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For years now, SSN has been reflecting the trials and the successes of those tasked with running shared services organizations. We've heard from in-house SSO leaders, from those managing outsourced processes, from consultants and from academics. But who are the sponsors that stand behind these teams? To what extent is their vision and support reflected?
This series profiles C-level execs that have bought into and are driving their shared services and BPO efforts with a true vision for the value that can be generated. Here we speak with William McCabe, from the US Department of Health and Human Services (HHS).
SSON: Bill, from your perspective, what's the real value of HHS' shared services office?
Bill McCabe: The Program Support Center (PSC) takes great pride in being the leading provider of shared services in the federal government. We not only deliver outstanding services and products to federal agencies, but we allow agencies to operate with greater efficiency and focus on their core mission. We're able to consolidate processes and minimize costs incurred from the duplication of services. Our support yields several benefits, including cost savings, better service, transparency and reduced risk. We have what it takes - the experience, expertise, timeliness, innovation and resources necessary to meet and exceed agency needs.
SSON: How did PSC begin and how does your shared services model support the overall financial strategy
BM: We were created in 1995 as part of Al Gore's 'Reinventing Government' initiative. In fact, there were really a number of factors that led to PSC's creation. Transparency had become an important issue, as had risk mitigation. HHS as that time, like many other components of government, had many loosely connected systems which made it difficult to get the consolidated financial and management reporting that was being asked of us. The 1990 CFO Act, and more importantly perhaps, the 1996 Federal Financial Management Improvement Act, also had a big impact on our operations. Both Acts required tightly integrated, unified systems. These Acts, along with Gore's initiative, led us to consolidate administrative functions to reduce cost, improve service, increase transparency and reduce risk.
Instead of the loosely confederated system that evolved in the various HHS agencies, the Department developed a more consolidated and unified system.
SSON: What kind of services does the PSC provide?
BM: We provide nearly 60 services right now, which we call business lines, within PSC. They basically cover finance, acquisitions, IT, employee related health services and other administrative services. We provide the backbone for critical internal operations. More specifically, on health services, we provide occupational health services to federal employees, including flu shots. We estimate that more than one out of every three federal employees is touched by our services.
SSON: Who depends on PSC?
BM: We have a wide range of federal agencies who depend on us such as HHS, NASA, the Departments of Transportation, Treasury, Agriculture, Defense, Interior and Justice, just to name a few. Fifty-four percent of our customers are outside HHS. They don't have to come to us but they do because they know our value. Our HHS customers also choose our services beyond those mandated. For example, 74 percent of the revenue from PSC's top HHS customers comes from non-mandatory services.
Why do agencies choose PSC?
BM: We have a proven track record. PSC has driven down the fixed cost of providing services by expanding its customer base and implementing business process improvements. The percentage of rates that were reduced or held unchanged has increased from 65 percent in 2006 to 75 percent in 2007 to 88 percent in 2008. Corporate overhead has also been held to 1.4 percent of revenue for the same three year period. We use key performance indicators to measure our performance. Recently the customer satisfaction from our customer comment cards indicated a 90 percent satisfaction rate and timeliness was 93 percent.
SSON: What is the scope of your operations?
BM: Our reach is far and wide. We provide important services to HHS and 31 other federal agencies located in the U.S. and abroad. We have a network of offices nationwide. These services keep agencies running.
SSON: What is your vision for the PSC?
BM: Well, 10 years ago, the shared services concept was a new frontier for the federal government. Now it is seen as 'how business is done.' Most private sector corporations and commercial companies, 80 percent I believe, are using a shared services concept. My vision is that shared services at HHS will grow dramatically because, as the economy dips, our government agencies will be looking for more ways to save money. I expect PSC to grow counter-cyclically. Last year alone our business volume increased 15 percent because more customers chose to buy our services. Our annual revenue has nearly doubled in the last five years. Approximately 54 percent of our total revenue is derived from non-HHS customers.
SSON: And what is driving this growth?
BM: There are two key growth drivers in government right now: reduce financial risk and increase transparency. Risk reduction is very important. Evidently, there was greater financial risk throughout the economy than any of us had realized, and it was because too many organizations were doing their own thing. The move toward centralization goes a long way towards reducing financial risk. Letting financial experts like PSC operate in a standardized way reduces this risk because our specialists are well versed in the regulations. For HHS, centralizing the financial services of all its agencies means greater financial security for the whole Department. The other factor is transparency: how are your tax dollars being spent? The shared services model gives us the ability to be more transparent. I think those two factors go beyond transactional cost savings, to favor the shared services model and will drive growth in the shared service model over the next decade. Reduced risk and increased transparency across government also ties in with Sarbanes-Oxley (Public Company Accounting Reform and Investor Protection Act of 2002) and other regulations.
SSON: Would you consider outsourcing, domestically, certain transactional services?
BM: Sure. If we believed there was a service we were providing that could be done faster and cheaper by someone else, we would definitely consider outsourcing.
SSON: What would be the deciding factors?
BM: We'd look for a significant improvement in quality, like timeliness, transparency and reduction of error rates - not just cost - before we'd consider outsourcing. We do have some outsourcing, for example we use Defense Financial Accounting Services (DFAS) for payroll.
SSON: What about bringing in new services? How do you decide whether a new service is appropriate for the PSC?
BM: 'Need' or 'demand' would be a driver. Are our customers demanding this service? Does the service fit our scope of administrative/financial type service? Can we offer it more efficiently and expertly than other providers? We've recently brought in some of our security services, which deal with centralized badging of all government employees. We're growing in that area.
SSON: To what extent is the PSC currently feeling the pressure of unexpected challenges, like the American Recovery and Reinvestment Act and H1N1 Flu? How are you dealing with this?
BM: Both initiatives are keeping us busy! PSC has a range of services that benefit federal agencies as they carry out their missions under the American Recovery and Reinvestment Act. One of the services we provide is grants management and payments. The grants that HHS awards come through my office in the shared services center. As a result of the American Recovery Act, $100 billion more in grant money is passing through our office. Normally we award approximately $300 billion a year in grants; this year it will be more than $400 billion. Obviously there is a lot more grant activity occurring. The added emphasis on transparency has resulted in a greater demand for reporting, and that demand naturally has fallen on us, as well. We supported the HHS mission to improve the health of all Americans by distributing more than 300,000 doses of the seasonal flu vaccine to federal facilities worldwide, and are providing about 200,000 flu shots to federal employees.
SSON: Are you able to cope with the same number of resources?
BM: Yes, we've handled the workload well because of our expertise in grants management. If we had multiple agencies awarding grants, and multiple systems, with non-dedicated staff, managing the workload would be much more complex and far less transparent. We have a group that specializes in administering grants. It's their full-time job. PSC awards approximately 75 percent of all grants that are given out by the federal government. As I said, this year we'll be awarding over $400 billion in grants.
SSON: What about the H1N1 Flu? How is that affecting your operations?
BM: In the accounting area, we're reallocating to make sure we have resources in the right place should we need to step up our efforts to combat the spread of the flu virus. We are responsible for ensuring resources are mobilized, and for making sure travel is available for nurses and doctors, when they are needed. We have our own medical team that responds to medical emergencies, within HHS, and PSC runs HHS' travel system. Our Service Supply Center is the only supply depot supporting HHS. They handle the distribution of the seasonal flu vaccines and H1N1 vaccines. We distributed 300,000 seasonal flu doses in Fiscal Year 2009 and plan to distribute at least that much for the H1N1 doses. We've already processed and distributed 10,000 doses of H1N1. In addition, we provide Personal Protective Equipment (PPE) such as masks and respirators, and antivirals such as Tamiflu and Relenza.
SSON: What's a real challenge to you? What's causing you headaches?
BM: Right now I'm keenly focused on the way we report and provide information to management. It goes along with greater transparency. We need to show where every dollar is spent. I think we do a good job but it can always be improved. Overall, I am very optimistic about PSC's future in government shared services. We are saving taxpayer dollars by reducing the government's costs of doing business.
SSON: Bill, thank you for your time.
William McCabe was appointed CFO of the HHS Program Support Center (PSC) and Director of the PSC's Financial Management Service for the US Department of Health and Human Services, Washington D.C. in May 2008. As CFO, McCabe provides leadership for PSC's Financial Management Services division by overseeing all accounting and financial services including: grant payment management services, debt management services, rate review negotiation, and approvals for Federal grant and program activities. He also provides fiscal advice, as well as technical and policy guidance to assist in implementing new initiatives to ensure compliance with regulatory requirements. McCabe's goals are to provide highest quality financial management services at the lowest possible cost.