Can Procurement Standards Help Feds with Consolidation Efforts?

Ann All

Consolidation is a recurring theme in a list of eight money-saving ideas compiled by the Technology CEO Council in an effort to help the Obama administration shave the federal deficit.


The CEOs suggested the federal government could shave up to 30 percent off its annual $76 billion expenditure to maintain IT assets by "reducing IT overhead, consolidating data centers, eliminating redundant networks and standardizing applications. IBM shared its own consolidation success story, saying it cut its overall IT expenses in half over five years through consolidation and standardization. It lowered annual operating expenses by up to 40 percent by consolidating data centers. And according to EMC, data center consolidation and adoption of cloud computing helped it save $104.5 million over five years, including an estimated $80 million in capital equipment cost avoidance and $19 million of operating cost reduction thanks to increased data center efficiency.


The CEOs also recommended moving to shared services for mission support activities. There, the CEOs offered examples drawn from the public sector. For instance, when the government consolidated 26 payroll systems to four, the Environmental Protection Agency reduced payroll costs from $270 to $90 per employee, saving $3.2 million a year, and the Department of Health and Human Services reduced costs from $259 to $90 per employee, saving $11 million a year.


Likewise, when the government consolidated travel systems, the Department of Labor reduced its costs from $60 to $20 per travel voucher and reduced processing time from about seven to about three days. If the government could expand these kinds of shared-services programs, it could save $50 billion over the next decade, the CEOs said.


But, as I fretted in a post about the CEO Council's suggestions, the federal government's bureaucratic culture could make it tough to follow through on these kinds of ideas. Maybe that's why the CEOs felt compelled to include a suggestion for better project management and real-time course correction. Introducing practices such as business process management and organizational change management could improve the success rate of government projects, the CEOs said, though they offered no ROI estimates for those practices.


The Department of Defense and Department of Veterans Affairs are both mired in projects that seem like obvious candidates for a centralized approach. They are pursuing individual upgrades of health information systems, despite a recommendation from the Government Accountability Office that the two agencies identify opportunities for joint investments. It's a bit of a mystery why they aren't already doing this, given a May 2010 DoD report done in coordination with the VA that found the departments share 10 of 13 core health IT requirements.


As always when government projects go awry, I suspect the government's convoluted and arcane procurement processes contribute to problems. As I've noted before, the process favors incumbent IT vendors and contractors that are experienced in jumping through all of the necessary hoops, mostly giants like AT&T, Lockheed Martin, Accenture, IBM and Oracle. While that's not inherently a bad thing, I think making the process so complicated discourages many other companies from even trying, which means agencies aren't getting a full picture of the possibilities.


Not only that, but why would these companies push government agencies to consider consolidating resources when a consolidated project would probably mean less money for them? (Or maybe not. Though they'd no doubt sell less gear, they could probably more than make up for it in consulting fees.)


There's certainly more to the problem than over eager vendors. I cited a UK article in which Gary Bettis of Compass Management Consulting said that government procurement focuses too much on the technical aspects of service delivery and not enough on desired business outcomes. He wrote:

... Instead of simply defining the need for desktop clerical tools such as word processing and e-mail, a procurer might insist on a certain PC specification, operating system and versions of the word processing tools rather than letting the vendor come up with the most cost-effective solution to deliver the same outputs.

Like the Technology CEO Council, Bettis recommended government agencies use standardized platforms where possible, because standardization "allows service providers to do what they have done so successfully in the private sector-provide utility IT services to a range of clients at a competitive price, having achieved economies of scale through use of the same delivery infrastructure."


Not sure how much it will help, at least initially, but Federal News Radio reports the National Institute of Government Purchasing is proposing a set of values, principles and standards of practices for public sector procurement. Rick Grimm, NIGP's chief executive, said the proposed standards will stress accountability, ethics, impartiality, professionalism, service and transparency.


NIGP plans to introduce 10 standards for each of the next three years. The first group of standards centers on strategic planning, performance management and performance measurement, Grimm said. Based on the DoD/VA experience with health systems and other government projects, I'd say the focus on strategic planning will be especially welcome.

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