Overseas Presence
State and USAID Should Adopt a Comprehensive Plan to Improve the Consolidation of Overseas Support Services Gao ID: GAO-06-829 September 8, 2006The Department of State (State) has embassies in about 180 countries, and the U.S. Agency for International Development (USAID) maintains missions in about 90 of those countries. At many posts, State and USAID are located on separate compounds and maintain multiple support service operations, such as warehouses. However, the United States is in the process of building new embassy compounds that will collocate all agencies, creating opportunities for greater sharing of services. In September 2004, we recommended that State pursue the elimination of duplicative support structures at overseas facilities. We reviewed (1) the status of State and USAID's joint initiative to consolidate overseas services, and plans for advancing the initiative; and (2) the challenges State and USAID face in these efforts.
State and USAID have demonstrated the feasibility of consolidating overseas support services and are seeking to expand their efforts. In June 2004, State and USAID initiated pilot projects at four posts to demonstrate the feasibility of consolidating support services. The four posts that participated in the pilot successfully consolidated 12 of the 16 support services, such as residential property maintenance, and reported operational efficiencies and costs avoided. For example, Dar es Salaam eliminated several positions and Phnom Penh improved motor pool and housing procedures. State and USAID learned valuable lessons from the pilot projects. They have directed posts to begin the process of identifying duplicative services and initiating consolidation efforts. As of July 2006, nine posts had responded, but only one had advanced beyond the planning stage. The two agencies face several challenges in consolidating services at posts. The challenges include the need for State and USAID in Washington and at posts to address concerns that USAID's costs may increase if services are consolidated, develop better cost and performance data, reduce the number of locally employed staff and reduce or replace U.S. direct hires with locally employed staff, communicate better, and resolve technical differences. During our work, State and USAID took steps to address some of these challenges. For instance, in June 2006, the two agencies produced a draft strategy that defines broad goals and sets forth a common vision-to combine at collocating posts all State and USAID services into a single administrative structure and reduce the number of U.S. direct hire personnel. This is a positive step. However, our analysis of the draft strategy shows that it does not include a plan that details milestones, specific goals, timelines, and performance measures or accountability mechanisms to demonstrate results.
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-06-829, Overseas Presence: State and USAID Should Adopt a Comprehensive Plan to Improve the Consolidation of Overseas Support Services
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Report to the Chairman, Subcommittee on National Security, Emerging
Threats, and International Relations, Committee on Government Reform,
House of Representatives:
United States Government Accountability Office:
GAO:
September 2006:
Overseas Presence:
State and USAID Should Adopt a Comprehensive Plan to Improve the
Consolidation of Overseas Support Services:
Overseas Consolidation:
GAO-06-829:
GAO Highlights:
Highlights of GAO-06-829, a report to the Chairman, Subcommittee on
National Security, Emerging Threats, and International Relations,
Committee on Government Reform, House of Representatives
Why GAO Did This Study:
The Department of State (State) has embassies in about 180 countries,
and the U.S. Agency for International Development (USAID) maintains
missions in about 90 of those countries. At many posts, State and USAID
are located on separate compounds and maintain multiple support service
operations, such as warehouses. However, the United States is in the
process of building new embassy compounds that will collocate all
agencies, creating opportunities for greater sharing of services. In
September 2004, we recommended that State pursue the elimination of
duplicative support structures at overseas facilities. We reviewed (1)
the status of State and USAID‘s joint initiative to consolidate
overseas services, and plans for advancing the initiative; and (2) the
challenges State and USAID face in these efforts.
What GAO Found:
State and USAID have demonstrated the feasibility of consolidating
overseas support services and are seeking to expand their efforts. In
June 2004, State and USAID initiated pilot projects at four posts to
demonstrate the feasibility of consolidating support services. The four
posts that participated in the pilot successfully consolidated 12 of
the 16 support services, such as residential property maintenance, and
reported operational efficiencies and costs avoided. For example, Dar
es Salaam eliminated several positions and Phnom Penh improved motor
pool and housing procedures. State and USAID learned valuable lessons
from the pilot projects. They have directed posts to begin the process
of identifying duplicative services and initiating consolidation
efforts. As of July 2006, nine posts had responded, but only one had
advanced beyond the planning stage.
The two agencies face several challenges in consolidating services at
posts. The challenges include the need for State and USAID in
Washington and at posts to address concerns that USAID‘s costs may
increase if services are consolidated, develop better cost and
performance data, reduce the number of locally employed staff and
reduce or replace U.S. direct hires with locally employed staff,
communicate better, and resolve technical differences. During our work,
State and USAID took steps to address some of these challenges. For
instance, in June 2006, the two agencies produced a draft strategy that
defines broad goals and sets forth a common vision–to combine at
collocating posts all State and USAID services into a single
administrative structure and reduce the number of U.S. direct hire
personnel. This is a positive step. However, our analysis of the draft
strategy shows that it does not include a plan that details milestones,
specific goals, timelines, and performance measures or accountability
mechanisms to demonstrate results.
Figure: State and USAID Collocated Posts, Fiscal years 2006-2011:
[See PDF for Image]
Source: DEpartment of State.
[End of Figure]
What GAO Recommends:
We are recommending that the Secretary of State, in conjunction with
the USAID Administrator, designate overseas service consolidation a
priority; and develop a plan that details the desired end state, and
defines timelines, performance and accountability measures, and
criteria for success. We are also recommending that State and USAID set
timelines for accomplishing the standardization of State and USAID
policies, procedures and systems. State and USAID agreed with the
report and the recommendations.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-829].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Jess Ford at (202) 512-
4268 or fordj@gao.gov.
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
State and USAID Have Consolidated Some Services and Plan Additional
Consolidations:
State and USAID Face Challenges in Expanding Consolidation of Support
Services:
Conclusion:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Posts Where State and USAID Are Currently Collocated:
Appendix II: Posts Currently Planned for Construction During Fiscal
Years 2006-2011 Where State and USAID Will be Collocated:
Appendix III: Results of Workshop on Consolidating Support Services:
Appendix IV: Scope and Methodology:
Appendix V: Comments from the Department of State:
Appendix VI: Comments from USAID:
Appendix VII: GAO Contact and Acknowledgments:
Table:
Table 1: Results of Pilot Services Consolidation Project, June 2004-
October 2005:
Figures:
Figure 1: Posts Where State and USAID are Collocated or Will be
Collocated Based on Current Construction and USAID Deployment Plans,
Fiscal Years 2006-2011:
Figure 2: The Location of State and USAID on the New Embassy Compound
in Dar es Salaam:
Abbreviations:
ICASS: International Cooperative Administrative Support Services:
OMB: Office of Management and Budget:
USAID: U.S. Agency for International Development:
United States Government Accountability Office:
Washington, DC 20548:
September 8, 2006:
The Honorable Christopher Shays:
Chairman:
Subcommittee on National Security, Emerging Threats, and International
Relations:
Committee on Government Reform:
House of Representatives:
Dear Mr. Chairman:
The Department of State (State) has embassies in about 180 countries,
and the U.S. Agency for International Development (USAID) maintains
missions in about 90 of these countries. At many overseas posts, State
and USAID are located on separate compounds and maintain multiple
warehouses, motor pools, and other support service operations. However,
the United States is in the process of building new embassy compounds
that will collocate all agencies, including State and USAID, under the
authority of a chief of mission, creating opportunities for greater
sharing of services.[Footnote 1] In September 2004, we recommended that
State aggressively pursue the elimination of duplicative support
structures at overseas facilities with the goal of limiting each
service to the one provider best able to provide a quality service at
the lowest possible price.[Footnote 2] Further, the President has
emphasized the importance of safety, efficiency, and accountability in
U.S. government staffing overseas by designating the achievement of a
"rightsized" overseas presence as part of the President's Management
Agenda.[Footnote 3] One of the elements of rightsizing is to eliminate
and consolidate duplicative services. State and USAID have initiated an
effort to eliminate and consolidate duplicative services at posts with
both a State and USAID presence, starting with pilot projects at four
posts.
This report examines (1) the status of State and USAID's joint
initiative to consolidate overseas services, and plans for advancing
the initiative; and (2) the challenges that State and USAID face in
consolidating services at posts. This report is one of three recent
reports that address your interest in rightsizing the U.S. presence
abroad. The other two reports discussed State's initiative to provide
support services remotely[Footnote 4] and the U.S. government's overall
effort to rightsize its presence overseas.[Footnote 5]
To address our objectives, we reviewed plans and studies describing
State's and USAID's efforts to consolidate services. We also met with
officials of several State and USAID regional and functional bureaus,
as well as private and public sector organizations with knowledge of or
firsthand experience consolidating and providing shared services. In
January and February 2006, we conducted fieldwork at three posts that
participated in the pilot projects--Cairo, Egypt; Dar es Salaam,
Tanzania; and Phnom Penh, Cambodia--and held a teleconference with the
fourth--Jakarta, Indonesia. We also conducted fieldwork in Nairobi,
Kenya, a post that is planning to consolidate State and USAID services.
We obtained and analyzed studies documenting the results of the pilot
projects and lessons learned, as well as the challenges encountered by
State and USAID. We also reviewed numerous studies documenting
consolidation and shared services lessons learned and benefits, and we
convened a workshop in May 2006 consisting of State and USAID
officials, as well as two experts on governance and shared services, to
further discuss and analyze these lessons in the context of State's and
USAID's initiative. This workshop not only provided participants with
an opportunity to discuss and learn from similar private and public
sector efforts to consolidate support services, but also provided us
with the context for framing our recommendations. Appendix III contains
the results of our workshop. We performed our work from November 2005
through July 2006 in accordance with generally accepted government
auditing standards. (See app. IV for a more complete discussion of our
scope and methodology).
Results in Brief:
State and USAID have demonstrated the feasibility of consolidating
overseas support services and are seeking to expand their efforts. In
June 2004, State and USAID initiated pilot projects at four posts to
demonstrate the feasibility of consolidating support services. The four
posts that participated in the pilot--Cairo, Egypt; Dar es Salaam,
Tanzania; Phnom Penh, Cambodia; and Jakarta, Indonesia--successfully
consolidated 12 of the 16 support services targeted, such as
residential property maintenance, and reported operational efficiencies
and costs avoided. For example, Phnom Penh used the consolidation as an
opportunity to improve standard operating procedures for motor vehicle
and housing services. Dar es Salaam eliminated several positions and
replaced a U.S. direct hire position with an eligible family member
position.[Footnote 6] State and USAID learned valuable lessons from the
pilot projects and are expanding their efforts to consolidate services
at other posts. In December 2005, State and USAID directed posts to
begin the process of identifying duplicative services and initiating
consolidation efforts. As of July 2006, nine posts had responded, but
only one had advanced beyond the planning stage.
State and USAID face several challenges in consolidating services at
all posts. The challenges include the need for State and USAID in
Washington and at posts to address concerns that USAID's costs may
increase if services are consolidated, in part because of embassies'
reliance on higher-cost U.S. direct hire staff,[Footnote 7] even though
overall U.S. government costs will decrease; develop better cost and
performance data; reduce the number of locally employed staff and
reduce or replace U.S. direct hire staff with locally employed staff
who are less expensive to employ; communicate better; and resolve
technical differences. During the course of our work, State and USAID
have taken steps to address some of these challenges. For instance, in
April 2006, State took steps to encourage the regional bureaus to
replace U.S. direct hires with locally employed staff. In addition, in
June 2006, the two agencies produced a draft strategy that defines
broad goals and sets forth a common vision--to combine at collocating
posts all common State and USAID services into a single administrative
structure and reduce the number of U.S. direct hire personnel. These
are positive steps. However, our analysis of the draft strategy shows
that it does not include a plan that details milestones, specific
goals, timelines, and performance measures or accountability mechanisms
to demonstrate results.
We are recommending that the Secretary of State, in conjunction with
the USAID Administrator, designate overseas services consolidation a
priority and develop a comprehensive plan that provides a detailed
picture of the desired end state and defines timelines, performance and
accountability measures, and results-oriented criteria for success. We
are also recommending that State and USAID set timelines for
accomplishing the standardization of State's and USAID's policies,
procedures, and systems.
State and USAID agreed with the report and our recommendations and said
that they are actively working to consolidate overseas support
services.
Background:
The operation of U.S. embassies requires basic support services for
overseas personnel, such as motor pool, residential property leasing,
warehousing, and others. Many non-State government agencies, including
USAID, operate overseas under the authority of a chief of mission and
require such services. Under a State Department-administered system
known as the International Cooperative Administrative Support Services
(ICASS) system, the costs of support services are divided among
agencies that have personnel at post and representatives of
participating agencies are part of a council that tracks and evaluates
service provider performance. While many agencies participate in ICASS,
it is for the most part a voluntary system; agencies can opt out of all
but two services.[Footnote 8] Reasons for doing so can include a desire
to retain control over service providers, an agency's belief that costs
can be minimized by providing the services itself, or because the
agency is not located on the main embassy complex. For these and other
reasons, at many overseas locations, agencies maintain multiple
warehouses, motor pools, procurement operations, and other services.
USAID, for example, provides its own services in many of the
approximately 90 countries where it has a presence. At some posts,
USAID is the largest agency that maintains its own separate, sometimes
duplicative, support services.
State plans to construct 65 new embassies and consulates over the next
6 fiscal years and State and USAID will be collocated at 37 of these
locations, providing considerable opportunities for consolidating the
agencies' services.[Footnote 9] For instance, the new embassy office
compound in Addis Ababa, Ethiopia, slated for construction in fiscal
year 2007, will provide space for both State and USAID. Figure 1 shows
the posts where State and USAID are collocated and will be collocated
over the next 6 years, based on current embassy construction plans and
USAID deployment plans. Figure 2 shows the new embassy compound in Dar
es Salaam, where State and USAID are now collocated. Appendix I
provides a listing of the 44 posts where State and USAID are currently
collocated, and Appendix II provides a listing of the 37 posts planned
for construction during fiscal years 2006-2011 where State and USAID
will be collocated, based on current construction and USAID deployment
plans.
Figure 1: Posts Where State and USAID are Collocated or Will be
Collocated Based on Current Construction and USAID Deployment Plans,
Fiscal Years 2006-2011:
[See PDF for image]
Source: Department of State.
[End of figure]
Figure 2: The Location of State and USAID on the New Embassy Compound
in Dar es Salaam:
[See PDF for image]
Source: GAO.
[End of figure]
In accordance with the President's National Security Strategy[Footnote
10] and the President's Management Agenda, State and USAID have begun
to integrate their operations and management structures, producing for
the first time a joint strategic plan in August 2003.[Footnote 11]
While mindful that the agencies remain two separate organizations with
distinct legislative mandates and budgets, the goal of the plan is to
reduce redundancies and costs where possible. As such, the plan states
that, among other things, State and USAID will work with the Office of
Management and Budget (OMB) and other U.S. government agencies to align
the number and location of staff assigned overseas with foreign policy
priorities, security, and other constraints. It also calls for State
and USAID to jointly review their operations at overseas locations and
implement pilot projects in which selected support operations would be
combined to reduce costs, enhance the quality of services provided, or
both. As part of a separate but related effort, State and USAID have
begun to consolidate administrative services at headquarters, including
information technology and financial systems services. In conjunction
with rightsizing efforts, posts receiving a new embassy compound are
required to prepare an analysis of duplicative services and identify
opportunities for consolidation.
To develop priorities and implement strategies for the two agencies,
and monitor progress toward the goals articulated in the strategic
plan, State and USAID established a Joint Management Council, cochaired
by State's Undersecretary for Management and USAID's Deputy
Administrator. The council created eight joint State-USAID working
groups, one of which was formed to identify parallel services performed
by both State and USAID and examine the feasibility of consolidating
services at selected posts, among other things. Within State, the
congressionally mandated Office of Rightsizing[Footnote 12] and the
Office of Global Support Services and Innovation within the Bureau of
Administration lead State's efforts to encourage posts to consolidate
services by providing technical services and direction, including
documenting and posting lessons learned on State's intranet Web site;
at USAID, the Office of Overseas Management Support within the Bureau
for Management plays the same role.
State and USAID Have Consolidated Some Services and Plan Additional
Consolidations:
In June 2004 State and USAID launched pilot projects at four posts to
demonstrate the feasibility of consolidating services. Consolidation
results varied from post to post but overall 12 of 16 targeted services
achieved some level of consolidation. For example, Phnom Penh and Dar
es Salaam merged four services--warehousing, motor pool, residential
maintenance, and leasing. Cairo was the least successful, consolidating
one service, warehouse operations. Jakarta consolidated motor pool,
residential maintenance, and leasing operations, but did not initially
consolidate warehousing. Posts reported some operational efficiencies
and costs avoided, but because of differences in how each post
calculated its benefits, the overall level of cost avoidance and
savings was not fully developed.
State and USAID learned important lessons from the pilot projects,
including the need for posts to determine the scope and pace of
consolidation efforts. State and USAID are expanding their efforts to
consolidate services at other posts. As of July 2006, nine posts had
begun consolidation projects. However, only one had advanced beyond the
planning stage.
Pilot Projects Demonstrate Feasibility of Consolidating Overseas
Support Services:
With assistance from a private contractor, a joint State and USAID
working group from Washington completed a study in May 2004 examining
the feasibility of consolidating duplicative motor pool, warehouse,
residential maintenance, and leasing services at four posts--Cairo,
Egypt; Dar es Salaam, Tanzania; Phnom Penh, Cambodia; and Jakarta,
Indonesia.[Footnote 13] The goal was to combine the best employees,
equipment, and processes from existing operations to ensure that both
agencies and all ICASS customers benefited from improved services at
lower cost to the taxpayer. The study identified significant advantages
to consolidating services, finding in every case that service levels
could be improved and cost could be reduced. The study also recommended
a set of pilot projects for each location and suggested which of the
two service providers--State/ICASS or USAID--should be the lead service
provider but left the final decision up to the individual posts.
According to agency and post officials, the pilot projects began in
June 2004.
As a result of the pilot projects, State and USAID reported that the
four posts had successfully consolidated in full or in part 12 of the
16 services targeted, resulting in operational efficiencies and costs
avoided. The final evaluation of the results of the pilot projects,
completed in October 2005, was based on surveys submitted by the four
pilot posts in June 2005 to the Joint Management Council. However, post-
consolidation customer satisfaction surveys were conducted on only 5 of
the services, providing insufficient data to draw reasonable
conclusions about changes in the quality of services provided. Examples
of operational efficiencies identified include:
* Re-engineered business processes and updated standard operating
procedures. For example, Phnom Penh updated its housing handbook.
* Better use of workspace. For example, combining the warehouses in
Phnom Penh resulted in a 40 percent decrease in the amount of space
used.
* Improvements in the competitive position of the U.S. government. For
example, posts reported that having just one U.S. government provider
responsible for residential leasing eliminated the competition for
residences in the local market.
* Reduced unit costs of service. For example, the unit cost of
providing residential maintenance in Jakarta--a measure of the cost of
maintaining a residence or building--decreased from $1.54 a square foot
before the pilot project to $1.33 per square foot after consolidation
occurred.
The pilot posts reported costs avoided of approximately $386,000
stemming from staff reductions, contract terminations, or other
actions. Table 3 summarizes what the pilot posts reported. Dar es
Salaam later reported that as a result of consolidating services, it
has decided to replace a U.S. direct hire position with a position for
an eligible family member. By doing this, post officials in Dar es
Salaam estimated that they saved an additional $300,000.
Table 1: Results of Pilot Services Consolidation Project, June 2004-
October 2005:
Cairo;
Motor pool: Not consolidated[A];
Warehouse: Consolidated;
Leasing: Not consolidated[A];
Residential maintenance: Not consolidated[A];
Annual cost avoidance: $180,000.
Phnom Penh;
Motor pool: Consolidated;
Warehouse: Consolidated;
Leasing: Consolidated;
Residential maintenance: Consolidated;
Annual cost avoidance: $ 49,000.
Dar es Salaam;
Motor pool: Consolidated;
Warehouse: Consolidated;
Leasing: Consolidated;
Residential maintenance: Consolidated;
Annual cost avoidance: $ 42,000.
Jakarta;
Motor pool: Consolidated;
Warehouse: Not consolidated;
Leasing: Consolidated;
Residential maintenance: Consolidated;
Annual cost avoidance: $114,885.
Total annual cost avoidance;
Annual cost avoidance: $385,885.
Source: October 2005 State and USAID evaluation.
[A] According to post officials, Cairo decided not to consolidate
leasing and residential maintenance services, in part because of a post
analysis that indicated consolidating these services would not reduce
costs. The motor pools were not merged because the post did not believe
this could result in significant savings.
[End of table]
Results Varied by Post:
Posts' efforts to consolidate services varied. Phnom Penh and Dar es
Salaam were the most successful, consolidating all four services, and
Jakarta consolidated three services. By contrast, Cairo, the largest of
the four pilot posts and one of the largest posts in the world, was
only able to consolidate one service.
Phnom Penh:
Phnom Penh successfully merged all four target services and realized
efficiency gains. State and USAID officials described Phnom Penh as the
model project. The post reported that it had reviewed and consolidated
all administrative instructions and standard operating procedures for
motor vehicle services and housing services. In particular, the post
updated its housing handbook, held customer service briefings, and
updated its country clearance cable to ensure that all customers
understood the changes in procedures. The post also reported that it
had instituted USAID's best practice of providing vehicles to the
maintenance staff, allowing its four maintenance teams to operate
independently without additional workload for the motor pool or the
need for additional drivers. Moreover, before consolidation, USAID and
State motor pool drivers occupied two separate offices, but these were
consolidated, making better use of existing space and decreasing
utility costs. Additionally, the post reported that leasing services
were improved by establishing a single point of contact for local
landlords with multiple properties under lease to the U.S. government.
Still further, the consolidation of maintenance services allowed USAID
in Phnom Penh to terminate its maintenance shop lease, which led to
savings in utilities and rent expenses. Finally, by consolidating
warehouse operations, the post reported that it had realized gains in
delivery times and a 40 percent decrease in the amount of space used.
Dar es Salaam:
Dar es Salaam reported several operational efficiencies and costs
avoided from the pilot project. In leasing, the post reported benefits
from the establishment of a single leasing office and by eliminating in
the process the competition between State and USAID. The post also
reported that while State had lacked an adequate assistant maintenance
supervisor before the consolidation of the residential maintenance
function, the acquisition of a highly qualified supervisor from USAID
made the combined section stronger.
Dar es Salaam initially reported that it had avoided $42,000 in costs
by reducing the number of locally employed staff. However, in our
discussions with post officials we found that it has also replaced a
U.S. direct hire position with an eligible family member position.
State's Bureau of Resource Management has computed the average cost of
each overseas position at $400,000 for fiscal year 2007, including
salary, benefits, and support costs, plus a number of costs that apply
only to officials overseas. It also includes costs for providing a
secure building for officers to work in overseas. By replacing a U.S.
direct hire position with an eligible family member position, post
officials estimated that they saved approximately $300,000, chiefly by
not having to pay additional support costs associated with a U.S.
direct hire. For this reason, costs avoided amounted to approximately
$342,000, the most of any pilot post.[Footnote 14]
Jakarta:
Jakarta reported that it was able to consolidate three services,
including leasing, and avoid costs of $114,000. However, post staff we
spoke with in February 2006 indicated that in fact leasing had been
only partially consolidated and that while residential leasing was
taken over by USAID, nonresidential leasing had not been consolidated.
Nonetheless, Jakarta reported gaining some efficiencies. For example,
driver utilization--a measure of the amount of time a driver is in use-
-increased from below 50 percent before motor pool consolidation to 78
percent after consolidation. In addition, post staff indicated that
dropping a $50,000 residential maintenance contract contributed to cost
avoidance.
Cairo:
Cairo reported that it avoided $180,000 in costs mainly by terminating
the USAID warehouse contract. State/ICASS took over the management of
both warehouses, increasing its inventory by 50 percent but leaving the
number of staff the same. Because the USAID and State warehouse
buildings are adjacent to one another, placing them under a single
management structure was a priority. However, although State/ICASS now
oversees warehouse activities for both agencies, operations are not
fully integrated. USAID still has a separate building and post
officials maintained that the separate building is necessary for
keeping track of its inventory, some of which legally must be used only
to support development activities in Egypt and therefore cannot be
merged with State's inventory. State officials contend that effective
monitoring would address the issue and that further efficiencies could
be gained by combining warehouse space.
Cairo did not consolidate the other targeted services for two main
reasons. First, the two agencies are in separate, very distant
compounds. While the embassy is located in central Cairo, USAID's
building is in a suburb of the city. Second, the post reported that
merging leasing, residential maintenance, and motor pool services would
not result in benefits. Cairo's ICASS Council, which includes
management officers and support services personnel from both agencies,
analyzed these services as candidates for consolidation. It found no
evidence that cost avoidance, improvement in service, or change in
staffing levels could be achieved, and therefore recommended they
remain separate. However, post officials also cautioned that their data
was imprecise and was derived from proxies or rough extrapolations. In
addition, State officials questioned the post's conclusion that
consolidating services would not reduce costs or result in operational
efficiencies, suggesting that the post had not explored the full
potential. Moreover, State officials suggested that other services
might be candidates for consolidation, including travel services and
human resource services for locally employed staff.
State and USAID Learned Lessons from the Pilot Projects:
State and USAID have learned some important lessons from the pilot
projects. These lessons were partially detailed in the October 2005
Joint Management Council evaluation, which included a number of
recommendations to improve the initiative, some of which have been
implemented. They included the following:
* Posts, not Washington, should decide whether to consolidate services
sequentially or simultaneously. During the pilot program, Washington
made many of the key decisions, according to post officials in Jakarta,
Cairo, and Dar es Salaam. In addition, posts reported that it was much
easier to consolidate services sequentially. More recently, many of the
key decisions about consolidating services, including whether or not to
consolidate services sequentially or simultaneously, have been left to
post officials. Nairobi, for example, has chosen to consolidate
services sequentially.
* To realize operational efficiencies and eliminate the potential for
increased duplication and operational confusion, certain services, such
as residential leasing and maintenance, should be paired and operated
by a single service provider. During the original pilot projects, these
services were not paired. According to officials in Jakarta, this
resulted in some operational inefficiencies and missed costs avoided.
For example, according to one official in Jakarta, Washington chose to
consolidate only residential leasing, though consolidating all leasing
services would have been more logical. In addition, while State and
USAID decided to consolidate property management, they did not include
supply management, which is closely related. More recently, Nairobi and
San Salvador decided to pair residential leasing and maintenance, among
other services.
* Posts that have consolidated support services should be encouraged to
expand the number of services consolidated. Phnom Penh, for example,
consolidated vehicle maintenance along with motor pool operations and
currently is exploring other possibilities.
In addition, in our discussions with agency and post officials, they
also identified other lessons, including the following:
* The need for chiefs of mission to take a strong and active role in
consolidating services. State and USAID officials attributed Phnom
Penh's positive results in part to the chief of mission's strong
commitment.
* The need for the agencies, particularly State, to make better use of
locally employed staff consistent with security and accountability
requirements in order to reduce the cost of support services overseas.
In July 2006, the State Department Inspector General issued a report
that addressed, in part, the consolidation of duplicative
administrative services. It found that State had done a good job of
consolidating services at posts receiving new embassy compounds, but
had not been as successful in combining services at posts not scheduled
to receive a new embassy compound. The report also found that despite
the Joint Management Council's guidance to eliminate duplicative State
and USAID support services, State and USAID had duplicative services in
22 of the 27 posts that it inspected in fiscal years 2005 and 2006.
State and USAID Are Expanding Their Efforts to Consolidate Services:
State and USAID are expanding their efforts to consolidate services,
relying on posts to identify and eliminate duplicative services and
designate a lead service provider. The approach was defined in a
December 2005 message from State and USAID that provided a status
report on the consolidation initiative, including lessons learned from
the pilot project; recommended collocating posts adopt a model merging
State and USAID services into a streamlined, unified operation; and
defined the services that could be provided by State's Office of Global
Support Services and Innovation. The message also directed chiefs of
mission and USAID mission directors involved in the process of
developing a mission performance plan to lead the effort to consolidate
services at their posts, including the development of short and long-
term consolidation plans. However, according to State and USAID
officials, the message did not go far enough. For example, it did not
define in detail the services that posts could and could not
consolidate. In addition, no detailed guidance was available for posts,
particularly USAID missions, to quickly identify the functions and
their associated costs that should be included in the operational
baseline analysis needed to determine the lead service provider--a
process that USAID mission officials in Jakarta told us was time and
labor intensive because of differences in State's and USAID's
accounting and financial systems and the inclusion of certain
administrative costs within USAID's program functions.[Footnote 15]
Recognizing that additional guidance was needed, in March 2006, State
and USAID developed a template to enable posts to quickly identify and
document the items that should be included as part of the operational
baseline analysis of costs and services. In addition, in April 2006,
State and USAID sent a second message to posts that updated and
clarified the December 2005 guidance. This message defined in detail
the services that posts could and could not consider for consolidation.
Services identified for consolidation included administrative support
functions, such as warehouse management, expendable supplies, and motor
pool services; financial management functions, such as cashiering and
locally employed staff payroll processing; human resource functions,
such as recruitment, and language training at post for Americans; and
joint information technology systems. Services identified as not
subject to consolidation included USAID technical and program
management functions and nonadministrative staff and management
activities that support these functions, and USAID legal advisory
functions. The April 2006 message assumes that collocating posts will
consolidate all administrative functions provided by State/ICASS,
leaving to posts the decision about which agency will serve as the lead
service provider.
Some Additional Posts Have Begun to Plan New Consolidation Projects:
Certain posts have begun to plan new consolidation projects. Officials
in Phnom Penh told us that they intend to consolidate additional
services, and eight other posts---Jakarta, Indonesia; Nairobi, Kenya;
San Salvador, El Salvador; Managua, Nicaragua; Kiev, Ukraine;
Tegucigalpa, Honduras; Pristina, Kosovo; and Cotonou, Benin--have also
begun to plan consolidation projects. However, only one of these posts
has advanced beyond the planning stages, and Nairobi, which started
first and had a timetable calling for State and USAID to consolidate
services before USAID's scheduled September 2006 move into the new
embassy compound, now does not plan to begin consolidating services
until after the move occurs.
Phnom Penh:
Post officials in Phnom Penh told us in February 2006 that they plan to
eventually consolidate all State and USAID services, but they have not
announced any specific plans, deferring any actions to consolidate
additional services until after USAID's move into the new embassy
compound, scheduled for September 2006. Post officials underlined three
main reasons for consolidating all State and USAID services: their
desire to become a model post, an interest in greater efficiencies, and
cost savings.
Jakarta:
In May 2006, the post announced that it had consolidated one additional
service, was in the process of consolidating a second, and planned to
consolidate two other services by November 2006. As of May 2006, USAID
had taken over nonresidential leasing and had begun the process of
taking over warehousing functions. USAID plans to complete its takeover
of warehouse functions by October 2006. However, post officials
reported that one issue, if not resolved, could erase any cost savings
resulting from this effort--the need to reconcile State's personal
property regulations, which require posts to track and account for all
items valued at more than $500 with USAID's much more rigorous
regulations, requiring missions to track and account for all items
valued at more than $100.[Footnote 16] The post has asked State and
USAID to waive USAID's regulations on personal property management.
In addition, the post plans to consolidate procurement and human
resource services for locally employed staff under the leadership of
State/ICASS by November 2006. State/ICASS plans to take over USAID's
administrative procurement function. However, this will not affect
USAID's program-related procurements. In addition, State/ICASS plans to
take over all of USAID human resource functions involving locally
employed staff, such as payroll services.
Nairobi:
In preparation for USAID's move to the new embassy complex, expected in
September 2006, Nairobi plans to consolidate seven services. The post's
original timetable called for State and USAID to consolidate services
before USAID's scheduled move into the new embassy compound. As of June
2006, the post had not begun to consolidate any services.
Nairobi began the process of consolidating support services in April
2005. In August and September 2005, a combined State and USAID team
from Washington, with assistance from a private consultant, conducted
an assessment of services. The team's report, submitted in September,
2005, recommended consolidating six services--motor pool, vehicle
maintenance, non-expendable property, warehousing, expendable property
and administrative supply, residential maintenance, leasing, shipping,
and customs. It also recommended combining all administrative services
and staff into a single organization under the leadership of State/
ICASS, but with a strong role for USAID. As an alternative, the team's
report recommended consolidating the six services under the leadership
of either State/ICASS or USAID.
Post officials decided to consolidate the six services, but not to
combine the services into a single organization in the short term. Five
reasons were given for not adopting this model: differences between the
two agencies on where the savings should be achieved, with USAID
arguing that consolidation should not result in any additional costs
for the agency; the need for Washington to harmonize systems before
certain services could be consolidated at post; ambiguity in lines of
authority; uncertainty over personnel assignments; and skepticism that
meaningful cost savings could be achieved with this combined structure.
Instead, the post decided to adopt the same model used by the pilot
projects involving the provision of services by one of the two service
providers. However, three factors--budget constraints, conflicting
interests of the two agencies, and a lack of effective communication
between Washington and posts--continued to slow the progress of this
effort.
More recently, in June 2006, the post reported that it had decided to
consolidate a seventh service--reproduction services. As of June 2006,
it had not begun to consolidate any service.
San Salvador:
In April 2006, a team from State and USAID in Washington traveled to
San Salvador to assist the post's efforts to consolidate State and
USAID support services, including determining the lead service
provider. A total of nine services were identified for consolidation,
including administrative supplies, motor pool, vehicle maintenance,
nonexpendable property management and warehousing, leasing, residential
maintenance, reception and switchboard, copy services, and mail and
messenger services. The State and USAID team suggested that San
Salvador take several steps to move the initiative forward, including
developing a timeline and an overall plan for implementation. The post
has indicated that it plans to consolidate reception and switchboard,
copy, and mail and messenger services by October 1, 2006. The post
plans to consolidate the other services beginning on April 1, 2007.
Managua:
In May 2006, a Washington team visited Managua to facilitate the post's
consolidation efforts. The team examined motor pool, administrative
supplies, warehouse, residential maintenance, leasing, shipping,
travel, reproduction, reception services, and human resource services
for locally employed staff. Their report recommended that the post
develop an overarching communication plan and form a working group to
manage implementation activities, including conducting a cost analysis,
reviewing service quality, standardizing processes, outlining a plan,
and creating a timeline. The report also stated that if cost savings
cannot be reached within 3 to 6 months, the post should identify a plan
to achieve cost savings over the next 1 to 2 years.
Kiev:
USAID is reducing the size of its mission in Ukraine and is looking to
State to take over some of its administrative services. In addition,
the post is in the process of planning for a new embassy compound. For
these reasons, the post has announced plans to consolidate a number of
State and USAID support services. The services that will be
consolidated are travel services, shipping and customs, warehousing,
and human resource services for locally employed staff. In addition,
the post plans to consolidate motor pool, and residential maintenance
and leasing services. For this purpose, the post has developed and sent
a communications strategy to post personnel and is currently at work on
an implementation strategy and timeline.
Tegucigalpa, Pristina, and Cotonou:
Tegucigalpa plans to consolidate State's and USAID's warehouses in the
summer of 2006. It recently created a task force to examine the
provision of other support services and recommend consolidation where
practicable and plans to consolidate additional support services next
year. However, as of June 2006, the post had not identified the other
support services that it plans to consolidate. In addition, Pristina
has stated that it plans to implement a consolidation project in the
next 2 years, starting with motor pool services. Finally, Cotonou,
Benin, has announced plans to consolidate warehouse, motor pool, and
maintenance services beginning in October 2006.
State and USAID Face Challenges in Expanding Consolidation of Support
Services:
State and USAID face challenges in expanding the consolidation of
support services. The challenges include the need for State and USAID
in Washington and at posts to address concerns that USAID's costs may
increase if services are consolidated due in part to State/ICASS's
reliance on higher-cost U.S. direct hire staff even though overall U.S.
government costs will decrease; develop better cost and performance
data, reduce or replace U.S. direct hire and locally employed staff,
communicate better, and resolve technical differences. During the
course of our work, State and USAID have taken steps to address some of
these challenges. For instance, in April 2006, State took steps to
encourage the regional bureaus to identify and replace U.S. direct
hires with locally employed staff. In addition, in June 2006, the two
agencies produced a draft strategy that defines broad goals and sets
forth a common vision--to combine at collocating posts all State and
USAID services into a single administrative structure and reduce the
number of U.S. direct hire personnel. The steps taken by State and
USAID are a positive development. However, their full impact has yet to
be determined. In addition, the draft strategy is not sufficiently
comprehensive, since it does not include a plan that contains key
elements including specific timelines, accountability mechanisms,
specific goals, and performance measures to show results.
USAID's Concerns about Potential Cost Increases:
USAID officials have expressed concerns that because State/ICASS relies
more heavily on higher-cost U.S. direct hire staff, its costs could
increase if services are consolidated. However, State officials have
argued that by consolidating services, USAID will save a significant
amount of the cost imposed by the Capital Security Cost Sharing
Program, which requires agencies with staff assigned to overseas
missions to pay a portion of the construction costs of new embassy
compounds based on the number of agency staff at all overseas locations
and the type of office space. USAID acknowledges that in some cases, it
will save money by consolidating services under State/ICASS. However,
USAID officials also cautioned that they have not determined the full
budget impact of support service consolidation, taking into
consideration the Capital Security Cost Sharing Program.
An October 2005 memo issued by the post in Nairobi, repeated again in a
message to Washington in June 2006, stated that while the proposed
unified administrative structure had great potential for overall cost
savings to the U.S. government, it would likely result in increased
costs for USAID. It also stated that the probable increased cost to
USAID of ICASS services was a key obstacle that had to be surmounted
before the project could move forward--an assessment that post
officials in Nairobi during our visit in January 2006 agreed was
slowing the progress of the project considerably. In particular, USAID
officials have expressed concern about the effects that increased costs
as a result of service consolidation could have on its operating
expense budget. USAID officials in Washington stated that while USAID's
program budget worldwide has increased since fiscal year 2001, its
operating expense budget, adjusted for inflation, has remained
essentially flat. In addition, USAID has opened missions in Afghanistan
and Iraq, which have placed additional strains on its operating expense
budget. Our analysis of the data shows that USAID's operating budget
from fiscal year 2001 to fiscal year 2006 increased annually on average
by 2.5 percent.
In addition, while USAID officials recognize that consolidating support
services overseas could result in reduced costs for the U.S. government
as a whole, they have expressed skepticism about State/ICASS's ability
to control or reduce the cost of services. Specifically, these
officials stated that State/ICASS relies more heavily than USAID on
more expensive U.S. direct hire personnel and has in the past
experienced difficulties controlling costs. In September 2004, we found
that State/ICASS costs rose almost 30 percent from 2001 to 2003 because
of State's increased hiring of U.S. direct hire personnel, rising
security costs, and other factors.[Footnote 17] We also reported that
21 out of 23 customer agencies had chosen to reduce their participation
in ICASS during the same period. More recently, OMB rated ICASS's
performance only as "adequate" in part because of the program's
inability to control costs, which according to OMB, have increased an
average of 7.5 percent since fiscal year 2001.[Footnote 18]
However, State officials have argued that by consolidating services
under State/ICASS, USAID could save a significant amount of the cost
imposed by the Capital Security Cost Sharing program as they would
likely have fewer staff assigned to embassies. Under the Capital
Security Cost Sharing Program, agencies with staff assigned to overseas
missions pay a portion of new embassy compound construction costs based
on the number of agency staff at all overseas locations and the type of
office space.[Footnote 19] The agencies' share of embassy construction
costs is phased in over a 5-year period, beginning in fiscal year 2005.
USAID officials acknowledge that the costs imposed by the Capital
Security Cost Sharing Program could mean that for certain missions it
may make sense to consolidate services under State/ICASS. For example,
according to USAID, a June 2006 examination of support services
provided by USAID in Gaborone, Botswana, determined that by
consolidating services under State/ICASS, the post could save
approximately $78,000 per year, chiefly by reducing the number of
locally employed staff and terminating the lease on a warehouse.
However, USAID officials also cautioned that the Capital Security Cost
Sharing Program is relatively new and its full effect is uncertain.
Posts Lack Reliable Cost Data:
In its October 2005 evaluation of the pilot project, State and USAID
reported that consolidating services at the pilot posts resulted in
costs avoided estimated at approximately $386,000. However, agency
officials indicated that this estimate is imprecise and based on
figures provided by posts, which themselves stem in part from
extrapolations or proxies. Post officials stated that because certain
performance and cost data was lacking, data often was not available to
make valid before-and-after comparisons, forcing them to use rough
approximations.
Several factors complicated posts' efforts to estimate cost avoidance.
First, State and USAID use different budgeting and accounting methods,
and did not follow the same methodology for developing cost
information. For example, State and USAID's motor pool logs do not
capture the same information and therefore cannot be used to make
direct comparisons. In addition, some USAID staff manage multiple
services but do not closely monitor time spent on each, making it
difficult to disaggregate the cost of a service. Further, during the
pilot project, posts did not have good guidance for reconciling
different accounting rules for transferring assets, such as building
space and vehicles. This caused uncertainty in valuations and raised
questions about how to calculate one time costs.
Reluctance to Reduce Staff:
To achieve cost benefits from consolidation, State and USAID need to
reduce or replace U.S. direct hire staff where appropriate or better
utilize locally employed staff. According to the October 2005 Joint
Management Council evaluation, significant savings from consolidation
of services can only occur if there is a reduction in the number of
U.S. direct hire staff overseas. Although officials from both agencies
in Washington and in the field recognize this fact, only one of the
pilot posts--Dar es Salaam--was able to achieve such an
outcome.[Footnote 20] Dar es Salaam decided to replace a U.S. direct
hire position--a State Department assistant general services officer--
with an eligible family member.[Footnote 21]
Post officials we spoke with in Phnom Penh and Dar es Salaam said that
they were reluctant to implement reductions in force, in part because
of a lack of consistent guidance from State and USAID, choosing to
combine the two workforces and transfer the cost of personnel from one
agency to another, or rely on slow attrition to achieve this reduction.
According to agency and post officials, the failure to implement
reductions in force of locally employed staff has reduced the overall
impact of consolidating services. The October 2005 evaluation stated
that Washington needed to provide detailed guidance to posts on both
U.S. and locally employed position reductions resulting from service
consolidation. Post officials also attributed their reluctance to
reducing the number of locally employed staff to other factors. For
example, post officials in Nairobi and Dar es Salaam told us that their
reluctance to reduce the number of locally employed staff also stemmed
from loyalty to their staff, many of whom have worked for the United
States for many years and were present during the 1998 embassy
bombings. In addition, post officials cited concerns about diminishing
morale.
State has demonstrated potential cost avoidance from reducing staff
positions overseas. For example, State reported that a rightsizing
initiative in Addis Ababa, Ethiopia, avoided approximately $14.2
million in construction costs for the new embassy compound. According
to State, the initiative avoided construction costs by reducing the
number of projected staff positions by 79--including 36 U.S. direct
hire staff. However, we have not validated State's reported cost
avoidance.
USAID has argued that one way State can reduce the cost of providing
support services is by replacing U.S. direct hire personnel,
particularly State Department general service officers, with locally
employed staff. State has estimated the average cost of employing a
locally employed staff member, including salaries and benefits, at
approximately $24,000.[Footnote 22] USAID tends to use locally employed
staff extensively, and these staff often play a key role in the
mission's operations and programming. However, State tends to use
locally employed staff to a lesser degree because of requirements
involving entry into secure parts of the chancery and other factors. In
June 2006, the post in Nairobi asked State and USAID in Washington to
clarify the extent to which locally employed staff can substitute for
State Department direct hire general service officers.
In April 2006, State's Undersecretary for Management took steps to
reduce the number of U.S. direct hire staff overseas, requiring State
regional executive directors to submit by June 1, 2006, a list of U.S.
direct hire positions for conversion to locally employed staff.
Moreover, in June 2006, State and USAID developed a draft strategy that
states, among other things, that posts rightsizing and consolidating
services need to conduct reductions in force of locally employed staff
in a transparent fashion and, where appropriate, to establish plans for
this purpose. However, as of July 2006, the April 2006 message had
resulted in the identification of only 21 U.S. direct hire positions
for conversion. State officials told us in July 2006 that they expect
that the bureaus will identify additional positions. In addition, a
recent survey of posts by the Bureau of Human Resources disclosed that
as of June 2006, 61 embassies had not prepared reduction in force plans
for locally employed staff, and another 30 have plans that are over 10
years old.
Communication between Headquarters and Posts:
State, USAID, and post officials told us that consistent and effective
communication between Washington and the posts has not always been
forthcoming, hampering posts' efforts to develop and implement
consolidation projects. For example, in February 2005 USAID instructed
posts to demonstrate that consolidating services would not result in
increased costs to the agency. The directive showed that there was a
basic philosophical difference between State and USAID about where
savings should be achieved. State/ICASS has argued that saving money
for the U.S. government is the overall goal, and USAID has argued that
any consolidation be cost-neutral for USAID. According to post
officials in Nairobi, the effect of the USAID directive was to cause
confusion about the purpose of consolidating services, slowing the
process, and causing it to be more contentious, since a time-consuming
cost analysis is needed to demonstrate that consolidating services
would not result in increased costs to USAID. According to USAID
officials, as of April 2006, this conflicting guidance remained in
effect. However, State and USAID officials said in June 2006 that they
are trying to address the difference by collaborating on the creation
of a new shared strategic vision for consolidating services.
Technical Differences Will Hamper Efforts to Consolidate Services:
State's and USAID's efforts to consolidate support services face
challenges stemming from having different technical systems, such as
different accounting, financial, and information technology systems and
software. In addition, State and USAID have different regulatory
requirements with respect to accounting for and tracking property.
While State and USAID have recommended that collocating posts adopt a
model merging State and USAID services into a streamlined, unified
operation, Nairobi's experience suggests that State and USAID will not
achieve this goal until these technical challenges are resolved.
State and USAID have incompatible budgeting, accounting, and
information technology systems. As a result, posts have found it
difficult and contentious to determine the most cost-effective service
provider. In addition, the different systems have complicated efforts
to merge operations, such as warehousing. State and USAID have tried to
address these issues by creating a cost analysis template and a
specialized version of their standard costing software application.
However, while posts acknowledge that these tools have helped, they
also stated that the tools have not entirely resolved the problems
caused by incompatible systems.
To identify the most cost-effective service provider, posts must
identify the appropriate functions that must be included in the
analysis and their associated costs. In addition, they must conduct a
side-by-side comparison of the two service providers' cost and quality
of services, and produce a "what if" analysis using a different mix of
inputs, such as vehicles and drivers. This is done to determine the per
unit cost of enlarging the scope of a service, for example, the cost of
transferring vehicles and drivers from one agency's motor pool to
another. To facilitate valid cost comparison, State and USAID have
agreed to use the State/ICASS system to examine costs and created a
special software tool for alternate service providers, such as USAID,
to use. However, posts still face three key problems.
First, the process of putting a value on certain inputs can to a
certain degree be subjective and is based on past performance, not
future requirements. For example, calculating a hypothetical cost for
USAID to provide motor pool services involves placing a value on staff
time spent supervising or operating the vehicle fleet. According to
State and USAID officials, this value can vary substantially among
posts and between agencies because of a lack of standardized rules and
procedures. Oversight of most support services also varies. In
addition, forecasting new requirements on the basis of past performance
can lead to misjudging costs substantially.
Second, most USAID missions do not have experience using the alternate
service provider software. According to State and USAID officials, the
recent development of a template in March 2006 to gather and translate
data related to specific cost centers has reduced the amount of time
and effort required to gather the needed data and create the baseline
analyses needed to compare the two service providers' cost and quality.
In addition, according to State officials, State/ICASS is developing a
new version of the alternate service provider software. According to
State and USAID officials, this software will make it easier for posts,
particularly USAID missions, to identify the appropriate costs that
must be included and produce "what if" analyses. However, State, USAID
and post officials also cautioned that the template will not eliminate
the subjective quality of the cost comparison, and as a result,
quantifying costs will remain a problem. In addition, as of April 2006,
State and USAID officials did not know when the new version of the
alternate service provider software would be released.
Third, State and USAID use different information technology systems to
track and account for property items in their warehouses, manage and
monitor payroll and human resource activities, and communicate
internally and externally, among other things. For instance, State uses
a property tracking system that is different from that of USAID. To
fully integrate their warehousing services, State and USAID will need
to adopt one system. In May 2006, the post in Jakarta asked State and
USAID to allow it to use State's system for tracking property to track
all items in the warehouse, including those of USAID. However, as of
June 2006, post officials indicated that State and USAID had not
responded to Jakarta's request. Post officials also told us that as an
interim measure, they have determined that whichever agency is serving
as the service provider will be utilizing its own guidelines in
providing the services, as is consistent with State/ICASS guidelines
for alternate service providers.
In July 2006, State officials told us that the Joint Management Council
was in the process of developing plans for harmonizing the two
agencies' systems and procedures. However, these plans were not
completed in time for us to analyze them.
State and USAID Need a Comprehensive Plan:
In June 2006, State and USAID developed a draft strategy that defines
broad goals and sets forth a common vision. Among other things, the
draft strategy sets as an immediate goal one of consolidating all State
and USAID services into a combined or single mission administrative
operation for those posts moving into new embassy compounds. It also
sets as a goal the reduction of U.S. direct hire personnel and their
replacement, where appropriate, with locally employed staff. The draft
strategy is a step forward, but our experience shows that the strategy
must be coupled with a more comprehensive, detailed implementation plan
that includes milestones, specific timelines, accountability
mechanisms, more detailed goals, and performance measures to show
results. State officials told us in early July 2006 that the Joint
Management Council is in the process of developing a plan. However, it
was not completed in time for us to analyze the results.
The Government Performance and Results Act of 1993 requires federal
agencies to develop plans and measures to assess progress in achieving
their goals. In particular, it requires agencies to set multiyear
strategic goals in their strategic plans and corresponding annual goals
in their performance plans, measure performance toward the achievement
of those goals, and report on their progress.
The draft strategy outlined by State and USAID in June 2006, while a
step in the right direction, does not provide a detailed map of actions
to take, and for this reason, State and USAID need to define a more
comprehensive plan. For example, the strategy does not identify the
actions that need to be taken to establish a single, joint
administrative structure. Such a structure was recommended for Nairobi
in September 2005, but the post decided not to adopt this structure in
the short term, in part because of skepticism that meaningful cost
savings could be achieved with this structure and the need for
harmonization of State and USAID systems and procedures. In addition,
the strategy does not address the fundamental problem that in some
cases adequate performance measures to fully demonstrate the extent of
cost and operational efficiencies do not exist.
The set of challenges faced by State and USAID as they consolidate
overseas support services are similar to those faced by other
organizations. In May 2006, we convened a workshop with State and USAID
officials as well as outside experts to discuss the most important
issues. The experience of other organizations generally supports our
analysis of the key challenges and highlights the need for strong
leadership, a clear direction, consistent communication, and agreement
on a standard set of procedures and systems. For more detailed
information on outcomes from the workshop, see appendix III.
Conclusion:
State and USAID have taken important steps toward the consolidation of
support services. During the course of our work, relations between
State and USAID improved. State and USAID have begun to integrate
certain operations and management structures and are currently revising
their joint strategic plan. This provides an opportunity to move the
consolidation process forward by addressing the challenges that have
limited the progress of the consolidation effort. If State and USAID
can overcome these challenges, they may have the potential to realize
significant savings and efficiencies. To do so, State and USAID need to
develop a more comprehensive plan that establishes clear goals,
performance targets, and accountability mechanisms.
Recommendations for Executive Action:
We recommend that the Secretary of State, in conjunction with the USAID
Administrator,
* designate overseas services consolidation a priority joint State/
USAID objective;
* define a comprehensive plan that provides a detailed picture of the
desired end state; addresses cost and incentive differences between
agencies; enables clear and consistent communications from headquarters
to post; demonstrates the overall cost benefits of consolidation;
defines timelines, metrics, and results-oriented criteria for success;
and outlines, where appropriate, options for leveraging more locally
employed staff; and:
* set timelines for accomplishing the standardization of State and
USAID policies, procedures, and systems.
Agency Comments and Our Evaluation:
We provided a draft of this report to the Department of State and USAID
for comment. State's and USAID's comments can be found in appendixes V
and VI. We also received technical comments from both State and USAID,
which have been incorporated into the report as appropriate.
State fully agreed with our recommendations. State said that it is
actively working with USAID to address the policy, procedural, and
technical issues identified in our report. State believes that
elimination of duplicative administrative support platforms will result
in overall savings to both State and USAID.
USAID also agreed with the basic findings of our report. USAID said
that it is clear that by consolidating duplicative administrative
operations and eliminating staff, the U.S. government will save
considerable sums of money. USAID said that it and the State Department
are in the process of developing a comprehensive plan to improve the
manner in which support services are managed.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the date of this letter. At that time, we will send copies of this
report to other interested members of Congress, the Library of
Congress, and the Secretary of State. We will also make copies
available to others upon request. In addition, this report will be
available at no charge on the GAO Web site at [Hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-4128. Other GAO contacts and staff
acknowledgments are listed in appendix VII.
Sincerely yours,
Signed by:
Jess T. Ford:
Director, International Affairs and Trade:
[End of section]
Appendix I: Posts Where State and USAID Are Currently Collocated:
Alexandria, Egypt;
Amman, Jordan;
Baku, Azerbaijan;
Basrah, Iraq;
Beirut, Lebanon;
Belgrade, Serbia;
Bishkek, Kyrgyzstan;
Bogotá, Colombia;
Brasilia, Brazil;
Bridgetown, Barbados;
Brussels, Belguim;
Bujumbura, Burundi;
Colombo, Sri Lanka;
Dar es Salaam, Tanzania;
Dhaka, Bangladesh;
Djibouti, Djibouti;
Dushanbe, Tajikistan;
Freetown, Sierra Leone;
Geneva, Switzerland;
Georgetown, Guyana;
Hillah, Iraq;
Islamabad, Pakistan;
Jakarta, Indonesia;
Jerusalem, Israel;
Kabul, Afghanistan;
Lima, Peru;
Luanda, Angola;
Mexico City, Mexico;
Minsk, Belarus;
Monrovia, Liberia;
Moscow, Russia;
New Delhi, India;
Nicosia, Cyprus;
Phnom Penh, Cambodia;
Podgorica, Montenegro;
San Salvador, El Salvador;
Istanbul, Turkey;
Sanaa, Yemen;
Sofia, Bulgaria;
Tashkent, Uzbekistan;
Tirana, Albania;
Ulaanbaatar, Mongolia;
Yerevan, Armenia;
Zagreb, Croatia:
[End of section]
Appendix II: Posts Currently Planned for Construction During Fiscal
Years 2006-2011 Where State and USAID Will be Collocated:
Abuja, Nigeria;
Accra, Ghana;
Addis Ababa, Ethiopia;
Almaty, Kazakhstan;
Antananarivo, Madagascar;
Astana, Kazakhstan;
Asuncion, Paraguay;
Baghdad, Iraq;
Bamako, Mali;
Conakry, Guinea;
Cotonou, Benin;
Dili, East Timor;
Harare, Zimbabwe;
Istanbul, Turkey;
Juba, Sudan;
Kampala, Uganda;
Kathmandu, Nepal;
Khartoum, Sudan;
Kiev, Ukraine;
Kigali, Rwanda;
Kingston, Jamaica;
Kinshasa, Congo;
Lusaka, Zambia;
Managua, Nicaragua;
Manila, Philippines;
Mbabane, Swaziland;
Nairobi, Kenya;
Ouagadougou, Burkina Faso;
Panama City, Panama;
Peshawar, Pakistan;
Port-au-Prince, Haiti;
Pristina, Kosovo;
Quito, Ecuador;
Santo Domingo, Dominican Republic;
Sarajevo, Bosnia;
Skopje, Macedonia;
Tbilisi, Georgia:
[End of section]
Appendix III: Results of Workshop on Consolidating Support Services:
In May 2006, we convened a workshop with State and U.S. Agency for
International Development officials as well as two outside experts to
discuss the most important issues related to State and USAID efforts to
consolidate overseas support services.
The experience of other organizations suggests that creating shared
service centers and consolidating support services can achieve
significant cost avoidance and efficiencies. Moreover, experts suggest
four elements are critical for achieving success in such efforts:
defining an overarching vision, communicating clearly and consistently,
demonstrating the cost benefits, and developing metrics.
External studies and the results of our May 2006 workshop show that
private and public sector organizations that consolidate support
services and create shared service centers can achieve major cost
avoidance and efficiencies. For example, in the private sector, British
Petroleum, one of the world's largest energy companies, has achieved
savings of 20 percent to 50 percent since adopting a consolidated
services model in 1995. In the public sector, the U.S. Postal Service
reported that consolidating and creating shared accounting service
centers enabled it to achieve economies of scale by closing 80 district
accounting offices. According to one study, the average organization
may realize net cost decreases of approximately 25 to 55 percent
through efforts to consolidate services and create shared service
centers, depending on the function. For instance, consolidating and
creating shared service centers for purchasing typically results in a
25 percent cost reduction for that function; while consolidating and
creating shared service centers for general accounting functions can
result in a 55 percent cost reduction.
A number of private sector corporations in the United States and
throughout the world have adopted a consolidated or shared service
model. For example, British Petroleum's program involves the
consolidation of finance and accounting functions, including internal
and external financial reporting, and budgeting and forecasting
functions, as well as the creation of shared service centers. According
to one private sector consulting company, as a result of these actions,
British Petroleum's finance and accounting transactional unit costs
have steadily declined, and working capital improvements measured in
the tens of millions of dollars have already been achieved, with more
on the way.
In addition, public sector organizations in the United States and
throughout the world have also adopted shared services models. These
include the U.S. Postal Service, which as part of an initiative in 2003
to consolidate its finance function reported that consolidating and
creating shared accounting service centers enabled it to achieve
economies of scale by closing 80 district accounting offices. The
Postal Service's Strategic Transformation Plan: 2006-2010 also outlines
a human resources shared services initiative that will centralize
certain transactional human resource functions and other noncore
support functions as well, such as information technology and
purchasing functions.[Footnote 23]
While examples of public and private sector successes in consolidating
services are numerous, it is important to note that cost savings and
operational efficiencies can vary. State and USAID may not be able to
achieve similar levels of success because of differences in the nature
and scope of their efforts. Nonetheless, the fact that large companies
and organizations have achieved positive results clearly demonstrates
that the potential for savings exists and suggests that their lessons
learned may be applicable to State and USAID's efforts.
The challenges faced by State and USAID as they consolidate overseas
support services are similar to those faced by other organizations. The
experiences of these organizations highlight the need for strong
leadership, a clear direction, consistent communication, and agreement
on a standard set of procedures and systems. For example:
* Defining an overarching vision: Experts suggest that a strategic
framework is critical to the success of a consolidation effort. Such a
framework should provide a detailed picture of the desired end state,
define results-oriented criteria for success, and outline key
milestones. In addition, it should address concerns about staff
reductions and career implications. Most importantly, the plan should
state that leadership commitment, from the executives of both agencies,
is strong and unified.
* Communicating clearly and consistently: Experts suggest that
communication should be consistent and clear, with detailed direction
on how to implement the consolidation effort at post. Agency officials
indicated that posts have received mixed messages from headquarters in
the past.
* Demonstrating the cost benefits: Experts suggest demonstrating a
compelling rationale for undertaking the consolidation effort is
critical. However, State and USAID do not have the data or a method for
accurately determining and comparing the cost and quality of services
provided by each agency, making it difficult to accurately demonstrate
the benefits of consolidating services and achieve consensus on which
is the most efficient service provider.
* Developing metrics: Experts suggest that the adoption of performance
measures is critical to evaluating operational efficiencies. Although
State and USAID have developed some metrics, key performance metrics
are lacking. For example, the May 2005 study that recommended
consolidating services at the four pilot posts noted that for both
State/ICASS and USAID, motor pool trip logs are not used for an
analysis of driver/vehicle utilization, peak volume/time determination,
or capacity requirements. Moreover, warehouse capacity use and
inventory turnover are not tracked to determine the need for warehouse
space or to highlight opportunities for disposal of unused items. The
lack of performance measures has also complicated posts' efforts to
quantify and document cost avoidance.
[End of section]
Appendix IV: Scope and Methodology:
To address what State and USAID have accomplished and learned from
their initiative to consolidate overseas support services, we obtained
and reviewed a number of State and USAID documents, including the State
and USAID joint strategic plan for fiscal years 2004 through 2009, the
May 2004 study that led to the original pilot project, and the October
2005 evaluation of lessons learned as a result of the pilot project. We
also met with State and USAID officials in the functional and regional
bureaus, as well as private sector consultants knowledgeable about the
initiative. We conducted fieldwork at three of the four original pilot
posts--Cairo, Egypt; Dar es Salaam, Tanzania; and Phnom Penh, Cambodia
and conducted a teleconference with officials of the fourth--Jakarta,
Indonesia. We also conducted fieldwork at a post that is planning to
consolidate support services--Nairobi, Kenya. At each post, we met with
the principal officers, including the chief of mission and the deputy
chief of mission, as well as the State management officer and the USAID
executive officer. At many posts, the State management officer and the
USAID executive officer are responsible for managing the day-to-day
operations of their respective agencies, and in most cases, these
officials were given the responsibility of working out the details of
consolidating support services. To assess the reliability of the cost
and operational efficiency data that posts provided, we (1) reviewed
pertinent documents provided by State, USAID, and the posts, such as
the May 2004 study that detailed problems with obtaining reliable cost
and performance data, and (2) discussed data reliability with agency
and post officials knowledgeable about the data. We noted limitations
in the data that result from State and USAID collecting data through
different systems and managers sometimes failing to record accurately
the times allocated to different tasks. However, we determined the data
to be sufficiently reliable for the purposes of this report.
To address the challenges that State and USAID have encountered in
implementing this program, we obtained and analyzed a number of
documents, among them the May 2004 study that led to the original pilot
project, the February 2005 directive from USAID directing missions to
demonstrate that consolidating services would not result in any
additional costs to the agency before agreeing to consolidate a support
service, the October 2005 evaluation of lessons learned, and the
December 2005 and April 2006 directives from State and USAID to the
missions that, among other things, established the services that can
and cannot be consolidated. We also reviewed a copy of State and
USAID's June 2006 draft strategy. In addition, we met with
knowledgeable agency and post officials, including State/ICASS
officials and USAID contractors knowledgeable about the ICASS alternate
service provider software and its use. Moreover, we reviewed certain
State/ICASS and USAID policies and procedures that outline the
requirements for managing property at post. These are spelled out in
USAID's Automated Directives System, and in State's Foreign Affairs
Manual.
To learn what private and public sector lessons learned can be applied
to this initiative, which we used to help frame our recommendations, we
reviewed a number of studies that examined how private and public
sector organizations have implemented efforts to consolidate and share
support services. Many of these studies detail shared service best
practices and lessons learned. We also met with private and public
sector officials knowledgeable about or responsible for implementing
shared services. Finally, in May 2006 we convened an informal
roundtable discussion featuring two respected experts on governance and
shared services. The two experts were Jonathan Breul, of the IBM Center
for the Business of Government, a research center dedicated to
improving government services; and Brad Gladstone, of Accenture, a
global management consulting and technology services company. Breul, a
Senior Fellow with the IBM Center, previously served as a Senior
Advisor to the Deputy Director for Management in the Office of
Management and Budget, and has provided his insights to a number of
government agencies and initiatives, including the State Department,
and the President's Management Agenda. Gladstone, a Senior Executive in
Accenture's Federal Client Group, leads their finance and performance
management practice. He has provided his expertise on consolidation and
shared services to a wide range of customers in both the public and
private sectors, including the Departments of Interior and Agriculture.
State, USAID, and other agency officials participated in this informal
roundtable. We prepared a summary of lessons learned based on the
roundtable discussion and shared this with State and USAID officials.
We performed our work from November 2005 through July 2006 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix V: Comments from the Department of State:
United States Department of State:
Assistant Secretary for Resource Management and Chief Financial
Officer:
Washington, D.C. 20520:
Ms. Jacquelyn Williams-Bridgers:
Managing Director:
International Affairs and Trade:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548-0001:
AUG 28 2006:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report, "Overseas
Staffing: State and USAID Should Adopt a Comprehensive Plan to Improve
the Consolidation of Overseas Support Services," GAO Job Code 320380.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact
Jennifer Bantel, Special Assistant, Bureau of Administration, Office of
Global Support Services and Innovation at (202) 663-3505.
Sincerely,
Signed by:
Bradford R. Higgins:
cc: GAO - Jose Pena:
A - Raj Chellaraj:
State/OIG - Mark Duda:
Department of State Comments on the GAO Draft Report Overseas Staffing:
State and USAID Should Adopt a Comprehensive Plan to Improve the
Consolidation of Overseas Support Services (GAO-06-829, GAO Code
320380):
Thank you for the opportunity to comment on you draft report entitled,
Overseas Staffing: State and USAID Should Adopt a Comprehensive Plan to
Improve the Consolidation of Overseas Support Services. The Department
of State fully agrees with the GAO Recommendations for Executive Action
as stated in the Draft Report. The Department believes that the
Secretary of State has already designated overseas services
consolidation a priority joint State/USAID objective as detailed in the
State/USAID Joint Performance Plan for FY 2007. Under the auspices of
the State/USAID Joint Management Council (JMC), State is committed to
working with its USAID partners to realize the elimination of
duplicative administrative support platforms at all of our overseas
locations through the consolidation of common, agreed-upon
administrative services. The Department of State fully believes that
administrative consolidation, in conjunction with ongoing efforts to
streamline, rightsize and reduce costs, will result in overall savings
to both State and USAID. The Department is working to realize the
consolidation of common administrative services overseas and
streamlined policies, procedures, and technology at the agency level.
Under the direction of the JMC, co-chaired by State's Under Secretary
for Management and USAID's Deputy Administrator, State and USAID are
actively using Enterprise Architecture methodology to systematically
define the comprehensive plan to achieve this goal. Joint Business
Analysis Teams, created by the JMC and reporting to the JMC
Directorate, employ Enterprise Architecture techniques and are actively
working with State and USAID agency stakeholders to address the
outstanding policy, procedural, and technical issues.
As noted in the GAO report, State and USAID agreed upon an overarching
strategic vision statement at the JMC Meeting on July 14, 2006. That
statement will be operationalized through a communications strategy, an
optimization strategy, a governance strategy, and an overall management
plan. All are currently in draft. State anticipates that the management
plan will be approved by both agencies, and disseminated to all
stakeholders by mid-September of 2006. State is committed to ensuring
that this plan, and all steps and processes needed, contain the
components of success to include those outlined by the Draft Report.
State and USAID have already determined that the path forward will be a
three-tiered approach to the consolidation of common administrative
platforms:
1. Consolidation at posts in which State and USAID are or will be co-
located in FY 2007;
2. Consolidation to extent possible at posts where State and USAID will
be co-located after FY 2007, with consolidation of the remaining
services within six months of co-location;
3. Consolidation or employment of Alternate Service Provider (ASP) at
all posts where co-location is not currently envisioned resulting in a
single service provider for each service.
State's Office of Global Support Services and Innovation (A/GSSI) is
conducting extensive analysis of the financial impact of consolidation
on State International Cooperative Administrative Support Services
(ICASS) and USAID Operating Expenses (OE) budgets as well as on all
customer agency invoices by using the information provided by four of
the posts that participated in the Shared Services Baseline Operational
Studies conducted jointly by State and USAID Washington teams. This
work will provide concrete information regarding cost savings realized
through consolidation. It will also provide the basis to address the
cost and incentive differences between the two agencies. Furthermore,
the two agencies' ICASS experts will meet in late August to resolve
ICASS issues related to administrative consolidation.
State and USAID, through the JMC, are incorporating communication to
overseas posts into the Strategic Vision and into all facets of policy,
timelines, procedural changes, and milestones required to meet our
desired end state. The JMC has created a website containing all policy
information, guidance, contact information, and the timelines,
milestones, requirements, and status of the JMC working groups. In
addition, all policy and timeline requirements will be addressed to
overseas posts via official cable on a continuing basis.
Under the auspices of the JMC, State and USAID have already realized
many instances of standardization of policies, procedures, and systems.
State welcomes the opportunity to expand on these achievements to
ensure successful consolidation of common administrative services at
our mutual overseas missions. The JMC working groups are now assessing
which elements of their respective business lines will require changes
to ensure harmonized procedures and regulations, and are systematically
working on implementing that harmonization. State firmly believes that
this is the backbone to the long-term realization of cost savings and
cost avoidance.
State also offers the following comments on the Draft Report.
The Bureau of Human Resources, Office of Overseas Employment (HR/OE)
has taken a very proactive approach to addressing Reduction in Force
(RIF) issues. HR/OE's initiative on RIF issues includes updating the
RIF Plan Template and accompanying guidelines for posts to use in
developing post-specific RIF plans. The revised RIF Plan Template is
currently under review and will replace the template on HR/OE's website
as soon as it is approved. HR/OE is also looking at revising the
guidelines to include a requirement that posts, at a minimum, revise
their RIF plans every five years. RIF planning requires local legal
consultation at the post level in order to ensure that local labor laws
are factored into every mission's RIF plan. While posts often focus
attention on RIF planning only when a potential RIF is likely, HR/OE
guidelines encouraging regular, periodic review will ensure that RIF
plans will be up to date, or require only minimal updating when RIFs
come into play.
With regard to the discussion of the financial effect of the Capital
Security Cost Sharing Program, State believes that the full effect of
this program is known. The program has been in effect since FY 2005 and
all participating agencies, including USAID, have been paying their
bills. In addition, during the annual budget cycle, every agency is
given their calculated CSCS charges so agencies can include these
charges in their budget requests.
Regarding the section titled "Technical Differences Will Hamper Efforts
to Consolidate Services", State readily accepts the challenges of
streamlining and standardizing our procedures, policies and technology.
Regarding the creation of values for inputs for determining
administrative costs, particularly the allocation of employee time,
State notes that this is an integral component of the ICASS system,
under which both State and USAID work to provide administrative support
services. The issue pertaining to USAID mission experience with the
alternate service provider software will be mitigated through the new
strategic plan with the three-tiered approach in which only a few USAID
missions will be alternate service providers and will need to use the
software. Lastly, the Draft Report mentions that actions need to be
taken to establish a single, joint administrative structure, such as
was recommended for Nairobi in September 2005. State agrees, is taking
measures to provide additional information to affected missions, and
notes that the rightsizing reports created by the Office of Rightsizing
(M/R) contain this information for posts sub-function by sub-function.
M/R will work directly with posts which will be consolidating, either
in an New Embassy Compound (NEC) or their current location, but which
have not yet had the benefit of a rightsizing study.
[End of section]
Appendix VI: Comments from USAID:
USAID:
Aug 28 2006:
Jess T. Ford:
Director:
International Affairs and Trade:
U.S. Government Accountability Office:
441 G. Street, N.W.
Washington, D.C. 20548:
Dear Mr. Ford:
I am pleased to provide the U.S. Agency for International Development's
(USAID) formal response to the GAO report entitled "State and USAID
Should Adopt a Comprehensive Plan to Improve the Consolidation of
Support Services" (GAO 06-829).
USAID agrees with the basic findings of the study. In recent months
State and USAID have made considerable headway in the development of a
comprehensive plan to improve the manner in which support services are
managed overseas. The report identifies many of the challenges that we
currently face in our efforts to eliminate management redundancies. It
is the intention of the Department of State and USAID to operate more
efficiently as well as reduce the USG footprint as part of
congressionally mandated rightsizing efforts. In this regard we have
made significant progress (see enclosure).
Thank you for the opportunity to respond to the GAO draft report and
for the courtesies extended by your staff in the conduct of this
review.
Sincerely,
Signed by:
Cynthia Pruett:
Acting Chief Financial Officer:
U.S. Agency for International Development:
1300 Pennsylvania Avenue, NW:
Washington, DC 20523:
Response to GAO Report 06-829 Overseas Staffing: State and USAID Should
Adopt a Comprehensive Plan to Improve the Consolidation of Overseas
Support Services (July 2006):
The challenges that face State and USAID are many and complex. Although
joined together in many programmatic arenas, we remain two separate
organizations with a history of similar, and in many cases
standardized, administrative procedures. As with most federal
organizations, however, State and USAID have independently relied on
their own personnel and technology tools to support organizational
needs overseas. Historically there has been little effort to find
common platforms to identify and eliminate redundancies. As a result,
we are embarking on a major paradigm shift in how administrative
services will be provided on all new embassy compounds (NECs).
With the arrival of Ambassador Tobias, our Agency resolve to find
common ground with the Department on how to best manage USG
administrative operations overseas is reinforced. The challenges to be
overcome for successful development of standard management services and
technology tools require both additional resources and a heightened
level of effort.
Detailed analyses are underway to ensure that the best methods for
combining services are utilized. With the elimination of the alternate
service provide approach, in specific locations cost efficient and high
quality services are of vital concern to the Agency. Specifically, , as
we move towards a single administrative support platform under one
International Cooperative Administrative Support Services (ICASS)
invoice we will have to rely on State to provide basic administrative
support services that will serve as an underpinning for USAID personnel
in implementing USG development assistance programs overseas. This
cultural change is being managed through a newly invigorated Joint
Management Council (JMC) and the sharing of best practices.
The Foreign Affairs Manual (FAM) provides the basic standards by which
our respective agencies' administrative areas are to be managed (e.g.,
personnel, motor pool, property management, office and housing
requirements, etc.) while working under the authority of a Chief of
Mission and the ability for USAID to manage these support areas as an
independent organization. In the area of real property management, we
have already agreed upon changes that incorporate procedures for
unified residential housing programs overseas. This will result in
streamlining the leasing and maintenance services to support this
program. It is clear that by consolidating specific duplicative
administrative service operations and eliminating staff the USG will
stand to save considerable sums of money. We have agreed with State
however, that as a precursor to consolidation, there must be a cost
analysis which clearly articulates the relationship between cost,
efficiency, and quality of service. The challenge for USAID will be to
eliminate the duplications in a manner that is timely and affordable
and does not compromise our ability to continue to serve as an
independent Agency providing quality development assistance and
humanitarian relief efforts abroad.
Many of our joint efforts to date have been successful; other areas
require more work. State and USAID have identified and agreed upon
specific administrative services that lend themselves to consolidation.
We are focused on ensuring personnel levels are reduced as we plan for
staffing in NECs. In particular, State and USAID have refined a
software tool that allows posts overseas to compare service functions
and their costs in order to determine which are best suited for
consolidation.
As noted in the report, however, there remain several serious
constraints inhibiting USAID from moving forward quickly with
consolidation. The most notable is cost. With the elimination of USAID
as a competing service provider we are concerned about the controls
that are in place to ensure costs will be reduced overseas. Ultimately
each Chief of Mission has great latitude in the level of services and
number of personnel used to deliver administrative services. Without
the implementation of strict and accountable performance measures for
the services delivered by a single provider model, e.g., ICASS, cost
escalation will go unchecked. One approach to bring this issue to the
attention of administrative and executive managers overseas is to seek
regular management and financial audits of the ICASS program by an
outside firm. With an annual revenue base exceeding more than one
billion dollars, regular audits should be a mandatory requirement.
USAID will continue to pursue this management control option under the
auspices of the Joint Management Council, as well as with OMB. We will
need the Department of State to join us in pursuing this goal.
What has been broadly realized and is pointed out in the GAO report is
that there are economies of scale in combining numerous services in
certain locations overseas through reducing US direct hire staff. In
fact, direct hire staff reduction will reap the greatest savings. USAID
has already experienced this over the years with its Foreign Service
personnel levels diminishing from over 3000 in 1990 to about 1000
officers worldwide now. To offset fewer management officers we have
relied on locally employed staff (LES) to manage what was traditionally
managed by US direct hires only. State has begun to embrace this
approach and we encourage them to continue. The report's example of
eliminating one US direct position in Dar es Salaam is an excellent
start. As noted by GAO, however, to realize success this area requires
more effort on the part of State in other locations overseas, as real
cost savings will come from the elimination of State's US direct hire
positions overseas, where in the management cone alone State outnumbers
USAID by a ratio of 17 to I (based on a total of 61 USAID EXOs and 1032
State USDH officers in the management cone).
The ICASS billing methodology calls for distributing all of the costs
for services among the ICASS customers. The cost basis includes the
many US direct hire staff that State relies on for management
oversight. Although combining services and reducing staff may reduce
overall costs to the USG in certain circumstances, USAID costs
invariably will go up at the post level. This only reinforces the need
to reform the way in which ICASS is managed and implemented,
particularly in light of the new USAID Administrator's mandate to
ensure that the Agency manages its operations within its allocated
operating expense levels as determined by Congress.
With respect to the challenge of developing reliable cost data, the
Joint Management Council (JMC) has established a team comprised of
management analysts (referred to as the Joint Business Analysis Team,
or JBAT) that will assist in sorting out the many implications of
consolidation of services. The JBAT members will work directly with
each of the JMC working groups responsible for aligning State and USAID
lines of business. The JMC has also restructured itself
organizationally with a focus on rightsizing, regionalization, and
consolidation of administrative support services. These activities will
be guided by the JMC's new strategic vision and management plan, as
well as the JMC's new governance structure to ensure timely and
responsive action. As part of the analytical responsibilities of the
JMC Executive Secretariat and the JBAT, timelines and metrics will be
developed to assist in the establishment of policies, systems, and
procedural standards for the consolidation efforts.
Lastly, the harmonization of our respective technology systems is an
area that will require time and resources. The GAO report accurately
identifies many of the problems associated with having distinct systems
to manage the administrative operations of personnel, information
technology, property management, and finances. Our respective systems
respond to agency-specific reporting and analytical needs and will
require thorough reviews of how they can be best harmonized. We have
already begun this process. As an example, in comparing the separate
systems used by State and USAID for property inventory control, it was
determined that USAID would not adopt the current State inventory
system but rather a new one planned for the future. In this way, the
planned system can be modified to reflect each organization's needs.
This will take time and there will be associated costs to migrate USAID
inventory data and add data fields to capture USAID funding sources and
reporting requirements. However, the most significant aspect, and a
major underpinning of the consolidation effort is the merger of State
and USAID's IT infrastructure. USAID has already conducted an in-depth
cost analysis of the various .options and is working with State to
verify the analysis and make joint recommendations to both State and
USAID Agency senior management for decision.
USAID remains a strong supporter of improving the process by which
services are consolidated overseas. We will continue to work
collaboratively with our colleagues at the Department State to optimize
this effort. In addition, we are appreciative of the proactive efforts
demonstrated by the GAO team responsible for this report and the
initiation of a successful workshop on consolidating support services.
[End of section]
Appendix VII: GAO Contact and Acknowledgments:
GAO Contact:
Jess Ford, (202) 512-4128:
Staff Acknowledgments:
In addition to the person named above, John Brummett, Assistant
Director; Kevin Bailey; Joseph Brown; Joseph Carney; Virginia Chanley;
Marc Castellano; Martin De Alteriis; Edward Kennedy; José M. Peña, III;
and Wrenn Yennie made key contributions to this report.
FOOTNOTES
[1] The Secure Embassy Construction and Counterterrorism Act of 1999,
P.L. 106-113, generally requires all agencies under the authority of a
chief of mission to be collocated on new embassy compounds.
[2] GAO, Embassy Management: Actions Are Needed to Increase Efficiency
and Improve Delivery of Administrative Support Services, GAO-04-511
(Washington, D.C.: September 7, 2004).
[3] Office of Management and Budget, President's Management Agenda,
Fiscal Year 2002 (Washington, D.C.: August 2001). The President's
Management Agenda is a set of management initiatives designed to make
government more effective and efficient. Rightsizing is a concept that
refers to having the right number of staff at overseas posts with the
necessary resources and expertise to accomplish U.S. policy objectives.
[4] GAO, Overseas Presence: Cost Analyses and Performance Measures are
Needed to Demonstrate Full Potential of Providing Embassy Support
Remotely, GAO-06-479 (Washington, D.C.: May 2, 2006).
[5] GAO, Overseas Staffing: Rightsizing Approaches Slowly Taking Hold
but More Needs to Be Done, GAO-06-737 (Washington, D.C.: June 28,
2006).
[6] An eligible family member lives with a U.S. direct hire staff
person at post. State uses eligible family members to fill a variety of
positions. According to State officials, hiring an eligible family
member often can result in savings because State does not have to pay
for many of the costs associated with supporting the U.S. direct hire
staff person, such as the cost of schooling for dependent children.
[7] See GAO-04-511 for a fuller explanation of how costs for overseas
posts' administrative services have increased.
[8] These include services that can only be obtained by the embassy,
such as securing diplomatic credentials from the host country and
services provided by the post's Community Liaison Office, such as
providing welcoming and orientation materials, and helping to enroll
dependent children in education programs.
[9] Total cost over the life of the program is estimated to be about
$21 billion. Under the program, State intends to replace approximately
200 embassies and consulates. According to State officials, the program
envisions spending approximately $1.4 billion per fiscal year for
construction over the next 6 fiscal years.
[10] The National Security Strategy of the United States of America
(Washington, D.C.: March 16, 2006). The strategy's goal of enhancing
and transforming key institutions has three priorities, one of which is
to promote State's reorientation toward transformational diplomacy by
more fully aligning the foreign assistance provided by State and USAID.
[11] Strategic Plan, Fiscal Years 2004-2009: U.S. Department of State
and U.S. Agency for International Development (Washington, D.C.: August
2003). State and USAID are currently revising this strategic plan.
[12] In fiscal year 2004, Congress mandated the establishment of an
Office of Rightsizing the United States Government Overseas Presence to
be established within the Department of State. The office was directed
to lead the State Department's effort to develop internal and
interagency mechanisms to better coordinate, rationalize, and manage
the deployment of U.S. government personnel overseas, under Chief of
Mission authority (Public Law 108-199, Div. B, Title IV ).
[13] In Cairo, State and USAID are located on separate compounds; in
Dar es Salaam, Jakarta, and Phnom Penh, State and USAID are collocated
or will soon be collocated on the same compound.
[14] OMB's estimate of the average cost across all agencies of having
one U.S. direct hire overseas for 2007 is $491,000, including direct
and indirect personnel costs.
[15] Examples of administrative costs included in USAID's programming
include, for instance, the costs associated with budget analysis.
[16] Personal property includes such items as vehicles, furniture,
equipment, supplies, and machinery.
[17] See GAO-04-511.
[18] Office of Management and Budget, Program Assessment Rating Tool.
OMB developed the Program Assessment Rating Tool to assess and improve
program performance. Using the tool, OMB places each program into one
of five categories: "Effective," "Moderately Effective," "Adequate,"
"Ineffective," and "Results Not Demonstrated."
[19] P. L. 108-447, Div. B, Title IV, sec. 629. Congress authorized the
Capital Security Cost Sharing Program in fiscal year 2005.
[20] Nairobi has also taken steps to eliminate two U.S. direct hire
positions. However, as of June 2006, Nairobi had not begun to
consolidate support services.
[21] General services officers provide leasing, housing and contracting
services for State and other agencies.
[22] According to State, this estimate was derived by adding the
salaries of all locally employed staff worldwide, including locally
employed staff employed by other agencies, and dividing this by the
number of staff employed. While we have not validated State's
methodology for producing this estimate, our analysis indicates that
the salary costs of locally employed staff overseas are considerably
lower than those for U.S. direct hires.
[23] United States Postal Service, Strategic Transformation Plan: 2006-
2010, (Washington, D.C.: September 2005).
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