Agencies have three years to begin processing all their invoices electronically through a shared service provider.

The Office of Management and Budget released a new memo July 17 detailing how that move is expected to happen as part of President Barack Obama’s second-term management agenda.

Dave Mader, the controller and acting deputy director for management at OMB, said the memo is the culmination of a nearly four-year pilot by the Treasury Department to prove the e-invoicing concept.

“There are, on an annual basis, about 19 million invoices that are paid each year, now about 40 percent of them are electronic. We have about 12 million that we want to move to electronic payments between now and 2018,” Mader said in an exclusive interview with Federal News Radio. “The reason we want to do that is two-fold. One is there is a clear savings to the government from moving from paper to electronic. We have estimates over a couple of studies that show an annual savings of anywhere between $150 million and $260 million, which is significant savings. I think as important, or maybe more important, the benefit there is to vendors in moving this process to electronic, especially for small businesses who are very concerned about cash flow. Electronic [payments], obviously, give you the heightened accuracy, the prompt payment and the quick movement of payment of invoices from invoicing to cash in the bank.”

Mader and Anne Rung, the administrator in the Office of Federal Procurement Policy, jointly signed off on the memo because the requirements impact acquisition and finance workers equally.

Treasury launched the Internet Payment Platform (IPP) in 2008. OMB worked with them to improve the platform and figure how to offer it governmentwide.

While OMB doesn’t mandate the use of the IPP, Mader said agencies must decide whether to go to Treasury or another agency’s e-invoicing platform, as the White House will not approve any budget requests to build a stand-alone system.

Only the departments of Defense and Veterans Affairs have electronic invoicing systems that meet OMB’s requirements. Mader said while DoD does service a few other agencies, neither has been officially named a federal shared service provider for e-invoicing.

“I think down the road, as we move through this process, we may [give the official designation of a shared service provider],” he said. “The goal is to move everybody away from paper in a three year period.”

OMB, Treasury face short-term deadlines on way to full implementation

The memo details several short-term deadlines that OMB and Treasury will lead, but gives agencies until 2018 to fully implement an OMB-approved electronic invoicing system.

One of the short-term goals under the new policy is for OMB, the Chief Financial Officers and the Chief Acquisition Officers councils, Treasury’s Office of Financial Innovation and Transformation (FIT), and agencies named as shared service providers to establish a shared services governance model.

The framework “will ensure all invoicing solutions provide value and service, reduce duplication, facilitate adoption of data standards and interfaces for electronic invoicing as well as those developed in support of the Digital Accountability and Transparency Act of 2014 (DATA Act) and Intra-Governmental Payment and Collection (IPAC) working group, in support of the cross-agency priority goal for shared services.”

Over the next 120 to 180 days, OMB will work with the councils and FIT to develop recommendations for a central collection portal into which invoices can be submitted and distributed, and make the data standards available to agencies that are to be used in electronic invoicing for procurements.

“We are giving people three years to decide what path they want to follow,” Mader said. “But we will move aggressively.”

At one point, government sources said OMB was considering mandating the use of the IPP, but DoD and VA pushed back against that requirement.

Mader said the goal is to focus on what the outcome is and that is moving agencies to electronic invoicing not mandating the use of a certain application.

Treasury already has shown a lot of success in meeting OMB’s goal. In fiscal 2015, the agency says 80 agencies already are using IPP to process about 500,000 invoices in 2015.

One could question why the government still is using paper more than a decade after most large organizations moved to electronic forms and processing.

10 years later, many agencies are still using paper forms

Mader said there a several reasons for the federal agencies to fall behind state and local governments and the private sector.

“We needed as a government to prove this would be as effective as people imagined, and I think the benefit of Treasury stepping out there as a leader in 2011 and actually now proving over three or four years that this is really valuable to both government and industry. They convinced us it’s now time to move everybody to this environment,” he said. “There’s also a cost element. Agencies are going to have to change their technologies and change their business processes. There is a cost to conversion as well. But we feel giving people a couple of years to get there, we can move that delta, that 12 million, over the next three years.”

Mader said OMB recognizes that in this budget environment, making these changes is difficult. He expects the implementation of the Federal IT Acquisition Reform Act (FITARA) to help this effort as well because agency chief information officers, CFOs and CAOs now will be more inclined to work together to figure out how to meet this mandate.

He said moving to electronic invoicing also links up with the implementation efforts of the Digital Accountability and Transparency Act (DATA Act). He said some of the elements between electronic invoicing and the DATA Act are similar.

Mader said the financial aspect of not just electronic invoicing, but shared services more broadly, whether it’s financial management or human resources, is causing a lot of challenges.

“What I’ve been working on the last couple of months is looking at an overarching approach on how we would as a government govern these different service providers and create more consistency when it comes to service level agreements, and better leverage synergies each can bring to the other,” Mader said. “I’ll put out a teaser, look for more around shared services come the fall and winter of 2015.”

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