Federal, state governments fishing for business process outsourcing bounties - HR News

HR Magazine, Sept, 2003 by Stephenie Overman

NEW YORK -- Corporate America isn't fishing the business process outsourcing seas alone. Governments are navigating the choppy waters themselves, as was described by federal agency and state government representatives presenting at the Human Resource Outsourcing Conference held here July 29-31.

The federal government is making a big move toward outsourcing, or what it calls "competitive sourcing," to provide better, more cost-effective services to the American people, according to U.S. Office of Personnel Management (OPM) Director Kay Coles James, who addressed the conference July 30.

"Outsourcing is one of the possible outcomes of the competitive process. It doesn't matter who wins the competition as long as the winner can do the job and be held accountable," said James. "It would not be fair for the American government to continue to do a job--a non-inherently governmental job-that another provider may be able to do better for less money," she said. Late last year President Bush announced plans to competitively source up to 850,000 federal jobs--nearly half of the non-postal civilian positions in the federal government.

Private businesses do not automatically win when competing with federal employees, James said. "On average, the government wins just over 50 percent of public/private competitions."

In an example of improvements made by competitive sourcing, James said 22 payroll systems are being combined into what will eventually be only two systems at a projected savings of more than $1 billion in the next decade.

A report presented at the National Academy of Public Administration also provides evidence that competitive sourcing is working, James said. The study, by Professor Jacques Gansler of the University of Maryland, shows that when the federal government uses competition, performance improves significantly, costs decrease significantly, few government employees are laid off and government has greater control.

Florida Reels in Whale of an HRO Contract

The State of Florida last year started casting lines out to outsourcing firms in the hopes of finding one that could handle all of the state's human resource functions, according to Cynthia Henderson, former secretary of the State of Florida's Department of Management Services, who also addressed the conference July 30.

In August 2002 the State of Florida awarded a seven-year, $280 million contract to Convergys, a private, for-profit outsourcing firm. The firm is taking over benefits and payroll administration, recruiting and training for the state government's 189,000 employees and elected officials. Florida officials have said the state will save an average $24 million per year, plus an additional $65 million to $90 million by avoiding the need to update its 20-year-old, state-owned HR software system.

"Before, there were 38 state agencies with separate personnel offices. They were decentralized, with manual processes," explained Christopher G. Emerick, vice president of operations, Convergys Employee Care, in his own conference presentation.

Convergys will operate employee care service centers in Jacksonville and Tallahassee and expects to take over in all contracted areas by January 2004. These changes will allow state employees to:

* Manage, through the Internet, their own personal information, such as address and dependent care changes, emergency contact information and life changes, such as marital status.

* Access all benefit program information and enrollment through a sell-service portal.

* Maintain a personal skills inventory and match it against available job opportunities with the state.

* Access comprehensive, up-to-date training information and opportunities, both classroom and web-based.

"Ultimately, the state will measure results just as other businesses measure results," Emerick said. For example, he added, "Today it takes 120 days to bring new employees on board. The state will be able to measure changes, to use typical benchmarks" to determine if Convergys is doing a better job than the state did for itself.

There was plenty of initial resistance to the outsourcing move, Henderson said, but "I put the most vocal opponents on the team. We had a person flail time to meet with employees. We wanted to clear up misconceptions." Employees "became excited about it" and encouraged others to support the effort.

Henderson also said that outsourcing administrative work now allows state HR professionals to concentrate more on collective bargaining, grievances, specialized training and interviewing.

Today, "other states are faced with the same issues of outdated technology and budget problems," said Henderson, who predicted that these factors would lead to a move toward more public-sector outsourcing.

STEPHENIE OVERMAN IS A FREELANCE WRITER BASED IN CHATHAM, N.J.