By Balancing Best Practices with Specific Needs, Booz Allen Helps Federal Agencies Cut Overhead Costs

The firm’s Overhead Optimization service offering is one way the U.S. government is reducing administrative expenses by hundreds of millions of dollars.

Since the 1990s, the federal government has been trying to drive down agency overhead and mission-support expenses while increasing management efficiency and mission fulfillment. To improve performance and accountability, set critical priorities, and measure for success, agencies are reviewing the ways they deliver overhead and internal support services across business units or departments.

Booz Allen Hamilton has been helping clients maximize their support service delivery and reduce their costs since the 1980s, and compiled its best practices and decades of expertise in a service offering called Overhead Optimization (OO). Today, this service offering has identified hundreds of millions of dollars in federal agency overhead cost savings… so far.

Booz Allen uses the OO service offering to help evaluate an agency’s support needs by assessing its customer requirements and priorities and identifying costs in its organizational structure, business processes, and technologies. The team works with the organization to develop cost reduction strategies and recommend a service delivery model that can respond to increasing demands for quality and service.

The OO approach is a 90- to 120-day strategic assessment of an organization’s cost structures, customer priorities, and supply and demand drivers. These factors are assessed against benchmarked data of similar public and private services. 

From these results, the team crafts a high-level business case of improvements and savings across business units and departments, often using one of four components:

• Organization redesign
• Shared services design
• Business process optimization
• Strategic sourcing

The service offering can assess the merits and drawbacks of options such as consolidation, resource reallocation, automation, decentralizing/centralizing, and standardizing and streamlining business processes.

Says vice president David Mader, “Booz Allen accommodates an organization’s unique business and cultural needs by designing and implementing the optimal service delivery model. Then we bring together a variety of teams to develop a single, go-to-market strategy for helping organizations identify a burning platform for cost optimization and a strategic approach to determining the right solution.”

David Mader

In May 2008, the firm sponsored the first Public Sector Shared Services conference in Alexandria, Virginia, to help federal agencies understand the OO service offering and how Booz Allen’s expertise can serve their needs.

Achieving Efficiencies, Economies of Scale, and More

Booz Allen’s OO service offering identifies key opportunities to reduce an organization’s internal support expenses by assessing:

• Factor costs, such as labor and IT spend
• Demand management, such as reducing unnecessary volume
• Automation, such as process streamlining
• Standardization and scale, including consolidation or sourcing
• Work practices, including process improvement
• De-layering and skill/mix reallocation

After the assessment, the firm recommends the best service delivery model to reduce overhead costs while delivering consistent quality support services. For example, the team may advocate implementing the external and/or internal shared services model, which consolidates a portfolio of support services into a single provider that manages and/or provides the services and allows business units to focus on delivering their core functions.

An example of this is a federal agency with a decentralized HR department where various business lines independently deliver services, such as payroll or benefits. Inconsistencies in delivery mechanisms can become costly to the agency as a whole, but a shared services approach can standardize services, reduce redundancies, and maximize automation to meet targeted goals.

“Booz Allen’s service offering can show how a shared services approach will consolidate services that had been scattered throughout an organization to achieve efficiency and economies of scale,” says associate Stacey Selenfriend. Benefits of shared services can also include focusing the organization on its core business, leveraging its technology, and much more.

The concept of shared services continues to evolve to keep pace with the government’s demand to improve agency performance at lower costs. This approach may also involve consolidating and streamlining cross-agency General and Administrative (G&A) services by identifying external shared services providers or federal Lines of Business (LoBs). LoBs are used as outsource providers to standardize requirements, business processes, and data and promote seamless data exchange between agencies.

“The LoB initiative allows high-performing government agencies that excel at providing services in certain areas to compete with private industry in outsourcing services,” says Selenfriend.

The Office of Management & Budget (OMB) has established several LOBs since 2004, and continues to identify more. Some in-house federal agency shared services providers are recognized as Centers of Excellence (CoEs) in specific LoB service areas and act as fee-for-service providers to other agencies. The Department of Health and Human Services, for example, is a CoE in HR management.

As a respected consultant to the government for over 90 years, Booz Allen continues to be at the forefront of innovation in tailoring its solutions to help organizations optimize delivery of support services and redirect critical resources back to their missions.

story posted October 1, 2008