliness. For projects dealing with human
capital strategy and policy support, agencies mentioned that along with
quality, their measures included timely completion and evaluation of
interim deliverables during the project. The USITC Human Resources
Director stressed that when using ASD for a specific project, it was
important to incorporate ongoing milestones into the contract as
markers for how well the project is progressing. Agencies using ASD for
training and development activities also reported using similar
measures to monitor the success of the activities. For example, NGA and
DOE stated that they used a multilevel training evaluation
model[Footnote 37] to assess the effectiveness of the methodology,
media, and delivery mechanisms used by their ASD providers. Several of
the agencies used client satisfaction surveys to gauge the quality of
their employee services provided through ASD. USCG, for example, used
surveys and had one-to-one contact with members who used its employee
assistance program.
Lesson Learned: Creating a relationship with the ASD provider is key to
resolving issues that may arise in addressing concerns and directing
work. Human capital officials emphasized that smooth and constructive
interaction between the agency and the ASD provider at an operational
level is crucial to achieving the expectations of the ASD arrangement.
Relationship management goes beyond the structure of the contract and
if a good relationship exists between the agency and the ASD provider,
many problems that may arise can be worked out. As the USITC Human
Resources Director remarked, the agency needs to have the capacity to
manage relationships, not just contracts, with ASD providers. In
looking at leading commercial practices for outsourcing IT services, we
included relationship management as one of three critical success
factors contributing to successful outsourcing, a capability that must
be present to implement good outsourcing practices.[Footnote 38] The
Director of OPM also emphasized the importance of program managers'
ability to work inside partnerships and relationships to help develop a
new paradigm of government-contractor relationships. She said that OPM
plans to analyze human capital contracts that were poorly managed and
use those lessons to improve the process.[Footnote 39]
OPM Has a Central Role in Assisting Agencies' Management of ASD:
OPM has a central role in agencies' management of ASD by providing
assistance and guidance in operating human capital programs. As the
President's agent and adviser for human capital activities, OPM's
overall goal is to aid federal agencies in adopting human resources
management systems that improve their ability to build successful,
high-performance organizations. The agency's five e-government
initiatives are examples of this effort. In addition, several agencies
used OPM's TMA program to help them manage their ASD efforts. The TMA
contracting vehicle assists government agencies with training and human
capital technical assistance projects. (See fig. 2 for more details.)
OPM's TMA program may be appropriate when agencies have a need for (1)
outside expertise to help define human capital needs and frame
requirements, (2) help doing something the agency has never done
before, (3) short-term help to get a specific task accomplished because
internal resources are not available, (4) long-term supplemental
assistance to accomplish ongoing, mission-critical objectives and
activities, and (5) plans to competitively source certain learning or
human capital activities or functions. USITC, for example, used TMA to
screen and qualify a select group of contractors to assist the agency
in its workforce planning initiatives. The agency's Human Resources
Director said TMA facilitated USITC's ability to appropriately identify
a contractor that could work best in the agency's culture. She also
noted that the TMA program assists smaller agencies in gaining clout
with contractors because of the program's large volume of contracts.
Figure 2: Description of OPM's Training and Management Assistance
Program:
[See PDF for image]
[End of figure]
OPM also plays a role in assisting agencies' management of ASD through
its authority to oversee management of human capital activities. The
Director of OPM has called for more rigorous oversight of federal
contracts used to acquire personnel management services for agencies
and their employees.[Footnote 40] In addition, to ensure professional
oversight of contracts, OPM has instructed the Federal Executive
Institute and the management development centers to begin to train and
retrain a new cadre of program managers with the skills necessary to
manage relationships and establish partnerships with their peers in the
procurement industry. The CHCO Academy, created by OPM to educate chief
human capital officers about human capital management issues, included
outsourcing human resource services as one of its agenda topics.
While OPM has made efforts to help agencies with their human capital
ASD initiatives, there are additional opportunities to assist the
agencies in compiling, analyzing, and disseminating information on
federal agencies' use of ASD for human capital activities. Several
agency officials noted that having a clearinghouse of ASD information,
such as posting information on ASD projects and providers, and more
communication sharing in general would help them manage their ASD
projects. They observed that joining other agencies with existing
contracts can be an effective strategy and that communication among
agencies about the reputation of ASD providers plays a role in their
selection process. An NGA official noted that (1) partnering with other
federal agencies could provide a venue to learn from each other versus
developing individually and (2) agencies could learn more from each
other's ASD accomplishments and mistakes. OMB, for example, is
developing a competitive sourcing data-tracking system to facilitate
the sharing of competitive sourcing information by allowing agencies to
identify planned, ongoing, and completed competitions across the
government. The agency plans to use the system to generate more
consistent and accurate statistics, including those on costs and
related savings.[Footnote 41] The importance of sharing information
about human capital ASD efforts has recently gained attention as a few
agencies have signed large contracts for human capital services.
Legislation creating the CHCO Council also highlighted the importance
of this activity by detailing that one of the responsibilities of the
Council is to advise and coordinate agency activities for improving the
quality of human resources information.[Footnote 42]
Conclusions:
Recent studies looking at private sector organizations suggest that ASD
use for human capital activities is being leveraged to achieve a
variety of strategic and tactical objectives within human capital
offices. The range of human capital activities and the reported
objectives for the selected agencies' use of ASD indicated the same.
Although more evaluation needs to be done, the agencies' use of ASD for
activities such as strategic human capital management and workforce
planning showed that ASD provides access to new skills, expertise, and
technology that can facilitate implementation of new human capital
initiatives. Likewise, freeing human capital staff from transactional
and administrative tasks such as payroll administration and training
delivery pointed to cost savings and an improved ability to focus on
mission-critical activities.
Given its potential benefits, it appears that, similar to its use in
the private sector, the use of ASD for human capital activities will
increase among federal agencies. There currently is not, however, a
widely shared body of knowledge about federal agencies' use of ASD for
human capital activities. By sharing experiences and lessons learned,
agencies may be able to tap into the benefits of using ASD while
avoiding some of the problems. Although OPM's TMA program appears to
help agencies manage their use of ASD, OPM could supply another
necessary link to the agencies by providing comprehensive information
about how to use ASD for human capital activities. The CHCO Council
could be an excellent vehicle to assist in this area.
Recommendation for Executive Action:
Given the need expressed by agency officials about the importance of
sharing data and lessons learned concerning the use of ASD for human
capital activities and consistent with OPM's ongoing efforts in this
regard, we recommend that the Director of OPM take the following
action:
* Work with the CHCO Council to create additional capability within OPM
to research, compile, and analyze information on the effective and
innovative use of ASD and strengthen its role as a clearinghouse for
information about when, where, and how ASD is being used for human
capital activities and how ASD can be used to help agency human capital
offices meet their requirements. OPM should work with the CHCO Council
to disseminate the type of spending data that human capital offices
could use to leverage their buying power, reduce costs, and provide
better management and oversight of their ASD providers. Such data would
include the types of human capital services being acquired, which ASD
providers are being used for specific services, how results are being
measured, and how much is being spent on specific ASD activities.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Director of OPM, the
Secretary of Agriculture, the Secretary of Defense, the Secretary of
Energy, the Secretary of Homeland Security, the Secretary of the
Interior, the Chairman of the International Trade Commission, and the
Director of the Mint. We received written comments from OPM and the
Department of the Interior, which are included in appendixes III and
IV. OPM stated that the report contained a good model for looking at
human capital ASD use and that the recommendation was consistent with
the agency's concern for human capital contracting, for which OPM has
the lead. OPM expressed concern, however, that we had not addressed the
role of its human capital officers in helping agencies improve their
human capital practices or how agencies ensure that their ASD providers
comply with regulatory and statutory requirements. We did not assess
the actions of the OPM human capital officers because their role did
not surface in our interviews with agency officials about their use of
ASD for human capital activities. Regarding the concern of ensuring
functions provided through ASD meet appropriate federal regulatory and
statutory requirements, we agree with OPM's concern and believe our
recommendation can help address this important issue OPM raises. In
addition, the Department of the Interior suggested that it would be
helpful if GAO or OPM followed this report with a further study that
would examine the quality and value of various ASD products and
providers to allow for comparisons of similar services. We believe that
our recommendation will also help address this concern. Based on
comments from DOE that we received by e-mail, we clarified our
definition of core activities. DOE also suggested an alternative way to
group human capital activities. We believe that the framework is
adequate for the discussion and summary for which it was intended. The
Department of Defense, USCG, and USDA noted that they had no comments
on the report. USITC and the Mint had several technical comments that
we incorporated.
As agreed with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 15 days
after its date. At that time, we will provide copies of this report to
other interested congressional parties, the Director of OPM, and the
federal agencies and offices discussed in this report. We will also
make this report available at no charge on the GAO Web site at
[Hyperlink, http://www.gao.gov].
If you have any questions about this report, please contact me or
William Doherty on (202) 512-6806 or at mihmj@gao.gov or
dohertyw@gao.gov. Other contributers are acknowledged in appendix V.
Signed by:
J. Christopher Mihm:
Managing Director, Strategic Issues:
[End of section]
Appendixes:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
The objectives of this report were to:
* identify the human capital activities selected agencies are
accomplishing through the use of alternative service delivery (ASD)
optionsand the basis on which they decided to use it and:
* describe how the use of ASD is being managed and the lessons learned
by the selected agencies.
To address these objectives, we first synthesized information from a
literature review including articles, studies, and reports on the use
of ASD for human capital activities in both public and private sector
organizations. We also gathered information from a variety of sources,
such as our past work on agencies' contracting efforts and other
reports on federal agencies' use of ASD, to characterize the ASD
options currently being used by federal agencies to accomplish their
human capital activities.
On the basis of this work, we identified a set of federal agencies
varying in size and mission that were using ASD for at least some of
their human capital activities. We consulted with human capital experts
from George Washington University, the National Academy of Public
Administration, and a private sector consultant for federal contract
management to assess whether they thought particular agencies in this
set would yield examples of ASD use for human capital activities. On
the basis of their suggestions and our previous research, we focused on
ASD practices in eight federal agencies: the Department of Energy
(DOE), the Department of the Interior's U.S. Fish and Wildlife Service
(FWS) and Minerals Management Service (MMS), the National Geospatial-
Intelligence Agency (NGA), the U.S. Coast Guard (USCG), the U.S.
Department of Agriculture's (USDA) headquarters, the U.S. International
Trade Commission (USITC), and the U.S. Mint's headquarters. The agency
selection process was not designed to produce findings that could be
considered representative of the use of ASD for human capital
activities in the federal government as a whole, but rather to provide
illustrative examples of how the selected agencies were using ASD.
We conducted semistructured interviews with human capital officials
from the selected agencies to gather information on (1) the human
capital activities for which the agencies were using ASD, (2) the basis
of their decisions, (3) how they were managing the use of ASD, and (4)
the lessons they had learned. Some agencies provided documents such as
final ASD projects, project plans, interagency service agreements, and
contracts, which we reviewed. We did not verify the agencies' cost
savings estimates. After reviewing and analyzing the agencies' material
and responses to our interview questions, we developed a framework for
organizing and discussing their use of ASD for human capital
activities. (See fig. 1.) As shown in our framework, the activities are
grouped into three overlapping tiers based on whether the activity had
more of a technical or a strategic focus. We then identified the
primary drivers and the primary ASD options used for each tier. Our
work was conducted from August 2003 through February 2004 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Examples of Alternative Service Delivery Options Available
to Federal Agencies for Accomplishing Human Capital Activities:
Federal agencies have a variety of types of ASD options available to
help them accomplish their human capital activities. The options
include mechanisms that provide reimbursable services from one agency
to another and contracting with the private sector. Agencies also
provide reimbursable services that help other agencies gain access to
private sector contracts. The options listed below are some examples of
ASD mechanisms used by federal agencies to accomplish their human
capital activities.
Intragovernmental Revolving Fund Services:
Intragovernmental revolving (IR) funds provide common support services
required by many federal agencies. An IR fund conducts continuing
cycles of businesslike activity within and between government agencies.
It charges for the sale of products or services and uses the
collections to finance its operations, usually without a requirement
for annual appropriations. Each IR fund is established by law.
Generally, the specific legal authorities creating IR funds authorize
these funds to enter into intragovernmental transactions and provide
flexibility by allowing the client agency's fiscal year funds to remain
obligated, even after the end of the fiscal year, to pay for the goods
or services when delivered.
One businesslike entity providing human capital services is the U.S.
Department of Agriculture's National Finance Center (NFC) in New
Orleans. NFC provides a variety of other federal agencies with
automated information systems services for personnel, payroll, and
voucher and invoice payment systems and services.
Franchise Fund Services:
The Government Management Reform Act of 1994 authorized the Office of
Management and Budget (OMB) to designate six franchise fund pilots to
provide common administrative services on a fully reimbursable basis.
Franchise funds are a type of intragovernmental revolving fund that
were created to be fully self-supporting competitive businesslike
entities within the federal government. The franchise fund pilots are
located in the Departments of Commerce, Health and Human Services, the
Interior, the Treasury, Veterans Affairs, and at the Environmental
Protection Agency. The six pilots provide a variety of common services,
such as acquisition management, financial management services, and
employee assistance programs. The legal authorities creating the
franchise funds are similar to those of other IR funds. However, most
of the franchise funds have the specific authority to carry over into
the next fiscal year up to 4 percent of the annual income of the fund
for capital equipment and financial management improvements. Most other
IR funds do not have this authority.
The Treasury franchise fund service, for example, contains multiple
business units operating under the brand name FedSource. FedSource
offers various human capital services such as recruitment, employee
assistance, position classification, and alternative dispute
resolution through contracts with multiple vendors experienced in
providing human capital services in the federal sector.
Cooperative Administrative Support Unit Services:
Cooperative administrative support units (CASU) have provided services
since 1986 and most operate under the authority of the Economy Act of
1932 as amended. CASUs are entrepreneurial organizations that provide
the full range of support services on a reimbursable basis to federal
agencies. Federal agencies in a local community identify services that
they would like to share under the leadership of one or more host
agencies. The host agency is reimbursed for all costs incurred in
providing the services to customer agencies. Several CASUs provide
services in conjunction with a franchise fund and operate under the
authority of the franchise fund, which allows them to make use of
provisions more expansive than those of the Economy Act, including
permitting the customer agency's fiscal year funds to remain obligated
to pay for services when delivered, even after the end of the fiscal
year.
The Southeast Regional CASU (SER-CASU) is an example of a chartered
unit within the National CASU Network. SER-CASU offers human capital
services, such as employee assistance program support and training
services.
Interagency Contract Service Programs:
Federal agencies also use fee-for-service interagency contract service
programs. The programs are being used in a wide variety of situations,
from those in which a single agency provides limited contracting
assistance to an all-inclusive approach in which the provider agency's
contracting office handles all aspects of the procurement. The
increased use of interagency contract service programs has come about
as a result of reforms and legislation passed in the 1990s, which
allowed agencies to streamline the acquisition process, operate more
like businesses, and offer increasing types of services to other
agencies.
The Office of Personnel Management's Training and Management Assistance
(TMA) program is an example of an interagency contract service program.
The TMA program operates under the IR fund established by 5 U.S.C. §
1304(e). It is an expedited contracting process for federal agencies
seeking human capital management and development in areas such as
knowledge management, training, and workforce planning. For a fee,
clients access project managers, technology, and prequalified
contractors with the intended result of time and cost savings compared
to the agency undertaking its own procurement actions.
Contracting for Services:
Contracting can be defined as the hiring of private sector firms or
nonprofit organizations to provide a good or service for the
government. In contrast to the use of IR funds, CASUs, and interagency
contract service programs, the agency uses its own contracting
authority to enter into a contract with a company and manages the
contract.
For example, the Department of Homeland Security has awarded a contract
to a company to help design a human capital strategic plan, which would
assist the department in aligning its human capital requirements with
its mission needs.
Partnerships:
Partnerships can be defined as voluntary alliances with other
organizations. They do not necessarily involve the exchange of funds.
For example, the Census Bureau's Partnership and Data Services program
continues and expands upon more than 140,000 organizational
partnerships established during Census 2000. During the census, the
Bureau relied on its extensive network of partners at the national,
state, and local levels to help recruit employees for more than half a
million temporary jobs.
[End of section]
Appendix III: Comments from the Office of Personnel Management:
UNITED STATES OFFICE OF PERSONNEL MANAGEMENT:
WASHINGTON, DC 20415-1000:
OFFICE OF THE DIRECTOR:
JUN 09 2004:
Mr. J. Christopher Mihm:
Managing Director, Strategic Issues:
U.S. General Accounting Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Mihm:
Thank you for providing the Office of Personnel Management (OPM) the
opportunity to review and respond to your proposed report entitled
Human Capital: Selected Agencies' Use of Alternative Service Delivery
(ASD) Options for Human Capital Activities (GAO-04-679).
The report contains a good model for looking at three tiers of what GAO
calls "Human Capital Activities," though the activities span the
continuum from basic human resources management systems to strategic
human capital planning. The descriptions and analyses of "Tier 1, 11,
and 111" are useful in imparting some order to the wide array of ASD
arrangements that exist among Federal agencies.
The report recommends OPM work with the Chief Human Capital Officers
Council to research, compile, and analyze information on ASD use in
Government and strengthen its role as a clearinghouse for information
about how ASD can best be used to assist agencies in leveraging buying
power, reducing costs. and obtaining the highest returns on
investments. This recommendation is consistent with my concern for the
contracting workforce overseeing human resources/human capital
contracts for which OPM has the lead, Additionally. OPM will continue
to demonstrate our strong leadership role in setting policy and
standards. and in providing guidance to agencies. A major outcome of
this leadership role would be the identification of "best-in-class"
providers for human capital activities and the identification of
accepted industry-wide standards for such activities.
We are concerned, however, that the report does not reflect the ongoing
efforts of our Human Capital Officers (HCO) to help agencies improve
their Human Capital practices, regardless of the level of ASD
involvement. Our HCOs work closely with agencies and expect their
agencies to keep them fully informed as to their efforts in planning
for ASD options. Additionally, the report does not address how agencies
ensure that their ASD providers comply with regulatory requirements. In
other words, while agencies may obtain the services through a variety
of sources, agencies remain accountable for ensuring compliance with
regulatory and statutory requirements, such as veterans' preference,
merit system principles and prohibited personnel practices.
As agencies consider outsourcing their HC Programs, OPM is developing
guidance to ensure non-Government entities perform these functions in
ways that are accountable and transparent on behalf of the Government.
We appreciate this opportunity to respond to you in this matter, If you
need further information, you may contact Marta Brito Perez, Associate
Director for OPM's Human Capital Leadership and Merit System
Accountability Division by phone at 242-606-1575, or email at
marta.perez@opm.gov.
Sincerely,
Signed by:
Kay Coles James:
Director:
[End of section]
Appendix IV: Comments from the Department of the Interior:
United States Department of the Interior:
OFFICE OF THE ASSISTANT SECRETARY:
POLICY, MANAGEMENT AND BUDGET:
Washington, DC 20240
JUN 7 2004:
Mr. Bill Doherty:
Assistant Director, Strategic Issues:
U.S. General Accounting Office
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Doherty:
We appreciate having the opportunity to review the Draft Report
entitled, "Human Capital: Selected Agencies' Use of Alternative Service
Delivery Options for Human Capital Activities" (GAO-04-679). Our
general comments to the draft report are as follows:
We believe it would be helpful if the General Accounting Office or the
Office of Personnel Management would follow up with a further study
that examines the quality and value of various Alternative Service
Delivery (ASD) products and providers. As the report mentions, the
subject agencies are paying widely differing amounts for the same
services; for example, use of expertise and use of technology. Also,
the report mentions the quality of the services received varies
greatly. At present, there is no mechanism that allows for an easy
objective comparison of providers for like services.
Again, thank you for providing the opportunity to review and comment on
this report. If you have any questions, please call Ms. Angela Herring,
Minerals Management Service's Audit Liaison Officer, at (202) 208-3976.
Sincerely,
Signed for:
P. Lynn Scarlett
Assistant Secretary, Policy, Management and Budget:
[End of section]
Appendix V: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
J. Christopher Mihm, (202) 512-6806 or mihmj@gao.gov William J.
Doherty, (202) 512-6806 or dohertyw@gao.gov:
Acknowledgments:
Judith Kordahl and Caroline Villanueva also made key contributions to
this report.
(450196):
FOOTNOTES
[1] U.S. General Accounting Office, Human Capital: Selected Agency
Actions to Integrate Human Capital Approaches to Attain Mission
Results, GAO-03-446 (Washington, D.C.: Apr. 11, 2003).
[2] Commercial Activities Panel, Final Report: Improving the Sourcing
Decisions of the Government (Washington, D.C.: 2002).
[3] The National Geospatial-Intelligence Agency (NGA) was formerly
known as the National Imagery and Mapping Agency (NIMA).
[4] We are using the construct of "tiers" of activities to discuss
similar types of human capital activities that are not discrete
categories, but rather groups of like activities with some degree of
overlap among the tiers.
[5] We use the term "core activities" throughout the report to refer to
those areas where the human capital office can add strategic value and
act as a strategic partner with the agency.
[6] See, for example, U.S. General Accounting Office, Information
Technology: Leading Commercial Practices for Outsourcing of Services,
GAO-02-214 (Washington, D.C.: Nov. 30, 2001).
[7] The CHCO Council, headed by the Director of OPM, is responsible for
advising and coordinating agencies' efforts concerning modernization of
their human resources systems, improvement of the quality of human
resources information, and legislation on human resources operations
and organizations.
[8] Lisa Gelman and David Dell, HR Outsourcing Trends (New York: The
Conference Board: 2002).
[9] Corporate Leadership Council, Strategic HR Outsourcing: A
Quantitative Assessment of Outsourcing Prevalence and Effectiveness
(Washington, D.C.: Corporate Executive Board: December 2003).
[10] Edward E. Lawler III and Susan Albers Mohrman, Creating a
Strategic Human Resources Organization: An Assessment of Trends and New
Directions, Center for Effective Organizations, Marshall School of
Business, University of Southern California, Stanford University Press
(Stanford, Calif.: 2003).
[11] National Academy of Public Administration, Alternative Service
Delivery: A Viable Strategy for Federal Government Human Resources
Management (Washington, D.C.: November 1997).
[12] U.S. General Accounting Office, 2000 Census: Review of Partnership
Program Highlights Best Practices for Future Operations, GAO-01-579
(Washington, D.C.: Aug. 20, 2001).
[13] The e-payroll initiative is one of OPM's five e-government
initiatives aimed at transforming the way human capital functions and
services are carried out in the federal government.
[14] U.S. General Accounting Office, Electronic Government: Progress
and Challenges in Implementing the Office of Personnel Management's
Initiatives, GAO-03-1169T (Washington, D.C.: Sept. 23, 2003).
[15] U.S. General Accounting Office, Best Practices: Taking a Strategic
Approach Could Improve DOD's Acquisition of Services, GAO-02-230
(Washington, D.C.: Jan. 18, 2002).
[16] GAO analysis of agency data.
[17] NAPA, Alternative Service Delivery.
[18] GAO analysis of agency data.
[19] NAPA, Alternative Service Delivery.
[20] GAO analysis of agency data.
[21] Gelman and Dell, Outsourcing Trends.
[22] U.S. General Accounting Office, Competitive Sourcing: Greater
Emphasis Needed on Increasing Efficiency and Improving Performance,
GAO-04-367 (Washington, D.C.: Feb. 27, 2004).
[23] NAPA, Alternative Service Delivery.
[24] Commercial Activities Panel, Improving the Sourcing Decisions.
[25] GAO-04-367.
[26] NAPA, Alternative Service Delivery.
[27] An "inherently governmental" activity is an activity that is so
intimately related to the public interest as to mandate performance by
government personnel.
[28] Commercial Activities Panel, Improving the Sourcing Decisions.
[29] Gelman and Dell, Outsourcing Trends.
[30] National Academy of Public Administration, Advancing the
Management of Homeland Security, Lifting the Winner's Curse and
Avoiding Buyer's Remorse: Lessons from HR Outsourcing Experiences
(Washington, D.C.: June 25, 2003).
[31] GAO-02-214.
[32] GAO-02-214.
[33] NAPA, Alternative Service Delivery.
[34] U.S. General Accounting Office, Contract Management: Guidance
Needed for Using Performance-Based Service Contracting, GAO-02-1049
(Washington, D.C.: Sept. 23, 2002).
[35] GAO-02-214.
[36] GAO-02-214.
[37] U.S. General Accounting Office, Human Capital: A Guide for
Assessing Strategic Training and Development Efforts in the Federal
Government, GAO-04-546G (Washington, D.C.: March 2004).
[38] GAO-02-214.
[39] Remarks by Kay Coles James, Director, U.S. Office of Personnel
Management, Human Resource Outsourcing World Conference and Exposition,
New York Hilton, July 30, 2003.
[40] Remarks by Kay Coles James, Director, U.S. Office of Personnel
Management, Human Resource Outsourcing World Conference and Exposition,
New York Hilton, July 30, 2003.
[41] GAO-04-367.
[42] Title XIII of Pub. L. No. 107-296, Nov. 25, 2002, Chief Human
Capital Officers Act of 2002, codified at U.S.C. ch 14.
GAO's Mission:
The General Accounting Office, the investigative arm of Congress,
exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability
of the federal government for the American people. GAO examines the use
of public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO's commitment to
good government is reflected in its core values of accountability,
integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains
abstracts and full-text files of current reports and testimony and an
expanding archive of older products. The Web site features a search
engine to help you locate documents using key words and phrases. You
can print these documents in their entirety, including charts and other
graphics.
Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as "Today's Reports," on its
Web site daily. The list contains links to the full-text document
files. To have GAO e-mail this list to you every afternoon, go to
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order
GAO Products" heading.
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. General Accounting Office
441 G Street NW,
Room LM Washington,
D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov
Automated answering system: (800) 424-5454 or (202) 512-7470:
Public Affairs:
Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 U.S.
General Accounting Office, 441 G Street NW, Room 7149 Washington, D.C.
20548:
