Ohio to Privatize Management of State Accounting and Payroll System

As the Columbus Dispatch reports, Ohio Governor Ted Strickland’s administration is soliciting bids for a contract to manage part of the state’s accounting, payroll, and personnel management system.

The Strickland administration wants to turn over a big chunk of the state’s sophisticated accounting, payroll and management system — including dozens of high-paying technical jobs — to a private contractor. The Ohio Department of Administrative Services, the business arm of state government, is seeking bids for a managed-services contract to handle part of the Ohio Administrative Knowledge System. OAKS is a $158 million, multiagency network that administers payroll, personnel and other state government functions. The proposed multimillion-dollar contract would cover work that would have been done by roughly 35 OAKS employees, most of them technical jobs with a salary range of $100,000 to $125,000, agency spokesman Ron Sylvester said. The state has been unable to fill the jobs largely because they require expertise with PeopleSoft, a technical software program that is the heart of OAKS. PeopleSoft also is used by many major Ohio companies, including AEP, Nationwide, Limited Brands and Blue Cross/Blue Shield. The high demand creates keen competition for skilled employees to fill the jobs. An assessment done for the state by Top5 Inc., a consulting firm from California’s Silicon Valley, concluded that OAKS now “is not able to effectively support the current and future business needs of the state.” More significant, the consultant found that half of the current OAKS workers “do not possess the requisite technical skill set to successfully perform in the roles for which they were hired.” About 75 percent of the OAKS organization is “high risk…either due to staffing gaps or skill set deficiencies,” Top5 reported. Only one candidate was considered for most of the 65 positions filled thus far, the consultant found. To cope with those deficiencies, a managed-services contract “is a cost-effective and expedient way to realize the vision of OAKS,” the consultant said. Sylvester said, “Unfortunately, the OAKS we have today was designed yesterday and will not necessarily meet the needs of tomorrow.” The new alignment would have only 29 state employees working on OAKS, resulting in the reassignment of 36 current state employees. Sylvester said layoffs are not expected. [. . .] Sylvester said Gov. Ted Strickland approved the contract plan even though “he’s not a fan of outsourcing.” The contract will have a five-year term, leaving open the possibility that state employees could take over the jobs when it expires, Sylvester said.

The Ohio plan is similar to what Georgia is currently doing, as reported here. And like Georgia, tapping the pool of private sector IT talent is a key driver behind the initiative. Ohio officials should be sure to learn the lessons Florida did after embarking on a large-scale IT revamp and running into difficulties in implementation. Modernizing antiquated legacy systems can be tricky business, and the more moving parts, the more potential integration challenges along the way.