November 1, 2011
Now is the time to get out in front of budget cuts.
Do you hear that tick, tick, tick? That's the sound of the budget clock ticking down to the next deadline. It's a constant reminder that spending cuts are coming.
Incremental belt-tightening used to be sufficient, but not now, given the enormity of cuts on the table as lawmakers struggle to reduce the federal deficit. A wait-and-see approach will only amplify the impact of not making decisions-or worse, making the wrong ones.
Now is the time for agencies to get out in front of the budget ax to capture cost savings in the short term and help shape their future over the long term. It is critical that executives make a plan for prioritizing investments and launching new initiatives. It takes time to identify the right opportunities to cut costs and help reduce the deficit.
There are concrete steps that agencies should consider to gain control of the situation, focus their precious resources on driving real value for citizens, and prepare for more budget reductions in fiscal 2012 and beyond.
Step 1: Find hidden savings
Survey a wide range of cost areas that could deliver a big impact without gutting the mission-from improper payments, procurement, technology and human capital to real estate, taxes and energy consumption. Savings from these costs areas can be surprising. In contracting, for example, instead of pay and chase, agencies could reduce improper payments by employing new tools and technologies. The Housing and Urban Development Department has reduced erroneous payments by more than 70 percent, from an estimated $3.43 billion in fiscal 2000 to $925 million in fiscal 2009-an average annual reduction of more than $278 million.
Step 2: Invest in efficiency
Data analysis, technology and visualization tools can help reduce costs and enhance performance. The Transportation Security Administration, for example, is moving to a risk-based security approach by using data intelligence to designate high- and low-risk passengers before they enter a checkpoint-one of the largest transformation initiatives undertaken since TSA's inception.
Step 3: Look at new delivery models
Take advantage of this budget environment to consider ways to restructure how the agency does business and identify duplicative or lower-priority programs. Be bold. Consider adopting shared services using telework or the like. The Agriculture Department's Forest Service is on track to save $100 million over five years and cut indirect costs by 40 percent through business process reengineering, consolidation and a shared services initiative. The General Services Administration has created a new business model that is projected to cut its Global Supply unit's operating costs by 20 percent.
Managers must start taking control now to create more options in the future. If they wait, they might not like the choices left on the table. A dedicated team of leaders can see a strategy all the way through, take advantage of synergies and make the cost savings stick. By taking pre-emptive steps now, agencies can help their organizations emerge as leaner, more agile and responsive organizations.
Janet Hale has more than 25 years of experience in government, public policy and corporate management and is a director with Deloitte Services LLP.
November 1, 2011