The recent media buzz in Texas over a state auditor's report illustrates a key point: results matter in the private sector. It's too bad for taxpayers that the same thing isn't true in government.
The State Auditor's Office recently released a report that was highly critical of the Health and Human Services Commission's (HHSC) five-year, $85 million contract with Ohio-based Convergys to provide human resources and payroll services for its 46,000 employees.
The audit findings generating the most buzz were claims that Convergys missed payroll deposit deadlines for 80 employees and complaints from some other employees that their paychecks didn't include overtime hours.
What's lacking is any perspective or sense of scale. We'd all be upset if our paycheck was late, but the 80 employees who experienced delays in getting paid account for less than two-tenths of one percent of HHSC's total of 46,000 employees.
The audit also found that there were 100 significant defects in the Web-based computer applications Convergys designed to interface with HHSC's existing human resources management system, though new software typically goes through numerous iterations of bug-fixing upon release.
In addition, the audit found that Convergys has already overspent its transitional budget by $2 million, inflating doubts about the expected savings the state is supposed to experience. Yet, HHSC never anticipated saving money in the project's first year; savings take time to materialize, especially given the transition and start-up costs here. HHSC still projects a five-year cost savings of $32.7 million, $10.9 million of which is directly attributable to outsourcing human resources functions.
So instead of focusing on 80 late paychecks, why not focus on the Austin-based service center Convergys established last year that has already taken more than 175,000 calls helping HHSC employees with their HR and payroll needs. Or the 42,000 HHSC employees who entered the Convergys-installed accessHR web portal during the month of December alone. Further, since the launch of accessHR's online recruitment and learning functions in May 2005, almost a half-million applications have been processed for over 14,000 job postings, and HHS employees have successfully completed more than 20,000 online courses.
It is misleading to leave the public with an impression of Convergys as a contractor running roughshod over taxpayers. HHSC's contract with Convergys does include performance monitoring, and Convergys met all but one of its implementation milestones on time. In that instance, HHSC was dissatisfied with the company's performance establishing the payroll system and delayed transferring the system to Convergys until the problems were corrected. There are bound to be road bumps along the way in such a large and complex transition process, and both HHSC and Convergys have been quick to deal with problems as they arise.
In fact, Texas has a good track record implementing public-private partnerships in which performance is a key focus. For example, the state has privatized over two dozen correctional facilities with relatively minor problems, a feat facilitated by the presence of a robust contract oversight process.
In contrast with the private sector, public agencies often lack an institutional mechanism for measuring their own performance and holding themselves accountable to taxpayers. Combined with an opaque accounting of how tax dollars are spent, it's obvious why the expression "good enough for government work" resonates with so many people. Government performance is often mediocre because no one can see how bad of a job it's doing and how much money it wastes doing it.
Performance-based management is the vehicle by which government can achieve transparency and accountability to taxpayers. When agencies establish benchmark levels of service delivery and measure performance over time, they are able to make comparisons with previous years to determine whether goals are being met and at what cost. Performance management ultimately improves the way governments work by lowering costs, improving service delivery, and fostering innovation among public-sector employees.
Performance management also helps policymakers identify opportunities for internal reform or services that the private sector can provide more efficiently. In essence, governments can purchase the results they want through outsourcing. HHSC recognized that its goals of modernizing its human resources processes, reducing costs, and avoiding future technology expenditures are best met by tapping private sector expertise. Other state agencies should follow HHSC's lead in partnering with the private sector to offer Texas taxpayers better services at lower costs.
So did HHSC and Convergys experience challenges that any organization could expect in transition to a modernized HR system? Yes. Should these growing pains lead public agencies to avoid partnerships with private companies? No. Lacking incentives and controls for performance, government-as-usual is poorly equipped to outperform the private sector at achieving goals with a focus on efficiency and bottom-line results.
Results matter in the private sector, but the sad truth is that all too often in government, ignorance is bliss.
Leonard Gilroy is a certified planner and policy analyst at the Reason Foundation