July 13, 2008
The Transportation Security Administration this month inked an eight-year, $1.2 billion deal with Lockheed Martin Corp. to provide TSA with comprehensive human resources support. The contract could expand into a $3 billion project if the Homeland Security Department decides to use it for human resources support at its headquarters operations.
The unprecedented deal is being viewed by many as a bellwether of things to come. Many expect a fast-paced outsourcing of HR services by federal agencies in the months and years ahead.
The outsourcing trend is fueled by a recognition that in-house HR methods are behind the times and unresponsive to growing needs. Agencies across government are seeing large-scale turnover of their staffs because of retirements, and that means accelerated recruiting, hiring and training. The move, proponents say, will enable agencies to employ smaller HR staffs that can focus on crafting strategic hiring plans and pay-for-performance systems. Meanwhile, contractors will handle the day-to-day operations of processing pay and benefits, recruiting and hiring, and managing personnel files, experts say.
“The role of HR has changed,” said Solly Thomas, associate partner for human capital management services at IBM, one of the contractors added to the government’s HR Line of Business program. “It’s gone from just processing, to looking at how they recruit and hire, and [considering things like] performance management practices.”
The White House is pressing agencies to consolidate their HR operations under a handful of service providers, both federal and private sector, under HR Line of Business. The program started in 2004, but officials overseeing it expect to win congressional support in coming weeks to greatly expand it.
The HR Line of Business program currently includes five federal HR service providers: the Defense, Health and Human Services and Treasury departments, the Agriculture Department’s National Finance Center, and the Interior Department’s National Business Center. Those agencies provide payroll processing services, process employee benefits and manage employee personnel files. Some also provide training, labor relations and strategic analysis. Actual hiring decisions remain with the customer agency, and agencies set their own goals and strategies.
The Office of Personnel Management, which manages the HR Line of Business, decided to allow private-sector companies to compete for federal business under the program last year in hopes the competition would drive down prices and spur additional service offerings. OPM added IBM, Accenture, Allied Technology Group and Carahsoft Technology to the list of available vendors in December and January.
But Congress has prevented the companies from taking part in the program until next month while it reviews the program’s projected cost savings. The Office of Management and Budget said in a June 25 report to Congress that agencies could save millions of dollars annually under the program. The Health and Human Services Department, for example, is expected to save $11 million per year.
Thomas expects IBM and its competitors in the program will start servicing agencies then.
Lockheed Martin said it’s getting increased interest from federal agencies.
“Some agencies that have previously done everything in-house are starting to put feelers out, and see what benefits the private sector can offer,” Lockheed Martin spokeswoman Emily Simone said. She would not say which agencies she was referring to.
The reason for the increased interest, experts say, is that the private sector is way ahead of the government in offering innovative Web-based personnel systems and other cutting-edge services.
“There are so many more new ideas out there ... in the private sector,” said Tom Kelley, senior vice president for the HR and management consulting company AmeriBen/IEC Group. Kelley and other private-sector officials say their online self-service programs, for example, are leaps and bounds ahead of what the government has so far come up with.
But experts also caution that as the government moves forward, it must adhere to common-sense boundaries on what is outsourced. John Palguta, vice president for policy at the Partnership for Public Service, said agencies can use contractors to pull together data and conduct analysis for a strategic plan, but agency managers must decide those strategies.
“There’s not a lot in HR that is inherently governmental, but you still need folks in-house to do that,” Palguta said.
Kelley of Ameriben/IEC said HR work at intelligence and national security agencies should probably remain in-house to avoid security breaches. And agencies should specifically spell out what it expects from contractors to avoid confusion, sloppy work and wasted money, he said.
Because of the urgency with which it was created shortly after the Sept. 11 terrorist attacks, TSA has always relied extensively on contractors to run its HR operation.
The Lockheed Martin contract consolidates work previously done by Accenture, CPS Human Resource Services and Avue Technologies. TSA spokesman Greg Soule said the deal will streamline operations and improve efficiency.
Homeland Security now relies on Northrop Grumman Corp. to provide many of its HR services at its headquarters and has no plans to drop the company, said DHS spokesman Larry Orluskie. But if DHS adds a new division or suddenly needs to ramp up hiring, it will turn to Lockheed Martin, he said.
“It’s a contingency,” Orluskie said. “If there’s anything in the world DHS is learning, it’s to be prepared.”
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