Government Executive - Authors - Lisa Daniel

Setting Up Shop

Lisa Daniel — Mon, 01 Nov 1999 00:00:00 -0500

alking into some federal facilities can be like browsing in a small de-partment store or specialty shop. From furniture and linens to jewelry and recordings to stationery and celebrity memorabilia, Uncle Sam has something to offer almost everyone. For the brand-conscious, there are logo items such as CIA golf balls, FBI ball caps and Postal Service coffee mugs. Shoppers can also pick up staples such as postage and boxes and collectibles such as coins.

At least a dozen agencies have retail enterprises, whether they are large-scale operations for the public or small shops for employees and visitors. Agencies hail their retailing efforts as a way of strengthening budgets without tax dollars and creating a positive public image. "We're looking for a brand presence that celebrates our place in American history," says Pam Gibert, the Postal Service's vice president of retailing.

The Smithsonian Institution in June announced an aggressive plan to expand its earning potential by consolidating commercial ventures under a new organization known as Smithsonian Business Ventures. The institution's board of directors hired Gary Beer, former president of the Sundance Group, a spin-off of the independent-film enterprise founded by actor/director Robert Redford, to head the organization, which will operate as a part of the Smithsonian.

The organization will consolidate Smithsonian magazine, the museum shops, the mail order business and other commercial activities, which brought in $147 million last year. Of that, $70 million came from retail sales in the museum shops and catalogs. Although Congress provides more than 70 percent of Smithsonian funding, the appropriations are used only for buildings, operating costs and salaries and expenses. Smithsonian's commercial revenue, which is used for research and exhibitions, has declined for years, officials say.

Core Business

For agencies in which retailing is a core function, the sale of goods and services is big business. At the Postal Service, $15.5 billion in revenue last year came from retailing, although 85 percent of that was postage. Still, USPS earned $141 million in its sales of tape, packaging materials and prepaid telephone cards. Items not considered central to mail service-T-shirts, hats, coffee mugs and coloring books and other logo items-brought in $44 million.

While selling items such as postage and packaging may not seem like retailing, it figures prominently into USPS' marketing strategy. In what's known as the "curb to counter" retailing plan, post offices in recent years began displaying products in open-merchandising displays designed to appeal to customers who may not buy them if they are hidden behind the counter, Gibert says.

Marketing of the items is worked out in USPS' "planning room" at headquarters, which is adorned with charts showing heavy buying periods for residential and business customers. Those "drive periods" are sorted into six categories: Thanksgiving and Christmas, Valentine's Day, the April 15 income tax filing deadline, spring (Mother's and Father's Day and graduations), summer and back-to-school. Post offices display certain items more prominently at different times of the year, such as phone cards that appeal to college students who are about to return to campus.

USPS also has tried to attract customers through convenience. New post offices are designed with designated areas for different needs, such as mailing help, do-it-yourself stamp buying or retail shopping. Postal officials now are going a step further by allowing business customers to set their postage meters remotely, rather than bringing them into the post office. Also, smart cash registers based on personal computer technology will allow postal clerks to do everything from looking up ZIP codes and printing money orders to accepting electronic signatures of customers, Gibert says. "We're trying to extend ourselves out into where people do business and not force them to make a trip to the post office," she says.

Another agency in which retailing goes to the core of business is the U.S. Mint. Of nearly the $2 billion the Mint received in revenue last year, mostly from circulated coins and bullion, $137.5 million came from retail items including commemorative coins, annual coin sets, jewelry, watches and logo items. "Retailing, to us, is crucial to meeting our mandate for this line of business," Mint Director Philip Diehl says.

The Mint meets that mandate by marketing to coin collectors, who number 1.5 million in the United States plus a substantial international market, Diehl says. The agency tapped into the international market when it sold coins in 45 nations commemorating the 1996 Olympic Games. The Mint generates revenues with surcharges on commemorative coins authorized by Congress and sold by foundations. With a typical surcharge of $10 on a $35 coin, the Mint has earned $400 million on the coins since 1982, Diehl says.

Stiff Competition

One of the strongest retail sales agencies in government is the Army and Air Force Exchange Service, which operates about 300 discount and convenience stores, gas stations, fast food franchises and barber shops around the world, and generated $7.2 billion in sales revenue last year. AAFES is the third largest owner of Burger King restaurants in the world. The Navy and Marine Corps run separate but similar exchange programs that drew 1998 revenues of $1.7 billion and $563.4 million, respectively.

The exchanges are a benefit for active-duty service members, reservists and military retirees. But because 98 percent of the exchange program's operating budget comes from sales revenues, service officials say they must be as competitive as their private-sector counterparts-Wal-Mart, Kmart and Target. "We consider ourselves to be very competitive," says Terry Wagner, AAFES' vice president of main store hard lines, which include items other than clothing and textiles.

"We're not there just because we got a location on base. We consider this a benefit to our customers. We offer them goods and services wherever they go." For the Exchange Service, that can mean opening stores on short notice, usually in tents, in places like Albania, Haiti or Saudi Arabia.

Unlike their competitors, the exchanges must offer products even if they're not profitable. Prices for goods such as military clothing and meals for Department of Defense Dependent schools are set on a break-even scale. The challenge, Wagner says, is to remain competitive with 17 major business lines, instead of being able to specialize in items such as clothing or sporting goods, the way many private retailers do.

Because the exchanges have a limited consumer base, they must try to tap into every possible customer, Wagner says. The toughest sells are those living off base, such as retirees or National Guard members and reservists, he says. Moreover, Exchange Service advertising is limited by law to a weekly, in-house tabloid sales flier mailed to potential customers. The Exchange Service conducts demographic studies to determine which products to promote. The studies often conclude that young families, the Exchange Service's biggest customer base, should be targeted with advertising and sales on products such as diapers and baby formula, Wagner says.

On a Short Leash

While agencies pattern their retail divisions and marketing strategies after those in the private sector, there is one distinction that sets them apart: They are all under the watchful eye of Congress. And most, at one time or another, have been called down by lawmakers concerned that federal retailing was infringing on private industry. In fact, Congress even regulated itself when it divided the House supply store in the late 1980s into separate supply and gift shops. The change, made in the wake of a high-profile controversy about government perks, meant that Capitol Hill employees could no longer buy personal items on official purchasing cards and the public, which can no longer use the supply store, cannot get discounts at taxpayer expense, a House official says.

Another federal retailing operation that has been feeling the heat on Capitol Hill is the Bureau of Prisons' Federal Prison Industries. Since 1934, the organization has sold goods and services to other agencies through its UNICOR program, which employs 20,200 inmates. Created to reduce inmate recidivism by teaching job skills, UNICOR brought in $534 million in revenue last year, all of which goes back into the program. UNICOR also receives a congressional subsidy, which was $3.8 million last year.

UNICOR generates 150 different product lines in 99 factories at 64 prisons, including office furniture, electronics, military uniforms and helmets, mattresses, circuit boards, towels and draperies, as well as jet starter cables for Patriot missiles. Services include printing, data entry, vehicle component remanufacturing, equipment repairs, laundry and recycling. About 60 percent of UNICOR's customer base is in the Defense Department.

Therein lies the problem. The Defense Department is a major consumer of UNICOR because it has to be. The law that created the program says that if UNICOR can produce the goods or services needed, DoD has to give it first right of refusal in competing for contracts. The law has been challenged many times by those who say it unfairly shuts out private-sector bidders who may do better work at a lower price.

Sen. Carl Levin, D-Mich., made a strong attempt at overturning the law last spring in an amendment to the $289 billion Defense spending bill. Sen. Phil Gramm, R-Texas, however, was successful in his opposition to Levin's amendment when the Senate voted 51-49 against it. "Would we rather have people in prison working, helping to defray the cost of their imprisonment and compensating victims or would we rather have them sitting in air conditioning, watching color TV?" Gramm says. "To me, that's an easy decision."

Gramm and other supporters of the program say safeguards are already in place to prevent a UNICOR monopoly. If UNICOR cannot produce an item or if it can't produce it as quickly as an agency wants, it must grant a waiver for the agency to allow open bidding on the item. UNICOR issued more than 12,000 such waivers last year. Also, any new UNICOR products must be approved by a presidentially appointed board of directors made up of representatives from the Justice, Labor and Defense departments and the private sector. Most requests for new products are rejected out of concern for competition with the private sector, Craig says.

With an inmate population explosion of 300 percent since 1980, the program continues to grow. "It's not a business, it's a major correctional work program," Craig says. The program's incentive for inmates is UNICOR's 19 cents to $1.50 per hour wages, compared to the 12 cents to 40 cents per hour they can earn at other prison jobs, Craig says.

Also, inmates who take part in the programs are more easily employed after leaving prison and are 20 percent less likely to return, he says.

Cutting Their Losses

The Bureau of Prisons won its battle with Congress, but this fall the House was again considering a bill that would end the UNICOR procurement mandate. And other agencies have had little luck recently on the Hill. AAFES expects to lose $11 million this year from a congressional decision to prevent the exchanges from selling pornographic magazines and videos. The exchanges also are still banned from selling TVs larger than 35 inches in a long-standing restriction to prevent AAFES from competing with electronics retailers.

Under pressure from Congress and companies such as United Parcel Service and Federal Express, Postmaster General William Henderson changed course on a major retailing campaign developed in the mid-1990s by his predecessor, Marvin Runyon. The business plan was designed to help make up for postage revenue lost to electronic communications, particularly the Internet. Henderson has restricted sales of non-postal retail items to the Postal Service's catalog, Web site and shops such as those in the Mall of America in Minneapolis and the Postal Museum in Washington. USPS began phasing retail items other than packaging and stationery out of post offices this year.

The Postal Service could receive more congressional intervention if Congress passes the Postal Modernization Act, which was reintroduced this year as HR 22. Sponsors of the bill say it would "level the playing field" with private industry by forcing USPS to create a separate agency to sell non-postal retail items. The agency would be regulated as a private company and subject to federal income taxes, a congressional staff member says. The bill also attempts to limit experimental products by mandating that test products "cannot create an unfair or otherwise inappropriate competitive advantage for the Postal Service, particularly in regard to small business concerns." The bill was passed out of subcommittee and had not been scheduled for a House Government Reform Committee vote at press time.

Profitability of new products became an issue after the General Accounting
Office found that USPS lost $84 million on 19 products developed between 1995 and 1997. Only four of the products turned a profit. GAO noted, however, that "it may not be reasonable" to expect new products to become profitable in such a short time.

Some agency officials say congressional restrictions have forced them to be more entrepreneurial. Postal officials still are considering opening more agency-run shops to sell retail goods, Gibert says. The Postal Service has looked at several "super mall" locations like the one in Minneapolis, including the outlet giant, Potomac Mills, in Woodbridge, Va., she says.

The Mint has tried to maintain a narrow product line, sticking mostly with coins, under the threat of congressional restrictions. Agency officials also have focused on marketing. Because Diehl considers the Mint a contender in the collectibles market, agency advertisers and marketers target, through brochures and the Internet site, young people who may otherwise choose to collect baseball cards, Beanie Babies or even rare or foreign coins (which the Mint does not market).

"If we don't take the opportunity to interest them, particularly in their preteen-age years, we have a much tougher sell later," Diehl says. The Mint has had to revive its customer base after market research showed that most began collecting coins as children in the 1950s and '60s when wheat pennies, buffalo nickels, Mercury dimes and silver dollars were still common.

With few collectibles left in circulation, the Mint had to come up with an idea to jump-start coin collecting. Its answer was the new quarters with a different design for each of the 50 states. The agency began issuing the Delaware, Pennsylvania and New Jersey coins this year. With a $300 million appropriation from Congress, the Mint hired the Coopers & Lybrand consulting firm to do a market study before going ahead with the new coins. "We had to make certain the American public would embrace the program," Diehl says. The Mint sells the quarters in bags of $100 for $29.95, securing a $4.95 profit on each bag.

Another retailing tool Diehl and other agency heads are hoping to cash in on is the Internet. And it appears that is already happening. The Mint sold more than $17.5 million in merchandise in seven months after launching its products on the Internet March 1, he says. "We have got to be on the cutting edge of retailing," Diehl says.The efficiency of the Internet may allow it to take over as the Mint's best medium for retailing soon, he adds. The Mint also sells products by mail and at its three shops in Denver, Philadelphia and Washington. But the Web site allows the agency to save money on promotional brochures and mass mailings and enables employees to ship products to customers within a day of receiving the order, he says.

AAFES also has found that Internet sales are becoming critical to its revenue base. Its Web site, launched in mid-1996, added $531,788 to fiscal 1997 catalog sales of $53.1 million and $8.4 million to 1998 sales of $57 million. The site is projected to grow to $11 million in revenue this year, says Air Force Capt. Cliff Ozmun, an AAFES spokesman.

AAFES officials have found that the Web site creates a new dynamic in both customers and competitors. "A lot of people say the main thing they like about Internet shopping is the ability to shop from home," Ozmun says. It is that untapped customer base and creative use of resources that government retailers say they must have to compete in an expanding marketplace that still offers few breaks for federal players. Some government retailers are adopting tougher business perspectives they hope will change negative attitudes about federal sales.

"I think of the American taxpayer as our stockholders," Diehl says. "When I turn money over to the Treasury, I'm turning it over to our stockholders."

Lisa Daniel is a Washington-area freelance journalist.

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Cashing In

Lisa Daniel — Sun, 01 Aug 1999 00:00:00 -0400

nquire about government's CASUs and you're likely to receive a blank stare. "Cashews?" says one dumbfounded federal employee. "Kazoos?" says another. But the term, which stands for cooperative administrative support units, is likely to become better known this year as those involved with the 13-year-old fee-for-service program work to revitalize the network. While some of the once-tiny administrative mergers have evolved into booming multimillion-dollar ventures, CASUs still operate largely in obscurity and at half the number of units that existed in the early 1990s.

Jan Faulkner, director of the Rocky Mountain Regional CASU, says the units have existed without notice for years because of their autonomy. "I think we purposely stayed below the radar because everyone was doing their own thing," she says. "Now we've come full circle and we want the national [office] to give us something that shows a united front."

Born out of President Reagan's Grace Commission, which studied how to improve administrative operations, CASUs are multiagency units that provide reimbursable services for government operations. They began in 1986 mostly as combined copy centers and mail rooms in federal buildings but now provide more than 80 types of services ranging from child care, computer training and design engineering to hurricane preparedness, recycling and wellness programs.

"I thought much of the steam had gone out of CASUs because I talked to assistant secretaries here who had never heard of them," says David O. Cooke, chairman of the national CASU board and the Pentagon's director of administration and management. "But out in the field, people are invigorated and ready to go."

Run by local directors and interagency boards, the government's CASUs operate autonomously, with oversight and assistance from a national board of federal executives. About 96 percent of CASU work is contracted to private companies that specialize in the services being offered, which local directors say is necessary to keep costs down.

Among their accomplishments last year:

$1.5 million in revenues for the Fort Worth, Texas, CASU, which spearheaded a major recycling program at no cost to the government.
$20 million in revenues for the Greater Hampton Roads CASU in Norfolk, Va., which provides various support services to 75 agencies in 20 states and five foreign countries.
$7.5 million in revenues for the Rocky Mountain Regional CASU in Denver, where 17 administrative services are provided to 168 agencies, a 17 percent increase over fiscal 1997.

Holly Mason, director of the Greater Hampton Roads CASU, says her unit has allowed its 200 customers to avoid about $6 million in costs over six years with the services it provides. "Our customers come to us because, No. 1, they can get a savings, but also because of our streamlining," which allows them to go to one office instead of several to get information such as costs, savings and revenues on contracted services, Mason says.

The Norfolk-based CASU's services, provided mostly to the Navy, include a refurbishment project for the Fleet and Industrial Supply Center's aviation parts containers, as well as a hazardous materials consolidation and resell service to the center. The CASU also contracted for clerical workers to obtain information for government-issued credit cards for the Defense Automated Printing Office and coordinated a welfare-to-work program with a contractor to supply military identification badges at a Navy exchange store, Mason says.

Savvy Start-Ups

The launch of a CASU usually begins when an agency approaches other agencies about merging some functions. The lead agency sends a proposal, signed by participating agencies, to the national board to receive a charter to provide specific services. The lead agency agrees to provide up-front costs out of its own budget and typically keeps the local CASU director and staff on its payroll. Since the program is self-supporting, the lead agency gets reimbursed for all costs, including the salaries of the employees it provides. Fees, usually 2 percent to 5 percent of the cost of providing a service, are charged to customers to cover CASU salaries and expenses.

CASU directors work not for their host agency, but for the local board. Agency participation is voluntary, and receiving services can be as easy as faxing a request for temporary help to the CASU office one day and receiving a temporary worker the next, says Rocky Mountain director Faulkner. The unit fulfills the request by seeking temporary services from its vendors, she says.

"Most CASUs can get anybody from a secretary to an attorney with security clearance to doctors," says Faulkner, a former Denver city employee who was hired by the local CASU board in 1997.

When the concept began, most CASUs stayed within their geographical regions and had as customers only other federal agencies in their home and neighboring states. Now most have customers in different parts of the country, and some CASUs deal with agencies overseas. Hundreds of federal agencies make up most of CASU customers, but 44 state and local agencies also participate, program officials say.

Sticky Business

Edward Donnelly, director of the Southeast Regional CASU, has little patience for CASUs that have struggled to break even. "If you can't support yourself in the first year, you shouldn't be in business," Donnelly says. "In all honesty, there's no reason to be small. We have people clamoring" to speed up contracts by going through the unit.

Donnelly, a Navy employee before becoming a CASU director, speeds up contracts for the Southeast Regional CASU by bypassing the contracting office at the host agency-the Navy-because he says the agency is too busy and would take too long. Instead, Donnelly sends requests to a Veterans Affairs contracting office in Temple, Texas, which can produce contracts faster by having CASU paperwork already in place. The VA, in return, receives one-fifth of the 5 percent markup.

"We're an agent, or broker, for others," Donnelly says. "We're very fast. We don't have to reinvent the wheel. People come to us because we're like 9-1-1. We can get a contract in a couple of days."

But the Southeast CASU, which has three federal agencies and seven state and local officials on the local CASU board, ran into legal trouble after selling services to state and local customers off the General Services Administration supply schedule. CASUs were permitted to buy off the supply schedule for state and local customers following the 1996 Cooperative Purchasing Act, but Congress repealed the law in 1997 after complaints that CASUs were competing with private businesses.

While some say the new law is vague, GSA was clear with its interpretation last fall to CASUs: Nothing is to be bought off the supply schedule for state and local governments. The rules could become even more stringent under a proposed Office of Management and Budget policy revision that would further limit the federal government's ability to do business with states and localities, CASU officials say. The revision (Circular A-97), which is expected to be issued this year, would mean that the Southeast Regional CASU "may have to draw back some" on its state and local business and that other CASUs should restrict any plans to branch into the area, says Mike Sneed, director of the national CASU program in Washington.

The legal change has had a chilling effect on CASUs that otherwise would have pursued state and local contracts, says Mariley Ferens, a member of the national CASU staff and director of the first CASU, which began in Seattle in 1986. "Everybody got a little nervous because they took that as a sign that they were not supposed to do business with state and local governments at all," she says.

Fewer Charters

While few dispute the merits of the CASU concept, there have been implementation problems. At their high point in the early 1990s, about 50 CASUs were in business, although some were loosely defined, according to national board members and staff. The board last year decertified 21 CASUs that either had merged with other units or franchises, had ceased operating or were being subsidized by their lead agency because they were losing money.

"Some didn't live up to their promises," says Cooke. "They oversold the local demand." By 1998, the number of CASUs had shrunk to 18. Two more were chartered this year, however, bringing the total to 20.

Of the 20, seven are franchise business activities, a spinoff of CASUs that were created by Vice President Gore's National Performance Review in 1994. Unlike most CASUs, the franchise activities operate under a revolving fund that may be carried over from year to year. They are exempt from some regulations, giving them more business freedoms. The seven franchises in the CASU network are all former CASUs now under the Treasury Department's direction. Six other franchises operate outside the network at the Treasury, Commerce, Health and Human Services, Veterans Affairs and Interior departments and the Environmental Protection Agency.

CASU officials say the decline in the number of units belies their success. While more than half of the CASUs merged or folded, the remaining units have flourished, resulting in $100 million of business in fiscal 1997 and $135 million in fiscal 1998. Subsidized CASUs drew criticism from both inside and outside the program, so the board's decision to shut them down was welcome. "I'm glad they decertified," Donnelly says.

And there have been other problems.

With pressure from Congress to cut costs and stick to mission-critical programs, some lead agencies abandoned their CASUs because the units were not part of their missions, Faulkner says.

Also, federal unions have viewed CASUs as a threat to jobs, particularly in procurement. The American Federation of Government Employees, in a May 1998 letter to Cooke, complained that "CASUs are actively marketing services aimed at helping agencies outsource functions currently performed by federal employees."

Thomas Tucker, director of the Pentagon's management support division of the Washington Headquarters Services, who works with Cooke on CASUs, says that after the union complained, the San Antonio CASU "had to back off" a notice it placed on the Internet saying it could provide temporary services. "That entrepreneurial spirit can get you in trouble," Tucker says.

Cooke, though, says CASUs adhere to contracting requirements.

Another challenge is getting federal officials to adopt the entrepreneurial spirit upon which CASUs were founded. Faulkner says he sometimes finds his customers applying their department's rules when they shouldn't. "I tell them to take off their bureaucratic goggles, take off that department hat," he says.

Mostly, though, the obstacle since the beginning of CASUs has been the concept of interagency cooperation, Ferens says. "It's always sort of been out there on the fringes of being a great idea," she says. "But just imagine trying to get agencies to work together [at all]."

Raising Standards

The remaining CASUs, invigorated by booming success and a mandate for more national interaction, are banking on a CASU revitalization.

Following last year's review, the national board drafted specific standards for CASUs requiring each to fully meet 15 operating principles to remain full-service units. Under the rules, the units must, among other things, be self-sustaining, serve at least two customers other than their host agency and maintain cost and performance benchmarks against competitors. Seven CASUs were found to meet all the principles, while four were deemed "developmental," having met only some of them.

The board hired Sneed, a former Pentagon procurement analyst, as its full-time executive director-a position that had been vacant for nearly two years-to help with oversight, support and awareness. Sneed heads a staff of two full-time employees and a part-timer in Washington to provide support for CASUs.

The national board also is developing performance measurements, a strategic plan and annual goals, and is reviewing results of customer surveys, all in an effort to improve oversight and leadership of the network. CASU officials say the climate is ripe for expansion.

So why aren't CASUs better known? As is often the case with changing administrations, CASUs suffered from "benign neglect" early in the Clinton administration, Cooke says.

Still, the birth of business franchises under the National Performance Review, as part of the 1994 Government Management Reform Act, has shown that the administration at least supports the concept. Six franchises, most of them former CASUs, were created as pilot projects through 2001. As the business ventures grow, CASUs have become increasingly competitive with each other and with franchises.

Franchise Rivals

"CASUs can be a worry because they can undercut us," says Barry Hudson, director of the Treasury Department franchise in Washington. "That's why we go after their customers."

Six original franchise pilots have grown to 11, and total revenues increased from $39 million in 1997 to $80 million last year, Hudson says. The franchises have increased their individual revenues by at least 50 percent, he says. "The franchising fund is the next evolution of CASUs," Hudson says.

As with CASUs, many in government have not heard of franchises. But Hudson says he's not concerned. "We're not advertising," he says. "We're getting more and more business without advertising. Managing growth is the hardest part."

The rivalry between some CASU and franchise directors is apparent. Treasury's Hudson and CASU Director Donnelly accuse each other of using inferior business practices. "They're just not at the same level of sophistication" as franchises, Hudson says. "Some that were the cream of the crop of CASUs stepped up to the plate and took the challenge to be a franchise."

"These Treasury franchises can't even spell finance. All of Barry's franchises came from CASUs, and he picked up some losers," Donnelly says. "He can't compete with me."

If the friendly scrapping between Hudson and Donnelly sounds like high-stakes corporate competition, it is a trait common among CASU directors and one they believe can only help business. "The bottom line is, we're supposed to help the taxpayer," Donnelly says. "We're all in competition because reimbursable government is moving forward."

Lisa Daniel is a Washington area freelance journalist.

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Feds and Families

Lisa Daniel — Thu, 01 Apr 1999 00:00:00 -0500

hen President Clinton ordered department and agency heads in 1994 to develop programs allowing employees to better balance their work and family lives, the challenge evoked the lofty ideals of reinventing government. No longer would employees have to battle rush-hour traffic or be docked leave for being a few minutes late in the morning. They could set their own schedules, leave in the middle of the day for an appointment or simply work at home.

In many ways, the government has lived up to those goals. The rate of departments and agencies that offer so-called "family-friendly" programs trounces private-sector employers in many areas, according to federal and nonprofit studies.

Fully 92 percent of agencies offer flexible work schedules that allow employees to change starting and quitting times, sometimes on a daily basis, according to an Office of Personnel Management survey released last year. And 79 percent of agencies offer compressed work schedules that allow employees to put in a 40-hour work week in four days instead of five. More than a third of federal employees work on some sort of flexible schedule, OPM found.

By comparison, only 68 percent of private-sector organizations allow employees to change starting and quitting times, according to a 1998 study by the Families and Work Institute, a New York-based nonprofit organization. And only 24 percent of those organizations allowed the changes on a daily basis, as many federal agencies do.

A 1998 study by the American Management Association also found that 68 percent of the private-sector firms it surveyed offered flexible work hours. Neither study tracked employee usage of the programs.

While federal employees have jumped on the bandwagon of flexible hours, they have shown much less interest in the government's other optional alternative programs. The most-used program after flexible schedules is part-time work. But while 92 percent of agencies offer it, only 3 percent of employees use it. More than 60 percent of agencies offer subsidies for the use of public transportation, but only 2 percent of employees use them. Leave banks, which allow employees to draw on annual leave donated by other employees, are used by only 1 percent of workers. Child care and elder care resource and referral services, offered by fully 83 percent of agencies, have drawn the interest of only 0.1 percent of employees.

In an effort to spur participation in such innovative programs, OPM opened its new Family-Friendly Workplace Advocacy Office on March 1.

Cornerstones

One of the most surprising and complicated findings in OPM's study concerned two cornerstones of the administration's family-friendly program: telecommuting and child-care centers.

While working from home has been a hot trend in the 1990s, only 1.4 percent of federal employees, or about 25,000 workers, have telecommuting arrangements-far short of the administration's stated goal of 60,000 telecommuters by 1998. Yet 73 percent of agencies say they allow telecommuting from home or satellite offices.

In the private sector, studies have shown that 95 percent of Fortune 1000 companies offer telecommuting arrangements, as well as a large number of companies with fewer than 100 employees. However few medium-sized companies allow employees to work away from the office, so the overall private-sector average is about 19 percent, according to David Mead, president of Telecommuting Success Inc., a Colorado-based training and consulting firm. Mead's conclusions are based on an annual study by Olsten Corp. staffing services.

The participation rate in telecommuting among employees in Fortune 1000 firms is 7 percent, which Mead says "is pretty good." Mead found the single biggest obstacle to telecommuting is mid-level management resistance.

When it comes to child-care facilities, the government again outpaces the private sector. As of 1998, 58 percent of agencies offered on- or near-site child care, and two or three new facilities open every year. The Families and Work Institute found only 9 percent of the companies it surveyed offered on- or near-site child care.

Only 1 percent of employees use federal child-care facilities. But that doesn't necessarily mean such programs are underused. Federal child-care administrators note that most centers have waiting lists, although as many as half of child-care slots may be given to children of non-federal employees.

Some employees prefer to leave their children in suburban centers near their homes, rather than in the mostly urban federal centers. Others simply don't want to put their children in day-care facilities. The most common form of child care in the country is care by family or friends, an OPM official says.

Still, government officials, union leaders and child-care advocates say many more employees would use the child-care centers, but can't afford them. The Families and Work Institute found that 9 percent of the firms it studies help employees pay for off-site child care and half of them offer pre-tax savings plans to pay for child care-benefits not available in the government.

OPM says it will continue to urge agencies to improve their child care, telecommuting and other family-friendly policies. "By beating this drum over and over, we want to make sure the benefits are communicated to employees and that managers comply with requests to take advantage of the programs," an OPM official says.

The official attributes the success of flexible schedules to the ease with which they can be implemented, the need for them in high-traffic areas and the benefit for agencies to have longer operating hours. The greater challenge, he says, is encouraging implementation of programs managers don't like, such as telecommuting.

OPM also is looking at several developing family-friendly issues, such as elder care, which 12 percent of employees said in 1992 that they needed. The agency will sponsor a governmentwide child care summit May 12-14 in Kansas City, Mo. OPM is also exploring the issue of breast- feeding arrangements for nursing mothers, which several agencies, such as the National Security Agency, already offer. "We see this as becoming a big workplace issue, and we certainly wouldn't have thought that 10 years ago," the OPM official says.

OPM must report to Congress on the status of family-friendly programs in March 2000.

An Issue of Trust

OPM found that most employee complaints about family-friendly policies come from people who've had their telecommuting requests rejected.

One of the reasons supervisors reject such requests is a lack of trust.

"Some old-timers are really reluctant," says Anne Bartels, director of the Labor Department's WorkLife Center. "They think when employees are out of their sight that there's no work going on. That's craziness and everyone knows it. What are you holding them accountable for, staring at their computers all day?"

The Labor Department has one of the government's strongest telecommuting programs, with about 25 percent of employees, many of them health and safety inspectors, working outside the office at least one day per week. Nearly 85 percent of Labor Department employees work flexible hours, Bartels says.

Managers usually are more open to granting flexible work arrangements if they have benefited from them, personnel managers say.

Theresa Novak, a manager at the Social Security Administration's program service center in Richmond, Calif., convinced her boss in 1988 that she should get six months maternity leave, rather than the three allowed under agency policy, because she had twins. Now Novak works from 6 a.m. to 2 p.m. so she can be home for her children after school. Although SSA program service centers have not approved telecommuting because of security concerns, Novak says she tries to grant flexible leave to accommodate employees' personal situations.

"Obviously, you would rather the person be at work, but if they've got problems at home, it's going to show up [in their work] anyway," she says.

The best way to determine if telecommuting will be successful is to fully assess the situation ahead of time, says Vivian Jarcho, assistant director of workforce relations at the Justice Department. Justice is among the 72 percent of departments and agencies that have policies for implementing family-friendly programs, according to OPM.

Under Justice's guidelines, managers should only identify for telecommuting those employees who:

Demonstrate self motivation, independence and dependability in accomplishing their work.
Can deal with isolation.
Have good time-management skills.
Have overall performance evaluations of fully successful or higher.
Have clear performance standards.

Potential telecommuters must further demonstrate a "full understanding of the operations of the organization" and indicate an appropriate level of trust in their supervisors. They must also show they have adequate work areas at home and will not allow classified information to leave the office. Then, if they are willing to participate in training and evaluation sessions, they can be approved for telecommuting.

Jarcho says the guidelines ease managers' concerns by making them more secure in their choices of employees for telecommuting. "If there is a problem, it's going to show up pretty quickly," she says. "People are not schizophrenic about how they perform. If they have a strong work ethic, they have it everywhere." The guidelines also are a reminder to employees of their responsibilities, Jarcho says. "We have to stay away from the mentality that this is a right employees have and that once they are approved, there is nothing more for them to do."

Making Telecommuting Work

Kathy Wolf, the Justice Department's WorkLife program manager, received Jarcho's approval to work from home two days per week only after she proved her telecommuting abilities by spending one day a week away from the office.

"Kathy is an excellent example of how an employee can make telecommuting work," Jarcho says. "She's always in contact with me and she makes sure I don't have to worry about how to reach her."

But it took some time for Wolf to figure out how to make her new arrangement work best for her. Concerned that she would be less productive outside the office, Wolf overcompensated.

"Finally, my 7-year-old daughter said to me, 'Mommy, you're always at the computer,'" Wolf says. "And she was right." Wolf set a regular schedule that ends at dinner time, but also allows for some occasional late-evening work.

"It's become a flow for me now," Wolf says. "Work for me is not defined by specific hours in a day. I know what I need to do to get the job done, and I get it done."

To make telecommuting work, Wolf suggests employees keep a set schedule for working at home, making sure to use an office with a door. She also recommends telecommuters go into the agency office at least a couple of days per week and consider not having their office calls forwarded to their home if they need quiet time.

Because agencies do not have to provide equipment for employees to work from home, workers may have to either pay for a computer, fax machine or second phone line themselves or work out an agreement with management to use agency equipment.

Also, there are jobs that don't lend themselves to being done at home or in satellite offices. While attorneys, computer specialists and those who spend most of their time on paperwork may find it easy to telecommute, other employees, such as customer service representatives, are probably out of luck.

Greg Knott, senior adviser to GSA Deputy Administrator Thurman Davis, says he believes many more employees telecommute than are tracked by OPM, which collected data only on formal arrangements. About 800 of GSA's 14,000 employees, or nearly 6 percent, telecommute, mostly by way of a simple agreement between supervisors and a note to human resources departments, he says.

The precedent for telecommuting at GSA started at the top. GSA Administrator David Barram, a Silicon Valley executive before joining the Clinton administration in 1993, directed managers last August to create an agencywide "teleworkforce," adopting a term that emphasizes how employees work, rather than where they work, Knott says.

"This new telework phenomenon is exploding as managers realize that sometimes the most productive environment is not in the office," Barram says.

A GSA office in Fort Worth, Texas, charged with reviewing monthly utility bills in an effort to save money, quickly jumped on the telecommuting bandwagon. The office manager and six employees work from home, saving the agency $25,000 a year in leased space. Productivity in the office is up 25 percent, Knott says.

Whether they arrange property leases, develop contract schedules or provide technical support to other departments, most GSA employees can work outside the office, Knott says. GSA hopes to expand telecommuting to save money on office space.

While some agencies have been skittish about encouraging telecommuting arrangements, many have been enthusiastic supporters of child-care facilities.

Child care provided by federal facilities is widely considered to be among the best available. Federal centers boast of tough standards for staff, buildings and equipment, higher salaries and benefits, and a lower employee turn-over rate than most non-federal facilities.

The National Association for the Education of Young Children (NAEYC), the only national child-care accrediting group, has accredited more than 65 percent of the 113 centers run by GSA, based on some 200 standards of criteria. Only about 5 percent of non-federal child-care centers are accredited.

But quality costs. While tuition at the GSA-sponsored child-care centers varies, parents pay on average between $107 per week for a kindergarten-age child and $147 per week for an infant. The price goes as high as $266 per week, depending on location and services offered, GSA figures show.

The average cost of day care for one child in the United States is about $80 a week, says Faith Wohl, president of the Child Care Action Campaign in New York and the former director of GSA's Office of Workplace Initiatives.

Joe Henderson, an attorney in the American Federation of Government Employees' fair practices office, says government centers are simply too expensive for many employees.

"Sure government child care is good," Henderson says. "Just like Tiffany's offers good jewels. But you have to ask, who are your customers? What we have in the federal government is child care for the rich."

The result, Henderson says, is that in the Washington area, "employees end up leaving their kids in the basements of churches outside the Beltway."

The law that created federal child care calls for flat tuition fees based on a child's age and allows no supplemental funding from agencies. Sometimes child-care centers hold fund-raisers for lower-graded employees and donations are available through the Combined Federal Campaign and the United Way, but these efforts don't cover the tuition needs of many employees.

"Is that really a very democratic process for our government?" says Susan Clampitt, who heads GSA's Office of Child Care.

Typically, agencies provide space for child-care centers, cover the costs of utilities and appliances and then lease the space to a nonprofit organization that hires a child-care provider. While rent-free space is attractive, contracts for federal centers are still not as lucrative as many corporate contracts, which subsidize operating costs that otherwise would have to come from tuition, says Michael Day, a vice president of Bright Horizons Family Solutions, a national child-care firm based in Cambridge, Mass.

Day and other proponents of federal child care want legislation to allow GSA and other agencies to pay for all aspects of child-care programs with money appropriated by Congress, as the Defense Department currently does. DoD's child-care workers are employees of the department and receive the full benefits of other federal employees. The employees are given extensive training and turnover rates are low. And the accreditation rate of DoD centers by the NAEYC is higher than 85 percent, say Clampitt and Day. (See "Fighting for Kids," December 1997)

Rep. Connie Morella, R-Md., reintroduced in January a bill that would allow agencies to help employees pay for child care. The House passed an identical bill in October, but it was not taken up by the Senate before Congress adjourned. Sen. James Jeffords, R-Vt., also is expected to reintroduce a bill-passed by the House last fall but rejected by House and Senate negotiators-which would allow agencies more flexibility in designing and implementing new child-care programs.

Whether it is encouraging managers to approve telecommuting arrangements or figuring out ways for employees to afford child care, GSA's Clampitt says there is a strong business case for the government to expand its flexible programs.

"It's about being a good employer," Clampitt says. "It's about recruiting and retaining the best. When people have choices in a tight job market, they're going to consider things like family-friendly policies."

Lisa Daniel is a Washington-area freelance writer who specializes in government personnel issues.

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