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Cost Reduction in the Federal Government

An interview with Janet Hale

Competing priorities are slowing down federal government efficiency, according to a fall 2012 study from the Government Business Council (GBC), sponsored by Deloitte.  Just 29 percent of the federal managers surveyed give high marks to the efficiency of their agency, and 16 percent say the same about the federal government as a whole. Despite this, agencies across government are completing successful cost-reduction initiatives – and studying these efforts reveals techniques that focus group members say could be used to drive greater federal agency efficiency. Janet Hale, a director at Deloitte Services LP and former undersecretary for management at the U.S. Department of Homeland Security, shares with GBC insights gained from numerous cost-cutting initiatives.

GBC: Strong project governance has been shown to play an integral role in improving project performance. What are some of the important aspects of governance?

Janet Hale: Strong governance means that you have a committed team of people reviewing the goals, how they are implemented, and what the outcome should be. An advisory team should consist of folks that could influence or assist in the strategy, often pulled from around the organization, including budget and finance, management, IT, programs, workforce, facilities, and acquisition and procurement. A dedicated team of leaders can see a strategy all the way through, take advantage of synergies, and make the cost savings stick.

Take advantage of this environment to consider how to do things differently. Be bold. By taking steps now, federal managers can create more options on how to deal with changes ahead.

GBC: Why is it so hard to capture costs and make cost savings stick?

Janet Hale: There is a tendency to want to “work it out in execution.” This can cause some anticipated savings to evaporate and inadvertently lead to less-than-strategic reductions. For example, cost reduction involves capturing the recovered costs. If a program makes a reduction, but the recovered money gets used somewhere else in the agency, costs have not truly been reduced. Savings typically accompany measures that lower both total cost of ownership and an agency’s cost basis going forward. By focusing on top-line reductions rather than internal budgetary reallocation, agencies can capture savings when evaluating cost-cutting options.

GBC: Managing risk is important when weighing different cost-reduction scenarios. Which risks present the biggest challenges to federal managers?

Janet Hale: Cost-cutting involves tough decisions, and its stakeholders can be numerous; interest groups, the media, and those on Capitol Hill are all capable of influencing or impacting the results of your efforts. Understanding who your influencers are and creating mitigation and communication plans is important to success.

GBC: Change is a constant in government. How do periods of transition impact efficiency initiatives?

Janet Hale: Given the “new normal” of budget pressures, change-focused teams are more valuable now; they can suggest new program service delivery and new ways to deliver back-office functions. It will be the leaders who will help drive change. Career people know how to get it done. Transition may open up new opportunities for federal managers to explore different practices from the commercial sector, different governance structures—generally, opportunity to do things differently.

GBC: What should federal managers being doing now?

Janet Hale: This is the time for federal managers to make a plan for prioritizing investments and launching new initiatives. It takes time to identify the right opportunities to cut costs. The first step is to identify costs across everything the agency does to uncover which cost area could deliver the biggest impact without compromising the mission. Next, focus time and effort on changes that not only reduce costs but improve mission performance. Finally, look at new delivery models.

 

As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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