Q&A: Paul Bartley, Department of Health & Human Services
Heading up the shared services organisation serving the US Department of Health and Human Services – and some 45 other agencies – is a towering challenge, but Paul Bartley can’t afford to be overawed… Outsource columnist Nick Mellors met with Bartley at SSON’s Shared Services in the Public Sector 2012 conference in Chicago to get the inside track on a shared services success story.
Nick Mellors: Paul, the Department of Health & Human Services (HHS) is the United States government’s principal agency for protecting the health of all Americans and represents almost a quarter of all federal outlays, administering more grant dollars than all other federal agencies combined; does that lead you naturally to working with a wide range of government organisations?
Paul Bartley: It certainly does: my shared services centre, the Program Support Center (PSC) offers a number of services available to all of the federal government. Those include grant-related services, health services for federal employees and procurement. In the past two years we have added a fourth area, transportation services – due to our wildly successful “Green Options” GO!card which delivers commuter benefits to federal employees.
In the grants area, we have almost 80 per cent of the federal market share with approximately $400 billion grant payments made each year. We currently serve HHS and about 45 other agencies. Once a grant is awarded by an agency, the payment piece is in our hands. We audit the grantee’s indirect costs and make payments on behalf of the grantor. We also provide helpdesk support for grant applicants. Our team of cost accountants maximises the amount of the grant that goes to the program’s mission.
We operate over 300 health clinics and over 30 wellness/fitness centres in federal office space nationwide. Last year, almost 300,000 individual doses of flu vaccine were shipped from our Supply Service Center, which is the only Food & Drug Administration-approved pharmaceutical restocking facility in the federal government. Because of HHS’s health mission, it is natural that we would provide these services. We rely on the expertise of sister agencies such as the Centers for Disease Control in utilising the latest techniques to encourage employees to be healthy.
In the area of acquisitions, we pool the needs of units across the government to provide volume-buying opportunities. In 2012, we handled $1.4 billion in contract awards for our customer agencies.
Our newest service is called the GO!cardTM and it is widely used in HHS and has a high potential to benefit other federal agencies too. We revolutionised the way federal employees get their monthly commuter subsidy (also known as “transhare”). Instead of having subway, bus, train, and/or ferry passes provided to them on paper as we had for years (with all the requisite logistical headaches), federal employees are now able to buy transit media for commuting to and from work with the swipe of a government-issued credit card. Commuters definitely like the convenience! And our customer agencies like this new system because it is an electronic transaction that can be tracked and regulated; there is no waste of paper or processing time, and it minimises the administrative cost. At the end of each month, PSC returns any remaining balance to the agency to cut back on unused subsidy benefits. In HHS alone, the GO!card provides an annual cost saving of $3.4 million. We just added two new customer agencies, tripling the number of GO!card users from 8,600 to 25,000 in just one year.
NM: Which presumably was part of the driver towards setting up the Program Support Center (PSC) in 1995 and the development of your range of shared services; can you give us a flavour of the scale and type of shared services you provide?
PB: Every new customer we take on contributes to us being able to spread the high fixed cost of systems and other investments over a wider pool, thus lowering rates for all.
Facilities and Logistics Services (FLS) provides warehousing, and distribution services for pharmaceuticals, medical supplies, and office furniture and general supplies; building operations and maintenance services for its residents under delegation of authority from the General Services Administration (GSA); Asset and Property management and regional support. FLS provided approximately $80m in services in FY12.
The Federal Occupation Health Service (FOHS) delivers programs that provide for the health and wellness of federal employees. This includes the clinics and health centres I previously mentioned. FOH provided over $150m in services in FY12.
Financial Management Service (FMS) provides grants management and financial services including grant cost review and allocation, grant payment management, debt management, and a full suite of accounting services such as account receivable, payables, and financial reporting for its customers. FMS provided $60m in services in FY12.
Our Strategic Acquisition Service (SAS) provides procurement services from planning through award for simplified and complex contracts. SAS received over $350m in revenue in FY12, performing approximately 100,000 contract actions in processing over $1.4bn in contract awards (and credit-card transactions).
The Administrative Operations Service (AOS) provides administrative and technical services including payroll; transportation and travel management; and print and media services. AOS provided approximately $60m in services in FY12.
NM: You came to the role at the PSC from a wide-ranging public and private sector background; what issues have the PSC had to deal with and what lessons have they taught you for the future?
PB: I have a very interesting job for a number of reasons. For one, I am in effect the “Chief Executive Officer” of PSC – I set the direction and provide motivation for my 3,000-person staff to deliver high-quality goods and services in the most efficient way. I also answer to my customers: the person in charge of administrative matters for every major agency of HHS – including the Centers for Disease Control (CDC), National Institutes of Health (NIH), Food & Drug Administration (FDA), Centers for Medicare and Medicaid (CMS) – sit on a board that oversees the PSC. They review and must approve the rates we charge and keep an eye on our customer service levels. Finally, I work for a political appointee so I must keep in mind the needs and priorities of each Administration while ensuring continuity between Administrations.
In performing this role I have relied greatly on learning how others in shared services have been successful. Every year I have been in this role I have taken the time to visit at least two or three shared services operations in both the private and public sector in order to learn from others and avoid too many painful lessons of my own!
NM: What have been your most satisfying achievements at PSC?
PB: One particularly satisfying achievement was our “SMART” (“Save, Manage and Assess our Resources Together”) program which generated $11.1m in savings for customers related to FY11 and delivered $32.2m in savings to customers in FY12. This initiative empowered the 24 PSC “business owners” to fully understand their budgets and make decisions on how to make their operations more efficient. We saved money through a number of successful cost-containment practices such as: challenging our use of contracting dollars; ensuring we had the workforce we need for the future as opposed to simply backfilling vacant positions; decommissioning duplicative assets such as multiple PCs/laptops, photocopiers, and unused email accounts and phone lines; and deferring purchases such as out-of-area travel when other means can be as productive, to name a few. We also creatively used technology to streamline operations, increase efficiencies, and reduce costs.
In addition to saving taxpayer dollars, this initiative firmly established these “business owners”, who we also refer to as “Service Managers”, as the true decision-makers for their activities. They shared cost-cutting techniques as a group and have begun to be seen by their staff and customers as true leaders and innovators for their activities. I find that empowering people who can really make a difference is very satisfying.
NM: You’re one of six or seven successful shared services stories in the US federal government – what has made you successful?
PB: There are a number of things that I believe have helped make us successful but the primary one is our fee-for-service model. Instead of receiving a set “appropriated” amount from Congress annually (as the vast majority of agencies in the federal government do), we provide services based on rates. If we don’t charge a competitive rate or our customers don’t believe we add value we won’t be in business for very long. This system not only motivates my organisation to be efficient, it affects the “demand” side of the equation as well: by charging for each item they are incentivised to ask for only what they truly need.
NM: Do you see those successes being transferable for other federal government organisations?
PB: Absolutely! This model has been so successful we have begun to see others adopt it. For instance, the Centers for Disease Control in Atlanta (part of HHS) has recently received authority from Congress to set up a fee-for-service type of arrangement and will use it for many support activities such as information technology, finance and human resources. Other departments in the federal government – including Treasury, Interior, and Transportation – use this model for their support activities. Many of our business practices are based on commercial best practice such as the balanced scorecard strategy, top-down budget accountability, forecasting, and benchmarking among others.
NM: Finally, what three things would you advise to someone starting out on the shared service journey in the public sector?
PB: Firstly (this is a lesson I learned from a colleague, Rick Arbuthnot, who started the very successful NASA Shared Services Center): be sure to document the cost of performing activities before you implement your shared services operation so that you can later show with clarity the savings you have generated through the change.
Make sure you have the right team in place. In order to set up a brand-new operation, or transform an existing one, you will need loyal and competent team members. Know what your strengths and weaknesses are so you can hire for the right complement of skills.
Finally: be prepared to be resilient! Although shared services involves a lot more than consolidation, moving to this model necessarily involves loss of control by those who will become your “customers”. Many of them will think of a thousand reasons to resist the change. Be patient and win them over. Go for the low-hanging fruit and prove yourself before expecting others to just hand off their activities to you.