Federal Franchisers

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Four years ago, Susan Spurling's boss called her into his office and asked her to run the Department of Veterans Affairs' franchise initiative.

Spurling recalls the question she had to ask: "What is a franchise?"

Four years, six business lines, and a Hammer award from Vice President Gore later, Spurling has helped define the VA's franchising effort. Now, when other agencies ask what a franchise is, Spurling is the one who gives the answer.

"I believe it is the future of government," Spurling says.

The National Performance Review concluded in 1993 that agencies were wasting money by depending solely on administrative services, such as payroll processing, from within their own departments. The NPR's report said that "the administration should encourage operations of one agency to compete with operations of another."

Congress liked the idea enough to authorize the Office of Management and Budget to set up a franchise fund, in which six pilot agencies would be permitted to sell their support services to other agencies.

Along with VA, the departments of Commerce, Health and Human Services, Interior and Treasury and the Environmental Protection Agency were selected to test the franchising concept.

VA offers six services: information technology, security, training, financial management, human resources and payroll, and records storage. Its support facilities range from a law enforcement training center in Little Rock to a financial management center in Austin, Texas, to a cave in Missouri that serves as a storage facility. On Oct. 1, VA's franchise efforts stopped receiving appropriated dollars, becoming completely reliant on the reimbursable funds paid to them by their customer agencies.

Spurling's job now is to keep her current customers happy and attract new ones, which is quite different from her old job as a program manager.

"I think for me the difference is I'm focusing on meeting the customers," Spurling says. "My scope is broadened."

Spurling says competition has driven both VA's service providers and its customers to become more cost-conscious. Requiring agencies to define how much they are paying for services makes them pay more attention to details like the cost of paper, so VA's financial management service offers them a paperless payment process to reduce overhead. Customers who use VA's storage service are looking more closely at their storage costs now that they see how much their paying, and are therefore less likely to leave obsolescent materials sitting around in VA's cave.

Spurling says the competition is good for everyone--customer agencies, service providers, and even federal employees themselves.

"It rewards employees by giving them a rich environment to work in," she says.

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