Managers should view contractors as partners, report says

Federal information technology managers should view contractors as partners and stay involved in project management even after the work is outsourced, according to a new report released Monday by the IBM Endowment for the Business of Government.

Managers tend to concentrate too much on the initial steps of the outsourcing process-drawing up contracts, selecting contractors to provide information technology equipment or services and negotiating agreements-and too little on monitoring contractors while projects are under way, the report said.

"There seems to be little effort put into what happens after the contract is finalized and equipment delivered," the report said .

"To be successful, public managers need to shift their focus from procurement to service and relationship management," the report continued. The new approach would allow managers to exercise greater control over contractors and make sure that they provide high quality service.

A shortage of "in-house IT talent to handle the complexities of government IT projects" has forced agencies to rely increasingly on contractors. The report predicts that by 2006, the federal government will have outsourced $13.2 billion worth of IT services, a 16 percent increase from 2001.

Outsourcing provides agencies with skilled IT personnel and state-of-the-art equipment, often saving them money, but contractors bring a host of potential problems as well, the report said. In addition to the tendency of federal managers to lose control over the quality of service, outsourcing allows outsiders access to government systems, increasing the likelihood of breaches in security.

To reduce the risk, the report recommended that managers work on gathering support from key stakeholders such as IT employees, interest groups and Congress, at the outset of competitions. "They will offer great insight into the strategic fit of the IT outsourcing project, labor issues and the level of support," the report said.

After consulting stakeholders, managers should write a contract that addresses security concerns, ensures systems will keep operating smoothly during a transition period and holds contractors responsible for reliable, quality service, the report suggested.

A good contract also outlines the working relationship among different units involved in the delivery and use of IT services, specifically the relationship between the contractor and the agency requesting the services. "A poorly written contract is a recipe for disaster," the report warned.

Once an agency selects a contractor, managers should collaborate with contractors to draw up a viable security plan, according to the report. "Client organizations and vendors need to work together to identify all security risks and jointly develop measures for minimizing them."

Managers also need to work with contractors to make sure that labor relations do not sour during the transition. "Job security for the transition period is very important," the report said. The report recommended that managers consider requiring the contractor to hire government IT personnel who might be displaced by the contract and employ them for at least a year or two. During that period, the agency could train these workers to use the new technologies and business processes introduced by the contractor.

Even once the transition is complete, the contractor and agency managers should maintain a "constant exchange of vital information," keeping each other up-to-date on any technical or management issues that might arise, the report urged. Agency managers should also work with the contractor to collect reliable performance data that will indicate whether the project is meeting performance goals.

Monitoring should take place on a daily basis and should include documentation of any security breaches. There should also be a system in place to alert managers if there are areas that are particularly vulnerable to hackers, the report suggested. Managers should keep data on service quality, as well. Such data could include responses to customer satisfaction surveys.

"The vendor in particular should be in a position to continuously improve its service by benchmarking best practices," the report said. "The client organization in turn should be prepared to reengineer its business process to address changing demands."

A recent industry group survey of 35 chief information officers indicated that many are concerned about security issues and about maintaining control over contractors, but feel understaffed and unable to address increasing management needs. Many CIOs said they were worried they did not have "adequate mid-level program and project managers to provide the management oversight to the ever-expanding contractor community that is serving federal information technology efforts," according to the results of the Information Technology Association of America survey released last week.

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