Inside Services Contracting: Best Practices for Staff Augmentation and Shared Services

Inside Services
Contracting
Best Practices for Staff Augmentation and Shared Services
Federal agencies are finding themselves stretched
increasingly thin, pulled in one direction by a
mounting list of mission objectives, and in another by
budgetary uncertainty limiting the resources available
to achieve them. As a result, many are turning to
different types of services contracting, including staff
augmentation, intra- and inter-agency shared services,
and commercially-provided managed services, to
acquire additional flexibility, expertise, and scalability.
Leveraging external parties for services delivery is
now considered common practice across the federal
government. Nevertheless, the major challenge for
agencies moving forward is ensuring their portfolio
of services meets or exceeds their needs in terms of
flexibility, cost, and operational control.
To explore how federal agencies are using external
parties to help meet their goals, Government Business
Council (GBC) and Accenture Federal Services
conducted a survey of 385 federal managers,
including those at the GS/GM 11-15 levels and
members of the Senior Executive Service, representing
34 civilian and defense agencies. In addition to the
survey, GBC interviewed a handful of high-ranking
officials from across the federal government to gain
an even more in-depth perspective inside the world of
federal outsourcing.
The Federal Context
In the context of the federal government, services
contracting refers to the practice of allocating
responsibility for a given job function to an outside
party – whether via contract personnel, often referred
to as staff augmentation, intra- or inter-departmental
shared services, or managed services provided by a
commercial firm.
According to the survey, one of the principle reasons
organizations utilize contract labor is to leverage
outside knowledge and expertise on a temporary
basis. Staff augmentation provides agencies access
to highly-skilled personnel possessing technical
knowledge that they may lack or be unable to develop
in-house within a short period of time.
For Andrew Jackson, Assistant Secretary of Education
for Management, it was this very combination of
expertise and agility that he needed. When Jackson
joined Education in 2014, he noticed that the
department employed fewer full-time classification
experts than they needed on staff, which was creating
a months-long backlog and considerable pain for the
August 2015Page 1
“The staff augmentation
model made sense for
us because we weren’t
sure what our long-term
needs would look like.”
Andrew Jackson, Assistant Secretary of Education
for Management

organization. Unsure whether he had the time or the
resources to hire additional fulltime employees (FTEs),
he chose to bring on contract personnel to help lighten
the load: “The staff augmentation model made sense
for us because we weren’t sure what our long-term
needs would look like,” says Jackson. “We definitely
had a short-term crisis, and staff augmentation gave us
a very flexible hiring model and expertise on demand.”
Nevertheless, Jackson recognized that there is a
tradeoff to using contract personnel, since in the
long-run it is typically more cost-effective to hire FTEs
to perform comparable functions: “Where we see
we have a long-term need, we can usually acquire
expertise through full-time employees and lower our
costs by bringing them onto our payroll. But that’s the
tension: either more flexibility or more stability in the
role and potential cost savings.”
One of the major factors exacerbating the tension
between flexibility and cost savings are federally-
mandated limits on the number of FTEs available
to each agency. As agencies’ missions continue
to evolve and expand while their number of FTEs
remains fixed, many face the possibility of personnel
shortages. As a result, the ability to hire experienced
contract personnel quickly and on an as-needed basis
can prove an attractive option. In the GBC study, 37
percent of federal managers indicate that the need to
bypass federal headcount restrictions contributes to
their agency’s reliance on contract personnel.
Staff augmentation via contract personnel is not
only the most expensive way to contract for services,
but high contractor turnover means that agencies
are responsible for constantly training individuals
who within a few months may take their talent and
institutional memory with them when they leave the
job. Further, relying too heavily on contract personnel
may ultimately forestall agencies from taking a more
systematic and creative approach to staffing.
Benefits of Shared Services and Managed
Service Models
In many ways, the expansion of federal shared services
over the last decade reflects the government’s desire
to find such a creative approach. Federal shared
services aim to accomplish two objectives:
1. To eliminate major capital outlays for agency-
specific applications by requiring agencies to lever-
age another agency’s platform as well as to reduce
associated maintenance and operations support.
2. To reduce transaction-related services by taking
advantage of centralization, specialization, and
scalability, allowing a single business unit to
provide services quickly and affordably, either
within its own department or agency, or across the
federal government as a whole.
Although it may take months or more for an agency to
hire the personnel and acquire the expertise necessary
to stand up a new business process in-house, one can
often acquire the same capabilities through a shared
service agreement in as little as thirty days or less.
For Ned Holland, Assistant Secretary of Health
and Human Services for Administration, whose
department oversees HHS’s Program Support Center
37%
of federal managers surveyed say their agency uses
contract personnel to bypass headcount restrictions
“We endeavor to provide
our internal customers
... continually shrinking
costs so that they can
devote their resources
toward other things.”
Ned Holland, Assistant Secretary of Health and
Human Services for Administration
73%
of all federal government grants were managed by
HHS’s Program Support Center in FY 2013

(PSC), the benefits of shared services are clear from
a cost perspective. “Among the 40 to 50 services we
provide,” says Holland, “our rates for just about all of
them are going down.” Among its portfolio of services,
PSC provides traditional back-office functions,
“ranging from paper shredding and mail processing,
to disposal of excess property,” as well as mission-
focused activities like grants management. In FY
2013, PSC managed approximately 73 percent of all
federal government grants, resulting in estimated cost
savings of $11 million.
“We endeavor to provide our internal customers –
within HHS and the federal government as a whole
– continually shrinking costs so that they can devote
their resources toward other things.”
Despite the advantages that shared services can
offer federal agencies, concerns surrounding the
perceived loss of operational control and the federal
government’s relative inexperience with managed
services contracting may in some cases impede
further adoption. According to the GBC survey, many
federal managers believe switching to a shared
services model or contracting with a commercial
provider will lead to lost institutional memory and
operational control. “If I’m a program manager,” says
Jackson, “I’m really reluctant to lose those skills and
expertise in-house, because if I turn that function over,
it atrophies and it’s harder to regain those abilities
later on down the road.”
However, recent benchmarking results from the
Office of Management and Budget indicate that
some agencies continue to fall short of their cost
reduction and performance goals. Although most
federal managers value operational control, reducing
costs and improving performance can be compelling
reasons to adopt or expand managed services.
This is true of frequently-outsourced domains like
IT, as well as newer ones such as human resources
management. “There have certainly been discussions
of expanding HR shared services,” says Jackson.
“The amount we’re spending on HR is somewhat
disproportionate to the level of service that our
customers expect to get from us.”
Nevertheless, he continues, agency leaders often have
the difficult task of bringing program managers on
board with the decision to shift to shared or managed
services. And in some cases, talk of potential cost
savings may not be enough to persuade those who
may be reluctant to relinquish operational control. In
such cases, it can be crucial that agency leaders speak
to shared services through the lens of performance.
Articulating that there are incentives to using managed
services – just as there are costs of not doing so – can
be extremely important, concludes Jackson: “Program
managers are much more willing to go out on a limb
with you if you have a really big carrot.”
Another concern expressed by federal leaders is
that many agencies currently lack experience writing
contracts and negotiating service level agreements
(SLAs) with providers. This inexperience can become
evident when agencies look to explore newer forms of
managed services, such as cloud-enabled business
process as-a-service (BPaaS).
“The biggest thing, in my experience, is that the
contracting process is not well understood by those
who use it, especially concerning how to write a good
contract for something like BPaaS,” says Rick Lattimer,
a program analyst with the U.S. Department of
Commerce’s Economics and Statistics Administration.
“There needs to be an educational component on the
part of agencies if BPaaS is going to take off.”
“The biggest thing, in
my experience, is that
the contracting process
is not well understood
by those who use it.”
Rick Lattimer, Program Analyst, U.S. Department of
Commerce’s Economics and Statistics Administration
“There have certainly
been discussions of
expanding HR shared
services.”
Andrew Jackson, Assistant Secretary of Education
for Management

About Accenture Federal Services
Accenture Federal Services is a U.S. company, with offices in Arlington,
VA, and is a wholly owned subsidiary of Accenture LLP. Accenture’s
federal business has served every cabinet-level department and 30 of
the largest federal organizations with clients ad defense, intelligence,
public safety, civilian, and military health organizations.
Contact:
Glenn Davidson, Managing Director
571.414.2652
glenn.k.davidson@accenturefederal.com
About Accenture
Accenture is a global management consulting, technology services and
outsourcing company, with more than 336,000 people serving clients in
more than 120 countries. Combining unparalleled experience,
comprehensive capabilities across all industries and business
functions, and extensive research on the world’s most successful
companies, Accenture collaborates with clients to help them become
high-performance businesses and governments. The company
generated net revenues of US$30.0 billion for the fiscal year ended Aug.
31, 2014. Its home page is www.accenture.com.
About GBC
Government Business Council (GBC), the research arm of Government
Executive Media Group, is dedicated to advancing the business of
government through analysis and insight. GBC partners with industry
to share best practices with top government decision makers,
understanding the deep value inherent in industry’s experience
engaging and supporting federal agencies.
In the face of expanding mission objectives and
stagnant budgets, federal agencies will continue
to rely on a range of services solutions that meet
their unique requirements for expertise, flexibility,
and scalability. Moving toward a more strategic
approach will require that both public and private
sector service providers understand and clearly
articulate the benefits and challenges associated
with utilizing contract personnel, shared services,
and commercially-provided managed services.
“In an ideal world,” explains Lattimer, “you would find a
way to effectively reorganize your workforce and then
do an analysis of what functions are best performed
by contractors and what functions are best performed
by FTEs, either operating under a shared service
model or otherwise.”
Methodology
To assess the perceptions, attitudes, and experiences of federal
managers regarding the ways their agencies use different forms
of outsourcing, overnment Business Council (GBC) and Accenture
deployed a survey to a sample of Government Executive, Nextgov, and
Defense One online and print subscribers in September 2014. The pool
of 385 respondents includes employees at the GS/GM 11-15 grade
levels and members of the Senior Executive Service (SES). At least 34
federal and defense agencies are represented. The findings included
here are weighted by department/agency to more fully reflect the
composition of the overall federal workforce.
In addition, GBC conducted qualitative interviews with three current
government officials with expertise on federal service contracting
issues: Andrew Jackson, Assistant Secretary for Management,
Department of Education; Ned Holland, Assistant Secretary for
Administration, Department of Health and Human Services; and Rick
Lattimer, Program Analyst, Economics and Statistics Administration,
Department of Commerce.

Inside Services Contracting: Best Practices for Staff Augmentation and Shared Services

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Inside Services Contracting: Best Practices for Staff Augmentation and Shared Services