navigating industry trends and government mandates for success
Developing and executing a sourcing strategy is a complex and time-consuming process for most businesses. It is particularly challenging for the Federal Government, especially in light of some recent trends. The Obama Administration has renewed interest in the discussion over fixed-price contracting and “inherently governmental” functions supported by industry (The White House, 2009). Activities that have historically been supported by the contracting community are now being brought back “in house.” This has a tremendous impact on both the Government and the contracting communities as increased scrutiny is focused on contracts and the pressures to in-source are heightened. This is very different from the Federal Government's long-standing policy (Office of Management and Budget Circular A-76) of encouraging agencies to rely on the private sector to determine the most economical way to carry out their commercial activities. Circular A-76 encourages Government agencies to evaluate their services against industry benchmarks and to contract out those services that could be more competitively achieved through outsourcing. Moreover, the need for the Federal contracts manager to demonstrate “transparency” is having its own ripple effect as the bright light of scrutiny shines on virtually every contracting action.
Are these trends and mandates bad changes for the Federal Government? Probably not, but whether you are philosophically for or against them, they require a new level of attention and management control to be implemented well. As the President's memorandum (The White House, 2009) states:
It is essential that the Federal Government have the capacity to carry out robust and thorough management and oversight of its contracts in order to achieve programmatic goals, avoid significant overcharges, and curb wasteful spending.
This paper addresses these issues and provides simple tools, tips, and processes to successfully navigate Government mandates and adhere to industry best practices in sourcing.
ICF's Sourcing Lifecycle Framework
ICF's approach to sourcing relies on a framework driven by A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (PMI, 2008) to meet both the project management oversight best practices and the legislative mandates for our Federal clients. This framework provides ICF with the flexibility to tailor implementation specific to each client's unique needs while ensuring that project management controls are in place. ICF's Sourcing Lifecycle Framework (see Exhibit 1) depicts the major areas of sourcing support that we provide. By delivering solutions through the implementation of ICF's Program Management Office (PMO) Sourcing, we help our clients focus their efforts to ensure that their sourcing activities are executed successfully.
Exhibit 1: ICF's Sourcing Lifecycle Framework
Whether you decide to source products and services internally or through a sourcing partner, ICF's Sourcing Lifecycle adjusts to meet your needs. This paper's intent is to describe the benefits of the PMO in the sourcing lifecycle, so we will describe only briefly the other elements from the framework and will focus on those directly related to PMO Sourcing.
The first major step in starting any program is to ensure that it is aligned with your company's strategy. It doesn't matter whether your company is profit driven or if you run a philanthropy; you have to map your program's goals and objectives to meet the strategic direction of your organization—or you risk having your stakeholders dissatisfied and your program canceled. In the case of determining how best to provision services, developing a sourcing strategy is key. Regardless of economic benefits, it may not be viable to outsource some services. These services may be core competencies that set your company apart from the competition, or can simply be culture or value issues that are not open for negotiation (e.g., providing grounds keeping/landscaping jobs to the local community). It is important to know what these issues are and ensure that your sourcing strategy matches your company's culture.
Whether you decide to “insource” or “outsource” your services, defining requirements, understanding legislative mandates, and establishing your programs goals are just part of effort. For outsourced programs, your ability to identify potential industry partners, conduct a successful procurement, make an award, and transition services still isn't the most difficult part of the journey. The real work comes after you have selected your partner(s)—in managing the outsourced environment to ensure that your goals and objectives are met. This requires a significant amount of time and resources. Though demanding, this process can yield tremendous results in both improved service and resource savings for the Government. The key to ensuring success is in designing and implementing a well-structured PMO, tailored to the sourcing environment.
This paper outlines ICF's PMO Sourcing approach, techniques, resource recommendations, and practical application methods that our existing clients currently use. The strategies put forth here are specifically tailored to the Federal sector, but can be readily modified to fit other environments.
What Industry Trends Impact Federal Sourcing?
Several industry trends impact sourcing in the Federal Government. Although this is not a comprehensive list, it represents the most significant challenges the market faces today and that have specific impact on the Federal sector. These trends are in no particular order:
- Skills Shortages—Can anyone do this job? The fast-paced and ever-changing technology marketplace makes it virtually impossible for most Federal agencies to stay current on IT trends and technologies. Their human resources process is slow and cumbersome and discourages many professionals from entering Federal service. Once on board, many Government IT professionals suffer from a lack of consistent training in newer technologies that leave them “behind” their industry peers.
- Technology Ownership—Do you have to own that PC? Contractor-owned and contractor-operated IT environments aren't new to the Federal marketplace. However, there is a significant movement to bring some technologies back in-house because outsourcers have failed to deliver on the promise of better service at lower cost. Commodities such as the desktop remain outsourced; critical infrastructure such as networks and communications circuits is being brought back in. This has produced hybrid sourcing environments and some management challenges.
- Performance Management—How do you get the most for your money? Performance management goes well beyond tracking service-level agreements (SLAs). The ability to manage and track performance—i.e., results—from your outsourcer is essential to maintain high levels of client satisfaction with your user community, which takes a significant combination of people, process, and technology to measure and manage. This work is best done under the auspices of a forward-looking PMO.
- Competition—How do you keep competition at the table? Once the deal is awarded—usually a large, multi-year deal—the thought of issuing another procurement is overwhelming. However, you don't want to be held hostage by your new contractor. To mitigate performance risk, more and more multi-award contracts are being issued for outsourced deals to ensure that competition stays at the table. The trick is in how you balance the extra overhead required for multiple partners while managing this environment to your advantage.
- Long-Term vs. Short-Term Contracts—How do you manage the benefits of having a long-term partner vs. having the flexibility to meet new requirements easily? Why is this even an issue with long-term partners? It shouldn't be, but it usually is with Federal contracts. Once a deal is struck, it is very difficult to negotiate significant modifications without opening a “Pandora's box” of disputed items for negotiation—often detracting from the issue at hand.
- Multi-source Environments—How do you manage multi-layered support? By ensuring that competition stays at the table, you pay a price—you now have to manage all of these separate contractors. No contractor wants to sit in “standby mode.” Contractors need to be engaged with meaningful work and committed to support your agency. You have to also ensure that multiple contractors all work together as a team—your team.
- Security and Privacy—How do you respond to outside threats? One of the most critical pieces of managing your environment is to ensure that it is safe. This goes well beyond issuing a few policies and timing password resets. Your outsourced team must be able to respond quickly and efficiently to new mandates, aggressive attacks, and highly unpredictable events. This capability has to be planned, staffed, and ready to go at a moment's notice.
- Process-Driven Frameworks—Although slower to be adopted in the United States than in Europe, the IT Infrastructure Library (ITIL) process framework is now gaining traction in the Federal market as a gold standard. However, just saying the words doesn't make a process or a service provider ITIL compliant. A lot of work has to be done—both by the service provider and the service recipient—to take advantage of this framework.
- Airline Magazine Syndrome—Green computing, cloud, virtualization, open source—much hype is circling these trends in the industry. How can you take advantage of these trends—without being taken advantage of? What are the benefits behind the buzz? Why wouldn't a service provider want to do this?
- The Washington Post—The number one thing you hear Federal managers demand from their contractors, “Keep me off of the front page of The Washington Post!” No one wants their program exposed to bad press. However, with the administration's push for transparency, Federal agencies are going to be exposed to scrutiny more than ever before; they need to have their programs in order.
- Legislative Mandates—They can impose new requirements that impact existing contracts. Whether it is security or privacy mandates, or changes to agency authorizations—legislation can impose significant changes to contract requirements midstream. Your team has to be ready to assess the contractual impact to meet these changes quickly.
Why PMO Sourcing?
The devil is in the details. The trends and mandates listed above are daunting enough alone. When you couple them with the pressures of everyday service delivery (i.e., keeping the trains running on time), they can be overwhelming. You need a well-structured PMO that is armed with the appropriate staff, proven tools, and techniques to get the job done right. The outsourcer's staff is performing the day-to-day activities that provide services to your customers. PMO Sourcing is established to provide a stable set of resources who monitor the environment, assess changing customer requirements, support the program as trusted advisors, and oversee the contractor through performance monitoring.
PMO Sourcing ensures that each of the contracted services is provided as needed to all of your customers. The PMO is not merely a “reporting branch” for your organization; it performs a very important verification and validation function for the enterprise. The Institute of Electrical and Electronics Engineers (IEEE) 1012 standard defines independent verification and validation (IV&V) as the processes for determining whether the “products of a given activity conform to the requirements of that activity [Verification], and whether the software satisfies its intended use and user needs [Validation].” In the context of PMO Sourcing, the Verification activity can be defined by the question “Are you building or delivering the service correctly?” and the Validation activity by, “Are you building or delivering the correct service?” Answering these two different types of questions builds the foundation for the multidisciplinary services and functions ICF's PMO Sourcing methodology supports. This PMO is responsible for monitoring the performance of the service provider, verifying SLA metrics, reviewing deliverables, assessing quality control, and determining the credits and penalties of the outsourcer. You have to balance your outsourcer's desire to maximize profit with your customer's desire for maximum service. A PMO team dedicated to ensuring that balance is achieved is essential to your success.
The PMO Sourcing Approach
The PMO Sourcing approach (see Exhibit 2) establishes the team and provides a methodology to support the outsourced environment. The PMO Sourcing team provides a best-of-breed, easy-to-follow guide for all the required elements:
- Project management and IV&V processes
- Subject matter experts (SMEs)
- Automation and productivity tools
- Tailored standards and knowledge repositories.
This approach allows project management and sourcing experts to deliver an integrated and customized solution to the client that reduces potential service delivery risks. The PMO Sourcing approach can be best described using a factory analogy. Raw materials in the form of inputs (e.g., monthly SLA performance metrics) arrive at the warehouse and are offloaded onto the factory floor. Factory workers “break down” the materials and deliver them to the appropriate production line—e.g., desktop, applications, network, help desk—where they are “processed.” Materials are then assessed, evaluated, and tested for accuracy using industry standards, best practices, and tools. They are assembled into final products that are either approved or rerouted for correction and follow-up. In the end, the PMO Sourcing team releases a finished product that results in payment or assessed penalties for non-performance. Other “products”—e.g., new work requests, proposals—follow a similar path and are processed by the PMO Sourcing so that the Government can make the best decisions for its customers on the value of these proposed services. To ensure predictable and repeatable results, our approach is built on industry best practices—including PMBOK®, ITIL, ISO9001, and others—used by successful organizations engaged in large, complex, mission-critical projects and operations.
Exhibit 2. PMO Sourcing Approach
The key components of this approach include the following elements:
- Project Management and IV&V Processes—PMO Sourcing uses management processes recommended by PMI's PMBOK® Guide. Scope management, cost and quality controls, risk management, among other things, are all key components of the work done by these teams. We enhance these processes to incorporate principles from the ITIL and the Capability Maturity Model Integration (CMMI) frameworks, as appropriate, based on the IT services being provided.
- Subject Matter Expert—The experience of our SMEs includes project management, IT infrastructure services, contract administration, security services, and SLA management. Our teams also include experts on Government acquisition, budgeting, and finance. This pool should be tailored to the specific environment being supported.
- Automation and Productivity Tools—This includes a wide array of automation software to analyze help desk ticket data and manage SLA performance and trending. Additional tools include document templates, checklists, and other productivity enhancements that support data analysis and ad-hoc reporting, document production, and service output quality control.
- Standards and Knowledge Repositories—This encompasses a specially assembled and wide-ranging collection of industry standards and knowledge repositories. These repositories include the CMMI, IEEE, ITIL, and International Organization for Standardization (ISO) standards. Equally valuable are previous contract files, a special collection of IT industry research reports, and a large library of industry SLAs and associated cost/performance data.
This holistic management approach is equipped with a full array of unique resources for initiating, planning, executing, monitoring, and controlling all work activities. We have used use this methodology successfully with our Federal Government clients.
Client Examples: PMO Sourcing
The following client examples will be highlighted during the presentation to describe the real-world application of the PMO Sourcing approach, techniques, and results.
- Department of Health and Human Services (HHS)—ICF supported HHS through the use of our PMO Sourcing framework for a complex acquisition effort valued at $800 million in IT Infrastructure services in a multi-sourced environment. This project started with requirements analysis, alternatives analysis, development of an acquisition strategy, and included the full support of HHS through the procurement process. Our successful performance on this project, from its inception, has provided HHS with an unprotested acquisition. We also provided the HHS transition oversight and have managed activities such as SLA development and SLA negotiations that have enabled HHS to ensure that all requirements and service levels set forth in the contract are met.
- Department of Transportation (DOT)—ICF assisted DOT in developing an IT Shared Services Common Operating Environment (COE) model and for transition support for the migration of DOT's field offices into the COE. ICF led the requirements-gathering sessions and developed performance-based Statements of Objectives (SOO) for the COE shared services (i.e., seat management, infrastructure, application hosting). ICF developed the charter, launched, and operated the COE PMO that performed the project planning, execution, monitoring, and control of the COE migration. ICF also supported the acquisition of the new COE contract.
- Department of Housing and Urban Development (HUD)—For more than seven years, ICF has conducted performance-based infrastructure outsourcing oversight on the multi-sourced IT infrastructure contracts valued at approximately $1 billion. The vendors providing the infrastructure services have long-term, contractor-owned, contractor-operated deals (period of performance is 10 years) for providing IT to HUD. ICF's support services include the review and acceptance tracking of all the contract deliverables. ICF manages the full-life cycle of an enterprise suite of SLAs, to include recommendations for a multimillion-dollar package of financial incentives/disincentives. ICF also supports the operations of two governance boards responsible for the processing of user request changes and adherence to enterprise architecture standards.
Because of the complex nature of sourcing operations and the challenges facing organizations today, there is an increasing emphasis on performance management, service delivery, and maximizing resources in the Federal marketplace. The application of the PMO Sourcing approach and techniques is an essential element of any sourcing initiative, to reduce the risk and impacts of these challenges.
Project Management Institute. (2008). A guide to the project management body of knowledge (PMBOK® guide). Newtown Square, PA: Project Management Institute.
The White House. (2009, March 4). Memorandum for the Heads of Executive Departments and Agencies. http://www.whitehouse.gov/the_press_office/Memorandum-for-the-Heads-of-Executive-Departments-and-Agencies-Subject-Government/.