The goal of shared services for federal back-office systems now has crossed into its third administration. And while there is plenty of progress on paper, the on-the-field performance remains problematic at best and wasteful at worst.

The latest example is the Homeland Security Department. After nearly three years, DHS has decided to “cut short” its effort with the Interior Business Center (IBC).

“The solution we’ve developed together is a good investment that DHS plans to leverage going forward,” said Chip Fulghum, acting undersecretary for management, in an email to Federal News Radio. “DHS will use the solution to deliver a standardized baseline with increased functionality and integration. We fully expect it to improve financial operations for [the] Domestic Nuclear Detection Office, Transportation Security Administration and U.S. Coast Guard.”

The House Appropriations Committee put a much less diplomatic spin on DHS and Interior’s efforts. The committee said in its fiscal 2018 spending bill that the agency spent $133 million and Interior is “unable to deliver a fully auditable financial management solution that meets DHS’ requirements. Reasons for the failure of this effort are multi-fold, including inadequate program management, inexperienced staff, lack of transparency in communications and governance.”

The committee laid a big portion of this latest failure at the feet of the IBC, saying it failed to understand DHS’ requirements and the complexities of moving an agency so large to shared services.

The committee said DHS is taking the hardware and software from Interior and will put it in an alternative hosting environment.

DHS also will develop a new acquisition strategy to modernize its financial management systems for which the committee directed the agency to consider private-sector options. This strategy will be DHS’ fourth attempt to consolidate and modernize its financial systems, having failed two other times with the private sector.

“DHS must invest in modernizing its outdated legacy financial management systems,” Fulghum said. “We will continue to actively support governmentwide efforts to develop standardized business processes and financial system requirements, to strengthen the shared services environment and promote efficiency.

Fulghum said DHS recognized the challenges it faced as one of the first large agencies moving to a federal provider.

“Our people accepted those challenges and we’ve gained capability and experience, although not within the schedule we set for ourselves,” he said. “DHS remains committed to working with OMB, Unified Shared Services Management (USSM), and other federal agencies to improve shared services. We are contributing our lessons learned to a cross-agency project, led by USSM, to define a framework to influence standards, systems, and practices to better support financial management performance, productivity and efficiency.”

The House Appropriations Committee passed the DHS appropriations bill on July 27.

Mike Hettinger, managing principal of Hettinger Strategy Group LLC and a former House staff director on the financial services subcommittee, has been an outspoken critic of the federal shared services effort.

He said the DHS failure is not due to the agency or even Interior, but the longstanding Office of Management and Budget policy.

“What’s interesting about the language in the House Homeland Security appropriations bill is the acknowledgment by Congress that the shared services effort was a failure and the fact that it pins some of the blame on the underlying OMB policy,” he said. “Add this to the fact that the department is now planning to remove the components that were moved to IBC away from IBC to another SSP, and you really have to ask yourself what’s going on. HUD spent over $120 million to move to a federal shared service provider and that was a complete mess and now DHS has wasted more than $130 million and is trying to salvage what it can. This should be a wakeup call, and before anyone jumps head first into the next shared services idea, maybe we need to understand why it hasn’t worked.”

Hettinger is referring to the Department of Housing and Urban Development’s effort to move its financial system to Treasury Department’s Bureau of Fiscal Service. Auditors from HUD’s inspector general and the Government Accountability Office disagree with former agency executives about the success of the program.

The list of failed or troubled shared services continues to grow beyond DHS.

The Labor Department brought its financial systems back in-house after an outsourcing effort with a private-sector firm went belly up.

Industry has expressed concerns about and is closely watching the Veterans Affairs Department’s effort to move its financial system to the Agriculture Department’s National Finance Center. And earlier this year, the General Services Administration’s decision to move its human resources systems to IBM under a $149 million deal also caused a lot of interest in the community.

The one outlier in all of this shared services struggles is the Commerce Department. Commerce expects to be the first large agency to move all administrative systems to shared services. It has spent the last year trying to capture the total cost of ownership for all of the back-office functions, did a comparative analysis of public and private sector companies and detailed what it would cost for people, process and technology to improve these administrative services.

DHS’ latest problems come as the Unified Shared Services Management Office is trying to put new governance and acquisition models in place. Additionally, a new draft bill promoting shared services from Rep. Mark Meadows (R-N.C.) is floating around the federal community seeking comments.

The USSM announced in December it was moving to an “as-a-service” approach for financial management and human resources. This is one approach to addressing the need for usually a large infusion of funding to begin the transition. USSM also developed the modernization and migration management (M3) framework and created a playbook for agencies in August as the first steps toward the as-a-service model.

The Meadows draft bill, known as the Federal Administrative Streamlining and Transformation (FAST) Act of 2017, would require OMB to work with GSA and other agencies to create a shared services marketplace consisting of acquisition vehicles and service providers. Agencies would be required to use the marketplace to move off of legacy back-office systems.

The bill also would establish a 15-member shared services advisory committee to promote best practices and help overcome any systemic or governmentwide barriers.

It will be interesting to see how much support the bill gets in the wake of DHS’ struggles and an administration that still hasn’t filled key management positions such as GSA, OMB’s deputy director for management and the OMB controller.

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