U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Special Report
EPA's Human Resources Management
System Did Not Deliver Anticipated
Efficiencies to the
Shared Service Centers
Report No. 09-P-0206
August 11, 2009
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Report Contributors: Eric Lewis
Dwayne Crawford
Rae Donaldson
Abbreviations
DFAS Defense Finance Accounting Service
EPA U.S. Environmental Protection Agency
FY Fiscal Year
HR Human Resources
HR-LoB Human Resources Line of Business
IT Information Technology
OARM Office of Administration and Resources Management
OCFO Office of the Chief Financial Officer
OIG Office of Inspector General
OMB Office of Management and Budget
OPM Office of Personnel Management
SSC Shared Service Center
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U.S. Environmental Protection Agency
Office of Inspector General
At a Glance
09-P-0206
August 11,2009
Catalyst for Improving the Environment
Why We Did This Review
We assessed the capability of
the U.S. Environmental
Protection Agency's (EPA's)
human resources (HR)
management system to provide
the information technology (IT)
support necessary for successful
implementation of EPA's shared
service center (SSC) initiative.
Background
In June 2008, EPA began
consolidating HR transactional
services under three EPA SSCs.
EPA expected the consolidated
SSCs to provide better results at
a lower cost. EPA had
documented the necessity of
upgrades to its HR management
system to achieve these
efficiencies. The Office of
Management and Budget
(OMB) has mandated that
agencies migrate to an Office of
Personnel Management (OPM)-
certified shared service center
(certified SSC) unless an agency
can show that it can maintain its
own operations at a lesser cost.
For further information,
Contact our Office of
Congressional, Public Affairs
and Management at
(202)566-2391.
To view the full report,
click on the following link:
www.epa.gov/oig/reports/2009/
20090811-09-P-0206.pdf
EPA's Human Resources Management System
Did Not Deliver Anticipated Efficiencies to the
Shared Service Centers
What We Found
The EPA SSC initiative lacked the necessary management controls to achieve
efficiency and effectiveness. In our draft report, we noted that EPA's Office of
Administration and Resources Management (OARM) lacked necessary cost
analysis and OMB approval to upgrade PeoplePlus with an automated workflow
feature in support of the establishment of the EPA SSCs. These actions were
contrary to OARM's own 2007 Business Case Study (Shared Service Center for
Human Resources} that stated EPA needed to upgrade its HR management system
to make the SSCs successful. EPA launched the SSCs in June 2008 before
obtaining the necessary upgrades. Subsequent to the release of our draft report in
April 2009, EPA changed its approach to achieving anticipated efficiencies at its
SSCs. EPA has determined that it is not cost-effective to update PeoplePlus.
Further, EPA's testing of an automated workflow feature to help improve HR
processing in support of EPA SSCs has proven unsuccessful, causing the Agency,
in part, to abandon the project.
EPA now looks to find an OPM-certified HR Line of Business (LoB) provider who
can provide the required HR IT support. This decision would be in agreement with
the previous recommendation included in our draft report pending a detailed cost
analysis for migration. However, EPA spent considerable time and funds pursuing
the former options. We concur with the Agency's decision to migrate to a certified
HR-LoB provider since it cannot justify upgrading PeoplePlus. However, we
believe that EPA must seek approval from OMB regarding its current hybrid
approach whereby the Agency would retain its current HR personnel who would
use an OPM-certified provider's HR system.
What We Recommend
Going forward, EPA needs to have the appropriate analysis, actions and approvals
in place to ensure the effective management of the Agency's HR function.
Therefore, we recommend that the Assistant Administrator for OARM: (1) obtain
approval from OMB for the level of migration intended by EPA; (2) develop a
baseline cost estimate to determine and secure necessary funding for migration to a
certified SSC; (3) establish realistic milestones with OMB for migration to a
certified SSC; and (4) document the risk of using PeoplePlus until EPA migrates to
a certified SSC.
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33
O
V
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
INSPECTOR GENERAL
MEMORANDUM
SUBJECT:
August 11, 2009
EPA's Human Resources Management System Did Not Deliver
Anticipated Efficiencies to the Shared Service Centers
Report No. 09-P-0206
FROM:
TO:
Bill A. Roderick
Acting Inspector General
Craig Hooks
Assistant Administrator
Office of Administration and Resources Management
This is the final report of the Office of Inspector General (OIG) of the U.S. Environmental
Protection Agency (EPA) assessing the capability of EPA's human resources management
system to help achieve anticipated efficiencies from EPA's shared service centers. This report
represents the opinion of the OIG and does not necessarily represent the final EPA position.
Final determination on matters in this report will be made by EPA managers in accordance with
established audit resolution procedures. The Office of Administration and Resources
Management provided comments to our draft audit report on May 29, 2009. The OIG evaluated
these comments, and where appropriate has made necessary changes in this report. We have
included the response and the OIG's evaluation in Appendix A.
The estimated cost of this project - calculated by multiplying the project's staff days by the
applicable daily full cost billing rates in effect at the time is - $152,524.00.
Action Required
In accordance with EPA Manual 2750, you are required to provide a written response to this
report within 90 calendar days. You should include a formal corrective action plan for agreed
upon actions, including milestone dates. We have no objection to the further release of this
report to the public. This report will be available at http://www.epa.gov/oig.
Should you have any questions, please contact Eric Lewis, Director, Special Reviews, at
202-566-2664 or lewis.eric@epa.gov.
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EPA's Human Resources Management System Did Not 09-P-0206
Deliver Anticipated Efficiencies to the Shared Service Centers
Table of Contents
Chapters
1 Introduction 1
Purpose 1
Background 1
Scope and Methodology 2
2 EPA's Human Resources Management System
Did Not Deliver Anticipated Efficiencies 4
EPA Options 4
Former Approach 5
New Plan and Challenges 8
Conclusion 9
Recommendations 10
Summary of Agency Response and OIG Evaluation 11
Status of Recommendations and Potential Monetary Benefits 12
Appendices
A Agency Response to Draft Report and OIG Evaluation 13
B Distribution 20
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Chapter 1
Introduction
Purpose
The Office of Inspector General (OIG) assessed the capability of the human
resources (HR) management system of the U.S. Environmental Protection
Agency (EPA). We sought to determine whether the system could provide the
information technology (IT) support necessary for successful implementation
of the Agency's shared service center (SSC) initiative and to achieve
anticipated efficiencies.
Background
The Office of Administration and Resources Management (OARM) is
responsible for managing EPA's human resources functions as well as
developing Agency-wide policy, planning strategically, and directing EPA's
human resources programs. As such, in June 2006, EPA's Chief Financial
Officer directed OARM and Region 9 to develop a plan to study consolidating
and streamlining EPA's human resources functions. These functions were
processed at 15 human resources offices located throughout the country.
Senior managers from OARM and Assistant Regional Administrators, who
oversee human resources functions in the 10 regional offices, directed the
study.
In May 2007, OARM issued EPA's draft Business Case Study entitled Shared
Service Center for Human Resources (2007 Business Case Study), based on
the results of the internal analysis by OARM senior managers and Assistant
Regional Administrators. The Business Case Study suggested consolidating
the Agency's HR transactional-type functions into two or three EPA SSCs.
In January 2008, the former Assistant Administrator for OARM announced
that EPA would be consolidating HR transactional services under three EPA
SSCs to improve the timeliness and quality of customer service and to
standardize work processes within EPA. The selected SSC locations were Las
Vegas, Nevada; Research Triangle Park, North Carolina; and Cincinnati,
Ohio. The former Assistant Administrator announced that transition to the
EPA SSCs would begin in June 2008, with consolidation efforts expected to
last from 12 to 24 months. According to the Agency's SSC Implementation
Plan, the final phase of transition is targeted for completion on December 31,
2009.
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The Agency's 2007 Business Case Study indicated significant IT upgrades to
the Agency's HR management system would be necessary if the EPA SSCs
were to succeed and operate efficiently. The IT upgrades listed were:
• Converting to an automated standard form 52 (Request for Personnel
Action) feature, known as "workflow." l
• Processing automated awards.
• Implementing EZhire XI options to track staffing actions.
• Implementing PeoplePlus modules for Employee Relations and Health
and Safety.
• Establishing a standardized benefit system with regional and field
office input.
• Purchasing learning management system modules for training and
development.
EPA stated that the SSC effort is also intended to align the Agency with the
HR-Line of Business (HR-LoB) initiative of the Office of Management and
Budget (OMB). OMB launched this initiative in 2004, to create a
government-wide, modern, cost-effective, standardized, and interoperable HR
solution, to provide common core functionality to support strategically
managing human capital through establishing certified public or private sector
SSCs.2 OMB selected the Office of Personnel Management (OPM) as the
HR-LoB managing partner due to its core mission and prior experience
managing E-Government initiatives.
Scope and Methodology
We conducted our audit between December 2007 and April 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we adequately plan for the audit; properly supervise
audit staff; obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions; and prepare audit documentation
related to planning, conducting, and reporting for each audit. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objective. Our audit objective was to
determine the feasibility of OARM implementing the proposed EPA SSC
initiative from an IT perspective, given the critical support necessary from the
1 The Agency describes workflow as an automated set of relationships between the activities in a business
process from start to finish. Such capabilities would enable EPA to efficiently automate the flow of
information throughout the Agency, crossing both application and functional boundaries. The goal of
Workflow was to obtain a high return on investment by automating manual, time intensive or paper
intensive processes.
2 The five certified public sector SSCs are the Defense Department, U.S. Department of Agriculture's
National Finance Center, the U.S. Department of Health and Human Services, the Interior Department's
National Business Center, and the Treasury Department. The private sector SSC contracts have been
awarded to Accenture, Allied, Carahsoft, and IBM.
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Agency's HR management system for these SSCs to succeed. To achieve our
objective, our field work analysis involved the following:
• Interviewing senior Agency officials involved with the planned
implementation of the EPA SSCs.
• Interviewing program officials involved with ensuring IT capabilities
necessary to support the EPA SSCs.
• Interviewing the PeoplePlus Project Officer and Contracting Officer to
discuss IT support for the EPA SSCs.
• Interviewing OMB officials involved in implementing the certified
public/private sector SSC concept.
• Obtaining and reviewing OMB criteria relative to the Government-
wide HR-LoB initiative.
• Obtaining and reviewing documentation supporting the Agency's
decision to implement EPA SSCs that included EPA's May 2007
Business Case Study, SSC Implementation Plan, IT Workflow
Implementation Plan, Performance Work Statements under the
PeoplePlus operations and maintenance contracts, EPA's June 2007
HR-LoB Analysis, and OARM's Reorganization Proposal for EPA
SSCs.
• Analyzing OARM's responses to OIG questionnaires regarding the
overall aspects of EPA's SSC initiative.
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Chapter 2
EPA's Human Resources Management System
Did Not Deliver Anticipated Efficiencies
The EPA SSC initiative lacked the necessary management controls to achieve
efficiency and effectiveness. Through consolidating HR transactional services
under EPA SSCs, the Agency's anticipated efficiencies included improving
the timeliness and quality of customer service, standardizing work processes,
and positioning the Agency for migration via OMB's HR-LoB initiative. To
achieve these efficiencies, EPA was relying on critical IT support from
PeoplePlus and deployment of an automated business processing feature
known as "workflow." However, PeoplePlus faced increased risks to its
security and stability because the software vendor no longer supported the
current version and had required that the Agency upgrade to a newer software
version.3
EPA Options
In December 2008, an OARM manager told us that EPA was considering two
options. The first option was to upgrade the current PeoplePlus-HR software
to PeopleSoft v. 9.0 to meet requirements by the software vendor. For this
option, we recommended that EPA obtain OMB approval to upgrade HR
systems. Under the HR-LoB initiative, OMB stated that no agency could
upgrade HR systems without OMB approval. The second option was to
migrate Agency HR IT services to a certified public or private sector HR SSC
provider. According to OARM management, that migration would require
EPA to use the providers systems. OMB guidance indicates that the providers
have the IT staff to operate the systems and the agencies should develop their
competitions based upon the number of full time equivalents to be replaced.
For this option, we recommended that EPA develop a baseline cost analysis to
determine the cost of the option and to obtain the funding necessary for
migration. We concluded that EPA must obtain documented approval from
OMB to perform the limited migration. The baseline cost estimate could be
used to determine if EPA's plan was less expensive than full migration.
In response to our draft report, EPA stated it was not in the best interest of the
Agency and cost-prohibitive to update the PeoplePlus system. OARM
management also stated that the testing of an automated workflow model
proved unsuccessful, prompting the Agency, in part, to abandon that project.
The Agency indicated it will now pursue the second option, to find an OMB-
certified HR-LoB provider for the necessary HR IT support. However, EPA
1 PeoplePlus is based on the Federal PeopleSoft commercial off-the-shelf (COTS) application version 8.3
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09-P-0206
spent considerable time and funds pursuing the former option. We concur
with the Agency's decision to migrate to a certified HR-LoB provider since it
cannot justify upgrading PeoplePlus. However, we believe that EPA must
seek approval from OMB regarding its current hybrid approach whereby the
Agency would retain its current HR personnel who would use an OPM-
certified provider's HR system.4 Joint OMB/OPM guidance requires that
agencies consult with OMB if they pursue a migration involving more than 10
full-time equivalents.5 This guidance is designed to help agencies describe,
prepare for, and manage migrations. However, neither OMB nor EPA could
produce documentation stating that OMB had approved any EPA migration
plan. Consequently, until EPA migrates to a certified SSC, the Agency will
continue to operate on outdated and unsupported application software, which
will not produce the efficiencies anticipated from the EPA SSCs.
Former Approach
EPA began consolidating its HR transactional-type functions under Agency
SSCs in June 2008 to improve the timeliness and quality of customer service
and to standardize work processes within EPA. Although EPA management
determined significant IT upgrades to the Agency's HR management system
would be necessary if the EPA SSCs were to succeed, the Agency created the
SSCs before obtaining the upgrades. These upgrades included enhancements
to PeoplePlus and the development of an automated business processing
feature known as workflow. EPA's stated its consolidation efforts were also
to align the Agency with OMB's HR-LoB initiative for later migration to an
OPM-certified SSC.
EPA's launch of its SSCs was risky given that it had no assurances that the
upgrades were achievable. Further, EPA could not produce documentation
showing that OMB approved EPA's migration plan. OARM management
stated that EPA chose this plan for migration because EPA wanted to maintain
its own HR staff. The ultimate nature of the EPA migration rests with OMB;
however, EPA has not developed the baseline cost estimate to show the cost
of this option and has not obtained documented approval from OMB that the
limited migration would be acceptable. We contacted OMB and could not get
OMB to state that any EPA migration plan was acceptable. Therefore, we
consider EPA's former migration plan to be high risk because no evidence
exists to show it is cost-effective or that OMB would approve the specific
action.
4 Rather than showing that an EPA option is cost effective, EPA favors a hybrid approach where the
Agency keeps its HR personnel who would use an OMB/OPM-approved HR system. PeoplePlus would be
a necessary interface to the approved system because of EPA Superfund requirements.
5 Joint guidance issued by the Deputy Director for Management, OMB, and Director, OPM, May 21, 2007.
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Plans for System Upgrades
EPA Requirements for Efficient SSCs. The Agency's 2007 Business Case
Study indicated conversion to an automated standard form 52 (SF-52) feature,
known as "workflow," and upgrades noted by Agency human resource
officers, were necessary to realize greater efficiencies under EPA SSCs in the
long run. EPA's June 2007 HR-LoB SSC analysis recommended that EPA
deploy workflow to facilitate and enable the internal operation of EPA SSCs.
This analysis also indicated the Agency should consider the remainder of any
prospective Fiscal Year (FY) 2008 development, modernization, and
enhancement funding to address immediate workflow needs in preparing for
migration
PeoplePlus Limitations. EPA's 2007 HR-LoB SSC analysis revealed
another important factor confronting EPA in selecting a certified SSC: the
ability to operate the PeoplePlus Time Reporting and Labor Distribution
system as a "stand-alone" module within EPA while outsourcing the
remainder of its HR IT systems to an outside provider. However, according to
this analysis, employing this approach for migration would pose significant
costs and technical risks to EPA. According to the HR-LoB SSC analysis, the
risks would be driven by the required development of two-way interfaces
between: (1) EPA's retained PeopleSoft Time Reporting and Labor
Distribution System; (2) the certified SSC HR IT system; (3) the Defense
Finance Accounting Service (DFAS)-Defense Civilian Payroll System
(assuming that EPA was to maintain DFAS as its payroll provider); and (4)
the new EPA Financial Management system. This analysis also showed
building and maintaining multiple interfaces and associated data feeds would
exponentially increase the cost and technical burdens to EPA.
Therefore, since 2007, OARM knew the risks of this strategy. The Assistant6
Administrator's May 2009 memorandum stated OARM is currently working
with the Office of the Chief Financial Officer (OCFO) to meet requirements
related to the Agency's HR management system and expect to make a
decision on a service provider and next steps during the fourth quarter of
FY 2009. In June 2009, OARM management stated that EPA would continue
to use PeoplePlus until OARM and OCFO could find an alternative for the
system.
OMB Requirements. Joint OMB/OPM guidance prohibits federal agencies
from upgrading their HR management systems without first getting a waiver.
The only exceptions are (1) for migrating to a certified public or private sector
SSC under its HR-LoB initiative; or (2) if the agency can demonstrate that
investing in a system limited to the agency's own use and associated support
represent a better value and lower risk alternative than migrating to a certified
SSC.
' He was the Acting Assistant Administrator when he issued the comments.
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OARM Pursued Upgrades Without Approval. An OARM manager
acknowledged that the list of upgrades from the human resource officers did
contain some items considered development, modernization, or enhancement,
and that these upgrades would not be implemented. However, this manager
stated that according to OARM, workflow features did not constitute
development, modernization, or enhancement, and the areas of PeoplePlus
that EPA would be customizing were operations and maintenance. However,
under OMB Circular A-l 1, Part 2, Section 53, the definition for development,
modernization, or enhancement covers ".. .the program cost for new
investments, changes or modification to existing systems to improve
capability or performance, changes mandated by... agency leadership.. .for...
direct support." When informed, OARM's former Assistant Administrator
disagreed with our assessment, stating in memorandum that his office did not
consider the work associated with enabling the workflow module in
PeopleSoft to be development, modernization, or enhancement, since the
Agency already owned it. However, based on OMB's definition for
development, modernization, or enhancement, regardless of when the Agency
purchased the PeopleSoft software, OMB guidelines would prohibit changes
or modifications to improve PeoplePlus capability and performance through
developing the workflow module.
Results of HR Systems Upgrades. EPA pursued HR systems upgrades
although it did not obtain OMB approval to do so. As such, the success of
EPA's SSCs was dependent on upgrades that the Agency did not have
permission to obtain. The failure to produce the upgrades leaves the EPA
SSCs without the tools to perform efficiently. In June 2009, OARM managers
stated that upgrading PeoplePlus was not cost-effective and OARM efforts to
develop the workflow module were unsuccessful. These managers also told
us that although the EPA SSCs were operational, they were not efficient
because they did not have some IT upgrades recommended in the 2007 study.
Specifically, OARM managers stated the SSCs were still performing manual
procedures to accomplish their mission.
Software Costs and Projected Savings
Workflow Costs. OARM's initial costs for developing the workflow module
was $245,000, with deployment scheduled for May 2008. By September
2008, EPA's estimated costs for development of the workflow module had
increased to $485,000, with deployment moved to early 2009. However, by
December 2008, OARM management began dismissing the importance of the
workflow module from earlier assessments but did not provide any
documented evidence or updated analysis supporting these assertions. We
found these assertions from OARM management to be unsubstantiated and
contradicted statements found in the Agency's 2007 Business Case Study and
OARM's own HR-LoB SSC analysis. Currently, OARM states that the
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selection criteria for a certified SSC will be the ability of a service provider to
deliver anticipated automated workflow functionality. OARM has not
provided the final costs incurred to develop workflow.
PeoplePlus Costs. According to the PeoplePlus Contracting Officer
Representative, EPA's annual maintenance fee of $156,000 paid to the
software vendor no longer included patches and fixes normally provided by
the vendor to update or address new issues regarding security or stability
problems with the existing software. Rather, the annual maintenance fees
mainly afford the Agency the ability to "ask questions" on the functionality
and limitations of the outdated PeopleSoft software. The Contracting Officer
Representative stated the vendor requires that EPA upgrade its PeopleSoft
software to version 8.9 or higher to maintain full vendor support and obtain
access to patches and fixes.
According to an OARM manager, regardless of the limitations of vendor
support, the Agency still would need an operations and maintenance contract
until the Agency decides that it would migrate PeoplePlus to a certified SSC.
EPA issued a new operations and maintenance contract with a period of
performance from August 29, 2008, through September 30, 2013. According
to the contracting officer, the total award is $10,328,937 for the base period
and four option years. There is also an additional $2,309,387 for optional
systems development.
Projected Savings. The Agency stated the consolidation effort was intended
to align the Agency OMB's HR-LoB initiative with an agreement with OMB
to migrate to an OPM-certified public or private sector SSC providers starting
in FY 2009. EPA's June 2007 HR-LoB SSC analysis indicated the Agency
may be able to reduce costs by $40-60 million over 10 years by outsourcing it
HR management system to a certified SSC. OARM did not detail how it
would achieve the savings. Currently, the Assistant Administrator stated that
subsequent analysis (currently in draft) shows a significantly lower reduction
in future IT costs as a result of a potential migration. The Assistant
Administrator also stated OARM was finalizing its analysis of costs
associated with migration, and expects to make a final decision on how to
proceed in the fourth quarter of FY 2009.
New Plan and Challenges
The OARM Assistant Administrator's memorandum concluded that OARM
and OCFO agreed that upgrading the EPA's current system is not in the best
interest of the Agency. EPA is now seeking to migrate the Agency's HR IT
services to an OPM-certified SSC provider.
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Selection Challenges
According to EPA's 2007 HR-LoB SSC Analysis, a certified SSC would need
to provide functionality in the following critical areas:
• Personnel Action Request Processing,
• Integrated Workflow, including manager self-service,
• Time Reporting and Labor Distribution, including an unlimited
number of time reporting codes, and,
• Payroll (currently with the Defense Finance Accounting Service -
Defense Civilian Payroll System but EPA would consider integration
with another provider as an option).
Funding Challenges
Baseline Cost Estimate. OMB criteria requires federal agencies to develop
comprehensive baseline cost estimates for investments to measure cost
savings and plan for future costs associated with IT investments.7 According
to OARM management, both they and OCFO are still analyzing costs
associated with migrating its HR-IT system capabilities to an OPM approved
service provider. The Agency's final decision on how to proceed is not
expected until the fourth quarter of FY 2009. Prior Agency documentation in
response to this OMB requirement was outdated (most recent was 2007), and
did not represent current cost analysis associated with the Agency's migration
of its HR management system to an OPM-certified SSC.
Migration is Not Funded. A significant issue facing the Agency with
migration is funding. OARM managers told us funding for migration to a
public or private sector SSC provider would probably not occur in FY 2009
because no funding for it exists in the Agency's FY 2009 budget. These
managers stated that given the anticipated changeover in EPA's
administration, there were no assurances that funding for migration would be
included in EPA's FY 2010 budget plan. Consequently, the Agency needs to
produce the baseline cost estimate to support migration funding in FY 2010.
Otherwise EPA will continue to operate the current inefficient HR
configuration for the foreseeable future.
Conclusion
OARM lacked effective management controls over implementing SSCs.
Although a previous EPA study had forecasted the risks of implementing the
SSCs without adequate IT support, OARM chose the risky implementation
strategy. OARM could provide no documented analysis showing that this and
7 OMB Memorandum M-06-22, issued August 8, 2006.
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another study was incorrect or no longer warranted. Rather, OARM managers
stated that it had made the decision to implement the EPA SSCs to keep its
own personnel. The OMB HR-LoB process allows agencies to keep their
internal HR systems if they can show that it is more cost-effective than
migration. However, EPA never produced documentation stating that OMB
approved EPA's limited migration plan or a baseline cost estimate that could
show that EPA's HR plan was cost effective. Consequently, OARM's high
risk attempt to provide the SSCs with the necessary HR IT has failed.
In response to our draft report, the Agency responded that it is not in the best
interest of the Agency nor cost effective to update the PeoplePlus system, its
primary HR system. OARM management also informed us that the testing of
an automated workflow model that was supposed to help achieve anticipated
HR efficiencies has proven unsuccessful. The Agency has since abandoned
this project. EPA spent considerable time and funds pursuing this former
option. OARM management now indicates that the Agency still looks to find
an OPM-approved HR-LoB vendor who can provide the required HR support.
Recommendations
Therefore, we recommend that the Assistant Administrator for Administration
and Resources Management:
2-1 Obtain approval from OMB for the level of migration intended by
EPA to ensure that future EPA resource efforts are not spent on a
concept that OMB could reject.
2-2 Develop an updated baseline cost estimate to determine and secure
necessary funding for migration to a certified SSC. The Agency
must fund the migration, which cannot occur without the baseline
cost estimate. Currently, OARM states there is no data to support
funding in EPA's FY 2010 budget.
2-3 Establish realistic milestone dates with OMB for migration to an
OPM- certified SSC. The FY 2009 date is not realistic because no
funding for migration exists.
2-4 Document the risk of using PeoplePlus until EPA migrates to a
certified SSC. Due to budget issues, EPA may not migrate until
FY2011.
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Summary of Agency Response and OIG Evaluation
The Assistant Administrator for OARM provided a memorandum of response to
our draft report on May 29, 2009. The memorandum concluded that OARM and
OCFO agreed that upgrading the EPA's current system is not in the best interest
of the Agency, and that it would be cost prohibitive to both upgrade the current
system and migrate to a service provider in response to our draft
recommendation.8 As such, the Agency is currently analyzing the costs associated
with migrating its HR IT system capabilities to an OPM-approved service
provider. The memorandum stated that OARM agreed that there may be
increased risks to PeoplePlus security and stability because the vendor no longer
supports the current version. However, the memorandum stated OARM
management believes the overall security of PeoplePlus is sound and represents
only a minimal acceptable risk to the Agency as it assesses the HR-LoB service
center options. OARM management expects to make a final decision on a service
provider and next steps for migration in the fourth quarter of FY 2009.
As noted in our draft report, OARM lacked the analysis and OMB approvals to
support its position to upgrade its HR systems. In 2007, the Agency had
identified that an upgrade to PeoplePlus and other IT initiatives were necessary
for the long-term success of the EPA SSCs. In June 2008, OARM established
the EPA SSCs without obtaining the necessary IT upgrades. A key upgrade
was the development of an automated business processing feature known as
workflow to realize greater efficiencies under EPA SSCs. However, in
June 2009, OARM managers stated their efforts to develop the workflow
module were unsuccessful. These managers also told us that:
• Although the EPA SSCs were operational, without the IT upgrades they
were not efficient. Specifically, OARM managers stated the SSCs were
performing manual procedures to accomplish their mission.
• The Agency is now directing its attention toward selecting a certified SSC
provider to achieve HR efficiencies once expected from PeoplePlus and
the workflow module.
• They were still seeking only to use the providers systems because the
Agency still wanted to keep HR IT jobs at EPA.
• OMB was aware of EPA's limited migration plans but could not provide
documentation that OMB had approved this concept.
Where necessary, we made revisions to this report based on OARM's comments.
We have included the Agency's entire response and the OIG's evaluation as
Appendix A.
Our recommendation required OARM to (1) seek a waiver from OMB to upgrade PeoplePlus to regain
access to patches and fixes to ensure system security and stability; and, (2) to develop a baseline cost
estimate to determine and secure necessary funding for migration to a public or private sector SSC on a
revised date negotiated with OMB.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
Rec. Page
No. No.
Subject
Status1
Action Official
Planned
Completion
Date
POTENTIAL MONETARY
BENEFITS (in SOOOs)
Claimed Agreed To
Amount Amount
2-1 10 Obtain approval from OMB for the level of
migration intended by EPA to ensure that future
EPA resource efforts are not spent on a concept
that OMB could reject.
2-2 10 Develop an updated baseline cost estimate to
determine and secure necessary funding for
migration to a certified SSC. The Agency must
fund the migration, which cannot occur without the
baseline cost estimate. Currently, OARM states
there is no data to support funding in EPA's FY
2010 budget.
2-3 10 Establish realistic milestone dates with OMB for
migration to an 0PM certified SSC. The FY 2009
date is not realistic because no funding for
migration exists.
2-4 10 Document the risk of using PeoplePlus until EPA
migrates to a certified SSC. Due to budget issues,
EPA may not migrate until FY 2011.
Assistant Administrator
for Administration and
Resources Management
Assistant Administrator
for Administration and
Resources Management
Assistant Administrator
for Administration and
Resources Management
Assistant Administrator
for Administration and
Resources Management
0 = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is undecided with resolution efforts in progress
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Appendix A
Agency Response to Draft Report and
OIG Evaluation
May 29, 2009
MEMORANDUM
SUBJECT: Response to Draft Report: Outdated Software Could Jeopardize
Anticipated Efficiencies from EPA's Human Resources Shared Service
Centers
FROM: Craig E. Hooks /s/
Acting Assistant Administrator
TO: Eric Lewis
Product Line Director
Office of Inspector General
I appreciate the opportunity for OARM to comment on the Office of Inspector
General's draft report dated April 29, 2009 and titled "OutdatedSoftware Could
Jeopardize Anticipated Efficiencies from EPA 's Human Resources Shared Service
Centers ". While we recognize the issues you raise, we believe the overall security of
PeoplePlus is sound and represents a minimal risk to the Agency as we assess the Human
Resources Line of Business service center options. OARM is currently working closely
with OCFO to identify the best course of action for the Agency to meet requirements
related to HR, time and attendance, payroll, and labor distribution. We both agree that
upgrading PeoplePlus is not in the best interest for EPA and expect to make a decision on
a service provider and next steps during the 4th quarter of FY2009.
Below are specific comments on the draft report:
At a Glance Section
Under background, the OIG writes "EPA has determined that upgrades to PeoplePlus
are paramount to successful implementation of the Agency's SSC initiative. "
We agree that upgrades to PeoplePlus would be beneficial and add to the success
of the Shared Service Center implementation in terms of further streamlining
business processes and reducing the total "time to hire". Unfortunately, OMB and
OPM restrictions have prevented OARM from enhancing or adding functionality.
The Agency's decision to consolidate HR transactional services under three
Shared Service Centers was based on the expectations of not only improving
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efficiencies but also improving the overall timeliness and quality of customer
service by streamlining business processes and enacting standardized operating
procedures. We believe that when the transition is complete, all of these goals
will be met and we will provide Agency customers and the public they serve, a
more efficient, cost effective, customer-oriented organization.
OIG Evaluation
EPA pursued HR systems upgrades (i.e., the workflow module and other
listed in the Agency's 2007 Business Case Study deemed necessary if the
EPA SSCs were to succeed and operate efficiently) although it did not
obtain OMB approval to do so. As such, the successes ofEPA's SSCs
were dependent on upgrades that the Agency did not have permission to
obtain. The failure to produce the upgrades, in particular the workflow
module, leaves the EPA SSCs without the tools to perform efficiently.
Chapter 2
• In the 1st paragraph the OIG states, "However, PeoplePlus faces increased
risks to its security and stability because the software vendor no longer supports
the current version, and has required that the Agency upgrade to a newer
software version."
OARM Comment: While we agree that there may be increased risks to
PeoplePlus security and stability because the vendor no longer supports the
current version, we believe the increased risk is minimal and therefore acceptable
at this time. Even though EPA is currently running the 8.3 version of PeopleSoft
HRMS application software, the underlying component software is being patched,
and kept at current release levels. These components are the focus of Computer
Security Incident Response Capability (CSIRC) notices and result in system patch
application. In addition, the PeoplePlus system is wholly contained behind the
EPA firewall and Agency security systems. OARM believes the overall security
of PeoplePlus is sound and running the current version represents a minimal risk
to the Agency as we explore the various options for moving to an HR-LoB service
center.
OIG Evaluation
OARM management is in agreement that there may be increased risks to
PeoplePlus security and stability because the vendor no longer supports
the current version. OARM management believes the increased risk is
minimal and therefore acceptable at this time. During the exit conference
with OARM managers in June 2009, the OIG requested a copy of the
most recent risk assessment of PeoplePlus supporting this statement.
These managers stated a risk assessment was almost finished and that
the OIG would be provided a copy. However, the OIG had not received a
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copy by the time this final report was issued. We have recommended that
EPA document the risk of using PeoplePlus until EPA migrates to a
certified SSC.
• In the Funding Challenges section on page 10, the OIG states, "However,
OMB issued criteria in August 2006 that required Federal agencies to develop
comprehensive baseline cost estimates for investments to measure cost savings
and plan for future costs associated with IT investments. Further, this
memorandum provides an IT investment framework for determining the total cost
of projects, both government and contractor costs, based on costing
methodologies provided in OMB-Circular A-76. The Agency could not provide
documentation that they had met this requirement. "
OARM Comment: We have located in our files documentation that reflects the
Agency responded to this requirement. A copy of the submission to OMB is
attached.
OIG Evaluation
A review of the file documentation submitted to OMB revealed this
information was outdated (most recent was 2007), and did not represent
current cost analysis associated with the Agency's migration to an OPM-
certified SSC. Consequently, the Agency needs to produce an updated
baseline cost estimate to support migration funding in FY2010 or beyond.
Otherwise, EPA will continue to operate the current inefficient HR
configuration for the foreseable future.
• In the Conclusion and Recommendation section on page 11, the OIG
states, "...not realize $40-60 million in reduced costs through outsourcing its HR
management systems to a certified SSC, which according to EPA 's own analysis
can be achieved by eliminating heavy reliance on external contractors. "
OARM Comments: Since that initial analysis, EPA has continued to research and
update the costs associated with migrating to a certified line of business provider.
These subsequent analyses (currently in draft) show a significantly lower
reduction in future IT costs as a result of a potential migration. We are finalizing
our analysis at this time and are working with OCFO to determine the best system
for the Agency.
OIG Evaluation
EPA spent considerable time and funds pursuing their former option.
OARM management now indicates that the Agency still looks to find an
OPM-approved HR-LoB vendor who can provide the required HR support.
To help avoid a repeat occurrence, we have recommended that OARM
obtain documentation from OMB specifying the level of migration required
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from EPA to ensure that future EPA resource efforts are not spent on a
concept that OMB could reject.
• In the Conclusion and Recommendation section on page 11, the OIG
states, "Therefore, we recommend that the Assistant Administrator OARM:
1. Seek a waiver from OMB to upgrade PeoplePlus to regain access to
patches and fixes to ensure system security and stability.
2. Develop a baseline cost estimate to determine and secure necessary
funding for migration to a public or private sector SSC on a revised date
negotiated with OMB."
OARM Comments: We are currently analyzing the costs associated with
migrating our HR IT system capabilities to an OPM approved service provider.
We expect the Agency will make a final decision on how to proceed in the 4th
quarter FY 2009. OARM and OCFO agree that upgrading our current system is
not in the best interest of the Agency. Therefore, we do not agree with the
recommendation to both upgrade our current system and migrate to a service
provider. The resources needed to perform both of these tasks are cost prohibitive
and represent a duplicative effort, as well as doubling the time required to achieve
a final solution.
OIG Evaluation
In December 2008, OARM managers told us that EPA was considering
two options. The first option was to upgrade the current PeoplePlus-HR
software to PeopleSoft v. 9.0 to meet requirements by the software
vendor. For this option, we recommended that EPA obtain OMB approval
to upgrade HR systems. The second option was to migrate Agency HR IT
services to a public or private sector HR SSC provider. For this option, we
recommended that EPA develop a baseline cost analysis to determine the
cost of the option and to obtain the funding necessary for migration. The
Agency indicated it will now pursue the second option, to find an OMB-
certified HR-LoB provider for the necessary HR IT support. Because of
this decision the original 1st recommendation has been removed. We
concur with the Agency's decision to migrate to a certified HR-LoB
provider since it cannot justify upgrading PeoplePlus. We have developed
recommendations to assist the Agency in this effort to ensure that future
EPA resource efforts are not spent on a concept that OMB could reject;
develop an updated baseline cost estimate to determine and secure
necessary funding for migration to an OPM-certified SSC; and establish
realistic milestone dates with OMB for migration to an OPM-certified SSC.
If you have any questions, please contact Sherry Kaschak, Director, Office of
Policy and Resources Management or Susan Kantrowitz, Deputy Director, Office
of Human Resources. I look forward to discussing this issue further during the
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exit conference and working with the Office of Inspector General to ensure the
Agency moves forward in the best approach.
Attachments (2)
1- Actual Cost Reporting September 2007
2- Baseline Cost Reporting - August 2006
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Actual Cost Reporting
September 2007
Agency:
Investment/Project Name:
Related E-Gov/LOB Initiative:
Prepared by:
Date:
EPA
PeoplePlus-Human Resources (PPL-HR)
Human Resources Management LoB
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Appendix B
Distribution
Office of the Administrator
Assistant Administrator for Administration and Resources Management
Acting Chief Financial Officer
Agency Follow-up Official (the CFO)
Agency Follow-up Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for Public Affairs
Audit Follow-up Coordinator, Office of Administration and Resources Management
Audit Follow-up Coordinator, Office of the Chief Financial Officer
Acting Inspector General
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