Exclusive: What OMB’s New Shared Services Policy Will Mean for Modernization

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A new class of shared services providers will manage a “marketplace” of offerings, meaning big changes for employees and modernization plans.

The Trump administration wants to make a concerted effort toward establishing a sustainable shared services ecosystem to lower costs and ensure best practices and modern infrastructure pervade government—something past administrations have tried before.

Later today, Office of Management and Budget acting Director Russell Vought will be issuing a memo, “Centralized Mission Support Capabilities for the Federal Government,” which replaces all previous shared services policies. The new policy creates a system for assessing which agency functions—such as payroll or cybersecurity—have consistent standards across government and which specific departments would be best positioned to act as leaders in those areas.

The memo also includes a mandate for the rest of government to follow those agencies and puts a hiatus on new projects once functional areas are identified.

“In the past, agencies took steps to consolidate common mission-support functions internally, and in some cases, to leverage common technology or services offered by other agencies,” Vought wrote in the memo obtained by Nextgov. “The government endeavors to utilize lessons from previous successes and failures to provide a new, enhanced strategic blueprint for sharing quality services within the federal enterprise.”

As those areas are identified, OMB will designate a single agency as the Quality Service Management Office, or QSMO—pronounced “queues-mo”—to manage that function area from end to end. The offices will offer in-house services, contracting support and establish and govern the use of best practices across government.

“What we’re saying about the Quality Service Management Offices is that they will manage a suite of services,” Federal Chief Information Officer Suzette Kent told Nextgov. “That’s multiple software solutions, that’s operational capability, and that could be federal solutions, as well. So, they’re not just doing one thing that they built themselves. It’s not a one choice kind of shop. It’s: They’re in charge of the marketplace.”

Along with the new policy, OMB will be announcing four initial QSMO agencies that will manage four shared service areas:

Human Resources Transactions—General Services Administration

GSA has already begun work on a shared payroll and work scheduling service called NewPay. Kent and GSA Administrator Emily Murphy, the co-leads for the shared services Cross-Agency Priority, or CAP, goal, previously cited the NewPay system as a case study for how the administration sees shared services.

While NewPay is already underway, Kent said that is just the start, and she expects GSA will roll out more HR services once that program launches.

Financial Management—Treasury Department

Kent noted there are currently 42 distinct financial management services in operation across government. As the QSMO shared service provider, Treasury will establish a single standard for managing financial transactions, resulting in better data for government and the public.

“We spend a lot of time and money trying to aggregate that information together and get common data elements,” she said. “Treasury has been offering shared services for a long time. This is an opportunity they are very excited about because they are going to expand their offerings,” both in scope and the number of agencies they serve.

Grants Management—Health and Human Services Department

The Health and Human Services Department is the largest provider of grants in the federal government, outsizing all other grant offerors combined, Kent said. The department already offers four shared services to agencies, including two around grants delivery, one to help people find the right grants, and another to help administer the backend.

This is also a federal shared service that will have effects beyond federal agencies, Kent noted.

“When people get grants from different agencies right now, all of those processes feel very different,” she said. A single standard for this process would alleviate that confusion.

Cybersecurity—Homeland Security Department

Similar to the other three starter QSMOs, Homeland Security already offers a number of cybersecurity services, including the Continuous Diagnostics and Mitigation, or CDM, program, Einstein and security operations center-as-a-service.

The new QSMO designation is “going to let them consolidate some of the things that they’re currently doing and add on some services like digital identity and access management, some additional data protection services, some mobile security services—some types of things where, right now, there’s not really a centralized government service for that,” Kent said.

Homeland Security officials won’t just be building services and contracts and forcing agencies to use them, Kent stressed. In some cases, agencies might opt into those offerings. But as a QSMO, Homeland Security will be expected to manage a full suite of offerings, including assisting agencies standing up or running their own systems, when appropriate.

Future Areas Under Consideration

OMB has already identified other services to investigate, including assisted acquisition, travel, answering Freedom of Information Act requests, customer experience and property management, among others. According to preliminary data, no single common standard exists across government for those services that can be adopted by a single provider, Kent said. However, a website going live Friday will include more information about how agencies interested in shaping—or even leading—the efforts to develop those standards can get involved.

But agencies will have to do more than just raise their hands. The memo says QSMOs will be chosen by an interagency process that will include OMB and the various c-suite councils, such as the Chief Information Officers Council and Chief Human Capital Officers Council.

Once chosen, QSMO agencies will have to submit a five-year plan detailing how the shared service will be managed.

“These plans must include sustainable resource considerations, relevant skill sets and effective stakeholder engagement necessary to execute the plan throughout the five-year life cycle,” the memo states. “OMB and GSA will analyze the QSMO proposed plans and milestones and, if needed, will recommend corrective actions in consultation with the” newly established Shared Services Governing Board, created under the policy.

For agencies not vying for a QSMO designation, the new policy might mean postponing some modernization plans.

A Halt On New Projects, With Exceptions

As a means of enforcing the shared services push, once a QSMO gets preliminary status, the policy prevents agencies from issuing solicitations for “new or modernized technology or services for these functions” without an approved business case signed off by the agency lead, agency CIO, function area QSMO and OMB. The process for gaining an exception will be outlined on the website.

Kent said this is not meant to stall ongoing modernization efforts, especially as it will take time for many of these services to spin up.

“In some cases, the services are available; in other cases, it might be three years,” she said. “All that it’s really saying is that a conversation needs to be had with the QSMOs to ensure that anything that is done is in alignment with the standards and there’s an awareness of what the intention is from a financial and long-term directive.”

What This Will Mean For The Workforce

The memo says agencies should also begin to construct human capital plans that can be executed within the next two to three years as more centralized services lead to workforce changes.

“Parent agencies of legacy providers will be responsible for working internally and with QSMO agencies to identify employees that may have their roles impacted based on new, changed or decreasing responsibilities,” the memo states.

The memo suggests employees facing displacement could transfer to the marketplace managed by the respective QSMO agency, change jobs within their current agency or enroll in one of the administration’s reskilling programs.

Few if any positions will be affected in the near-term, Kent said, but one reason the memo is dropping Friday is to give managers a chance to speak with their employees on Monday about what potential changes to the workforce might be coming down the road.

Even for function areas with services to offer on Day 1, it will take time to transition and shut down legacy systems at the customer agency, Kent noted, meaning most workforce changes are a couple of years away.

With all the work to be done, Kent projected the new policy won’t be producing large-scale savings for the government for six or more years. But there will be more immediate impacts to be had.

“We’re already seeing tangible benefits for some of the services we can offer to small agencies that they can’t obtain right now,” Kent said. “We’re going to elevate the quality that’s available, particularly in the security services area. We’re going to offer things that will create a more secure environment and that is absolutely an important impact that this administration will see.”

“But the long-term transition … is going to span many years,” she added.

Past administrations have made pushes to more widely adopt shared services before, but Kent says this effort is different.

“There’s a very well-defined, robust process that sits behind this and we have all agencies involved in defining the standards. And we have a way to maintain keeping systems current and keeping the markets relevant,” she said. “And that’s maybe where we failed in the past: We set up a shared service and then we kind of said, ‘Hey, everyone, go to the person who has the best one.’ But we didn’t invest in it like a mission product.”