Synopsis
Today’s global environment demands a faster, more agile USAID with a
sharper focus on the results of our investments of American
taxpayer dollars overseas. Meeting foreign policy and program
management challenges requires a modern, flexible and well-disciplined
organization.
Managing a comprehensive business transformation across
an agency as large and decentralized as USAID is an enormous
challenge. The Business Transformation Executive Committee
(BTEC) unites the most senior career executives across the
Agency in a partnership to reform USAID's management systems
and improve organizational performance. Over the past two
years, BTEC has developed the major components of the Agency’s
business transformation plan. USAID is introducing new business
systems, processes and changes to our organizational structures.
Notes
Nancy Barnett, USAID/M/AA
The eighth summer
seminar focused on the Agency’s Business Transformation
activities and achievements to date. The seminar referenced
“USAID’s Business Transformation Results Report.”
The report was released in August 2004, as part of the Office
of Management and Budget’s (OMB) coordinated government-wide
release of similar reports centered on President’s
Management Agenda results. USAID’s report was prepared
to inform USAID employees, members of Congress, business
partners, and U.S. taxpayers of the Agency’s business
transformation initiatives and achievements over the past
three years. USAID’s business transformation plan
is organized around four focus areas that describe how we
are applying the Agency’s most important assets: our
People, our Ideas and our Technology to improve our Results
in development and humanitarian initiatives around the world.
The need to improve USAID’s business systems was
first acknowledged by Administrator Andrew Natsios at his
Senate confirmation. Administrator Natsios realized that
the establishment of an effective governance structure would
be integral to the success of the Agency business transformation
initiatives. He created the Business Transformation Executive
Committee (BTEC) to set priorities, oversee reforms and
make decisions.
The BTEC was first implemented in early 2002, as a “best
practice” governance structure for agency-wide management
improvements. The chairman of the BTEC is the Deputy Administrator,
Frederick Schieck. The vice chairs are John Marshall, Assistant
Administrator for Management and Barbara Turner, Deputy
Assistant Administrator for Policy and Program Coordination
Bureau. Ms. Turner is “acting” vice chair. The
BTEC is comprised of senior career executives from across
the Agency who have developed the major components of the
business transformation plan. The committee also serves
as the Agency’s capital investment review board, with
the main goal of ensuring that IT investments within USAID
meet the highest priorities, as well as, employee needs.
In addition, the BTEC set out to accomplish two main tasks,
to reform the Agency’s management systems, and to
improve the Agency’s organizational performance. In
order to accomplish these goals, the BTEC meets monthly
to review progress and make decisions. Through these meetings,
the committee established sub-committees, comprised of Agency
employees in both Washington and overseas missions, to further
study reform initiatives and create action plans.
The Business Transformation Report was designed to address
three areas: the Administrator’s Management Reform
Principles; the State-USAID Joint Strategic Plan, and the
President’s Management Agenda (PMA).
The Administrator articulated a set of core principles
to guide the Agency's transformation with Management Reform
Principles:
• Simplify and standardize business systems and processes
to reduce costs, simplify use, and enable the Agency to
respond with speed and agility to changing program needs.
• Establish a customer service culture in all USAID's
service providing organizations that demonstrates a dedicated
commitment to making Agency programs as effective as possible.
• Increase efficiency by reducing overhead expenses
and improving the ratio of product to process, making sure
that the Agency's costs of doing business are transparent,
aggressively managed, and compare favorably with peer organizations.
• Promote partner inclusiveness in all business relationships
to better meet the needs of internal and external customers
and to ensure that small businesses are well-represented.
• Increase transparency in program and business decision-making,
assuring that decisions are fast, results driven, and clearly
understandable to partners large and small.
• Ensure accountability and compliance with the letter
and spirit of all applicable laws and regulations to achieve
a clean audit opinion; deter legal disputes; acquire a sterling
reputation for sound management; and improve relations with
the Congress, GAO, and OMB.
• Deliver programs smarter, faster, better, and cheaper,
continuously improving USAID's performance as a global "thought
leader" and as the world's most effective delivery
organization of economic and humanitarian assistance. (see
BTEC report http://www.results.gov/agenda/report8-04/USAID.pdf)
The Strategic Plan for FY04-FY09 directly supports the
U.S. National Security Strategy, which identifies development
as the third essential component of foreign policy, alongside
defense and diplomacy. The Joint Strategic Plan management
objective is to strengthen diplomatic and program capabilities.
The strategic goals are to achieve management and organizational
excellence, and to ensure a high quality workforce supported
by modern and secure infrastructure and operational capabilities.
The President’s Management Agenda (PMA) was launched
in 2001 as a strategy for improving the management and performance
of the U.S. government. The PMA incorporates three guiding
principles: citizen-centered by providing citizens greater
services at lower cost; performance-driven in order to make
sure the government is well run; and results-oriented to
ensure that resources are well managed and wisely used.
The main initiatives in USAID’s Business Transformation
are Strategic Management of Human Capital, Knowledge for
Development, Business Systems Modernization, and Strategic
Budgeting. These integrated initiatives incorporate the
five PMA initiatives: Strategic Management of Human Capital,
Competitive Sourcing, Improved Financial Performance, Expanded
Electronic Government and Budget and Performance Integration.
Hand-outs for this seminar include copies of the summary
tables from the appendices in the Business Transformation
Results Report. These tables provide an “at a glance”
view of the Agency’s business transformation initiatives,
the relationship to the PMA and the joint strategic plan
management performance goals and, very importantly, the
benefits to USAID employees and U.S. taxpayers.
The video message from the Administrator provides context
for our reforms including Agency challenges, our response
to the challenges (our business transformation initiatives)
and key achievements to date.
Andrew Natsios, USAID Administrator (via videotape/paraphrased)
When
Administrator Natsios arrived at USAID, he made it a priority
to correct the inefficiencies of the business systems within
the Agency. At the top of his list were the financial management
and procurement systems, and the human capital system.
There have been some notable accomplishments such as the
“Phoenix” financial management system implementation
in Washington. When the Phoenix overseas deployment is completed
next year, the Agency will have its first ever integrated
financial management system. With this new system, it will
be easier to complete financial audits.
The Agency has many antiquated management systems. The
systems in use today are systems which were implemented
in the early to mid nineties. These software systems are
out-dated and their maintenance is cumbersome. A new integrated
system will substantially improve the quality of the Agency's
central business systems.
Last year, the Agency received its first ever clean audit
from the Office of the Inspector General, and USAID has
begun to revitalize the workforce through new hiring programs.
The hope is to have nearly 600 new hires by the year 2005.
These new hires will include 250 Foreign Service appointments
over the next three years. When we adequately re-staff the
Agency, we will be even better equipped to carry out our
mission.
A new, more structured budgeting system has also been set
into place to help us allocate resources based on performance.
The new budgeting system, along with a new knowledge for
development system, will further help enable the Agency
to achieve its goals. When one adds the new worldwide staffing
template, which justifies budget allocations, a relationship
can be seen between the size of a staff and a budget.
Agency-wide effort involving the support of our employees
is needed in order for the new business systems to be optimally
effective and functional.
Patrick L. Brown, Deputy Director, Human Resources
“Strategic Management of Human Capital” (People)
We are beginning to revamp our staff, which is rather refreshing
after we saw the Agency's direct hire workforce dip forty
percent in the nineties. In the last several years, the
staff leveled off at about two thousand direct hire employees.
This year we have budgeted to hire more employees than we
will lose. It is our hope that we will hire nearly 612 employees
by the end of fiscal year 2005. This figure represents the
total hiring we hope to achieve over the next two years,
increasing the base level by 150.
By the end of the Development Readiness Initiative (DRI),
a three year initiative spanning 2004-2006, we would have
added about 250 new direct hires to our workforce. The DRI
is designed to align workforce skills to business requirements.
It is important to note that only one-quarter of the workforce
are direct hires, while sixty-two percent are Foreign Service
Nationals under personal service contracts. The Agency currently
has in place 9-10 other mechanisms for employment.
We can use our experience so far in FY2004 to show the
various elements that go into our overall DRI recruitment
plan. Simply to replace attrition we have to hire about
80 new Foreign Service officers and about 90 civil service
employees. To meet the DRI increases in those two categories
for FY2004 we are hiring an additional 20 FSO and an additional
32 CS employees. In addition, Congress has given the Agency
the authority to hire up to 85 employees under Foreign Service
limited appointments not to exceed five years for overseas
service. Many of these appointments will consist of conversions
of contractors or employees in other employment categories
with USAID. In general, for the years 2004-2005 we appear
to be on target with our hiring.
Steve Crabtree, Division Chief, Financial Management,
Management Bureau “Business Systems Modernization”
(Technology)
As the Agency has expanded, we have
seen a lot of problems with the financial management systems.
It wasn't until 1988 that the problems began to surface.
The problem was that there were no financial management
systems on the market that were both federally compliant
and that could also meet Agency requirements. For example,
a basic requirement is the ability to process transactions
in a foreign currency. Federally compliant commercial-off-the-shelf
(COTS) financial systems that met these requirements did
not begin to emerge until the mid-late nineties. In the
meantime, the Agency attempted to create its own integrated
software. These attempts were proven unsuccessful.
By 1998, products were available on the mandatory GSA schedule
that met all of our requirements. The Agency procured the
CGI-AMS package, Momentum, in September 1999. The new system,
renamed “Phoenix” at USAID, was configured to
Agency requirements and went into production December 2000
without any modification to the baseline product with Phoenix,
the Agency has been able to turn off numerous legacy financial
systems such as the systems for loan accounting and letter
of credit processing. They have also been able to remove
the antiquated IBM mainframe. Prior to 2000, before Phoenix
was in practice, the Agency received disclaimers on its
audit reports. This past year the Agency received unqualified
opinions on all five of its financial statements –
achieving its first clean audit report.
With the success of Phoenix, there was a desire to replace
the Mission Accounting and Control System (MACS), the overseas
accounting system, in an effort to standardize all Agency
financial transactions on a single database. The process
of replacing the MACS overseas began in July of 2003 with
five pilot locations. This initial phase was completed in
August of 2004, on schedule and under budget. Completion
of the overseas deployment is dependent on upgrading the
base software, Momentum, from its current Java-based format
to a new, HTML package. The new package also includes a
procurement module, Acquisitions, which is currently being
configured by the Office of Acquisitions and Assistance
(M/OAA) to replace their legacy system, NMS/A&A. The
upgrade will also bring USAID onto the same version of the
software as the Department of State and enable the two agencies
to share the same platform and eventually lead to a complete
integration of our two systems. The upgrade, and integration
of Acquisitions, is scheduled for March 2005. By October
2005 we will complete the integration of State Department’s
financial management system with Phoenix, and by December
2005 all missions will be under this platform. Through this
new roll-out, it is believed that we will be able to keep
audits clean in the future. It is also important to note
that with the new financial systems in place, taxpayer dollars
are being saved across the board. Cost savings will continue
as we integrate our financial systems with the State Department.
Lynn Kopala, Deputy Director, Office of Acquisitions
and Assistance, Management Bureau
“Business Systems Modernization” (Technology)
USAID does more than $7 billion worth of business a year
in acquisitions and assistance, and the job of the acquisitions
and procurement staff is to make sure dollars and materials
are delivered to the offices and Missions that need them
in the most efficient manner possible. Currently, the office
lacks the systems and functionality to distribute funds
and resources with maximum efficiency. Currently new, off-the-shelf
solutions are being implemented which will greatly improve
the Agency’s productivity and results. This business
system modernization (BSM) is an integral part of the business
transformation.
Acquisitions and assistance instruments are simply tools
to achieve development results around the world. To date,
USAID has lacked the information systems that adequately
support contracts and grants; they had to be implemented
manually. There were several different systems worldwide
that did not readily “talk” to one another.
This lack of IT interface and transfer led to errors or
gaps in the system. With the new technology, a software
package called Momentum; the systems will be standardized
and improved throughout the Agency so that all purchasers
and users can depend on a smooth transition. The new system
is scheduled to be implemented in Washington beginning in
March 2005, and in the Missions beginning the following
October. The gaps in the process, including common functionality,
IT infrastructure, and system specific functions will be
bridged. Part of this process is integrating with USAID’s
new financial system, the Joint Financial Management System
with State Department, which will further extend the capabilities
of the software to facilitate and improve the business of
development.
Peter Hobby, Knowledge Management Advisor, Europe
and Eurasia Bureau
“Knowledge for Development” (Ideas)
Knowledge
for Development (KfD) plays an integral role in USAID’s
business transformation plan. The new KfD Strategy was recently
approved by the BTEC. In general, KfD deals with the capturing
and generating of USAID's development knowledge. More specifically,
KfD seeks to capture the intellectual capital that is created
in abundance throughout the Agency. Once captured, intellectual
capital can then be shared Agency-wide.
KfD is very interested in the use of technology in an appropriate
fashion. As opposed to the use of one tool, KfD seeks to
utilize multiple tools in order to most efficiently capture
the intellectual capital, and build a sense of support knowledge
sharing community throughout the Agency. Since this is a
demand driven area of concern, it is also important that
the tools used to create an accessible wealth of knowledge
be flexible.
In addition, KfD is also heavily vested in curbing the
Agency’s human capital crisis from a knowledge retention
standpoint. Provisions are being put in place to capture
the expertise of the senior members of the Agency that are
on the verge of retiring, in order to better provide access
to the intellectual capital, which is rarely documented,
to the development community at large.
There are many solutions that allow us to see early accomplishments
of the KfD Strategy:
- Communities of Practice (CoPs) - to understand how systems
work on all levels;
- After Action Learning - in order to document and learn
from the past events;
- Expertise Locators - to provide access to the expertise
of the people at USAID;
- Knowledge Mapping-account for the informal pieces that
are often overlooked as pertinent to a larger process;
- Knowledge ‘Yellow Pages’- broaden attempt
to expose access to information available;
- Collaboration Software - supports teams and knowledge
sharing;
- Improved document management, search, and portal technologies,
to better capture and integrate knowledge resources from
all lines of USAID business across the Agency; and
- KfD - provides leadership and incentives for knowledge
sharing
Next on the horizon is the rollout of the strategy to the
bureaus, missions, and partners. Implementation planning
is underway. The KfD yellow pages project is going through
the prototype/pilot/rollout processes leading to implementation.
In addition, a series of knowledge conferences will be held,
with the next one occurring in spring of 2005. The “ideas”
component of USAID’s business transformation will
be facilitated by KfD projects and staff.
Joseph Lombardo, Director, Strategic and Performance
Planning, Policy and Program Coordination Bureau “Strategic
Budgeting” (Results)
Strategic Budgeting seeks
to align resources with program priorities. In the case
of USAID, we face the challenge of applying aid effectiveness
criteria in developing programs to support U.S. foreign
policy priorities. Over the years, this has become increasingly
complex: the Agency manages multiple appropriation accounts;
the scope and range of foreign aid has increased to include
issues such as HIV/AIDS and terrorism; and there is a concomitant
need to differentiate countries according to their commitment
a la the Millennium Challenge Account to promoting sound
economic policy, good governance, and investment in people.
Furthermore, the Agency’s budget has mushroomed from
about $7 billion in FY 2001 to over $14 billion in FY 2004.
Moreover, OMB has placed a greater emphasis on budget and
performance integration. These trends make it clear that
traditional incremental adjustment to budgets needs to be
replaced with a more strategic approach.
To address this challenge, in formulating the FY 2005 budget
USAID developed a strategic budgeting process to allocate
resources among bilateral programs. First, counties were
placed into categories: Top Performers (top rated on MCA
indices); Good Performers (near misses and other high performing
countries not meeting the income threshold for MCA consideration);
Fragile or Failing States; and Strategically Important Countries
for Foreign Policy. Second, USAID constructed a complex
statistical formula to assess the degree to which the Agency’s
budget request strategically allocated funds based on Country
Commitment, Program Performance, Foreign Policy Importance,
and Development Need. The results showed a strong positive
correlation between the model and the budget request. Most
of the discrepancies were due to the need for the Agency
to request large levels of funding for Afghanistan, Israel,
Egypt, Jordan and Pakistan. In addition, an analysis of
the source of funding for each of the country categories
were found to be along the lines the model would predict:
Development Assistance and Child Survival & Health are
the primary sources of funding for Top and Good Performers,
whereas Economic Support Funds is the primary source of
funding for Fragile and Strategic States. The analysis also
showed that two-thirds of the Development Assistance funds
and over three-quarters of Child Survival and Health funds
were allocated to top and good performers, whereas over
85 percent of the Economic Support Funds were allocated
to fragile states and strategic foreign policy countries.
Looking towards the formulation of budget for Fiscal Year
2006 and beyond, the Agency is applying a new set of definitions
to the categories of countries to more clearly differentiate
among Transformational Development Countries, Fragile States,
Geo-Strategic States, as well as among regional and central
programs designed to support humanitarian aid and address
transnational development issues, such as HIV/AIDS. Within
the Transformational Development Country category, further
distinctions are being made as to how well the country performs
on MCA and other objective criteria. This information when
combined with more specific strategic budgeting criteria
for sector, such as family planning, education or environment,
will help guide decisions and where to allocate resources
and how to approach the development problems those resources
will address. Thus, this new paradigm for strategic budgeting
will allow the Agency to decide a priori which are the priority
countries for improving education, and then how to approach
education programming depending on the type of country one
is working in (e.g. programs may require different approaches
in a fragile state than, say, in a transformational development
country).
Question and Answer Session
I am concerned about a growing vulnerability in
the Agency over the last several years with respect to human
resources and procurement. I’ve noticed that there
are an increasing number of inexperienced staff managing
programs and procurements. In Washington (and in the field),
I think that its due to non-U.S. direct hire technical staff
being in charge of managing programs and projects. Also,
as we move out of central mechanisms of procurement to GSM
mechanisms, we lose the quality controls. What are other
people thinking about this? What are we going to do about
this?
Lynn Kopala: First, the procurement
function itself both here and in the field is vastly understaffed
in terms of direct hires that can sign and negotiate contracts
and grants. There are several reasons for that. About 50
to 60 percent of the workforce on the procurement side is
reaching the age of retirement. To combat this problem,
we are recruiting with haste. Second, one thing we really
need to examine with respect to the contract, acquisition,
and assistance sides is the professionalization piece. We
have a career management program that is over ten years
old. There are contemporary business skills that are just
as important as knowing the nuts and bolts of contract writing,
such as working in a team environment, collaborative communication
techniques, and internal consulting techniques. Lastly,
our use of technology should allow us to do things more
quickly, but we must make a point to capitalize on the opportunities
that it brings us. Web-based tools, used properly, can improve
collaboration.
Patrick Brown: From a human resources
point of view several parts of that question resonate for
me. The ‘missing generation’ includes the people
that we lack at the mid-level in the Foreign and Civil Service.
We are adjusting in several ways to accommodate this lack
in human resources. First, we fill the gap with New Entry
Professionals (NEPS), whom we bring into the Foreign Service
above the normal entry level. Then we begin to fill the
entry level pipeline with the International Development
Intern (IDI) program. While these two sources are being
grown, we use the non-career or limited appointment authority
to fill the gaps with employees who have gained valuable
USAID experience as U. S. Personal Service Contractors or
in other non-direct hire employment categories. On the Washington
side, we are hiring 32 new civil servants through our DRI
program. Also in FY ’04, in the direct hire area,
we are hiring 85 limited term Foreign Service officers for
overseas assignments. As far as awareness of the gaps the
questioner identified is concerned, the Agency has recognized
it as a problem which we are addressing through both recruitment
and training.
Peter Hobby: KfD is also concerned with
ways to solve these same issues.
In terms of knowledge for development and collecting
the information—how do we collect data not just internally,
but externally? You mentioned that the Agency was trying
to be more inclusive. We were excited about the new GSA
schedule until it rolled out; however, we now have some
concerns. How do we get information to people so that they
understand what our experience is while the project is in
progress, rather than waiting until the end of the evaluation
period? Is there going to be an area where contractors can
provide input and feedback in terms of this new direction
to make sure it’s going well?
Hobby: AID is actively building out its
extranet infrastructure and investigating what applications
are suited to that environment. One of its key concerns
is how to handle Sensitive But Unclassified information.
The Agency has a pilot program underway to test an application
with the Office of Small and Disadvantaged Business Utilization
(OSDBU) to gather partner information. Strengthening the
relationship between USAID and its partners is one of the
main objectives of KfD and the extranet development process.
From the OP side, it is counterproductive for the
document structure of the contractor and that of USAID to
differ. There should be a standard format on each side where
all you have to fill out is a statement of work. I would
hope that part of this transformation process would be to
try and look at how you streamline the process to reduce
the intellectual content that has to go into each action
and to reduce error potential.
Kopala: The software that we’re installing
is commercial off the shelf software—the opposite
of how systems development has taken place in the past.
One of the big challenges is the culture of the contracting
field. For a contracting officer, the decision whether to
sign a contract is very serious and personal. Contract formats
and language frequently reflect individual variations from
officer to officer. It will be a challenge for contracting
officers to rely on technology and to adopt more standardized
documents.
There are a lot of complaints about inability of
outside contractors, not existing USAID contractors, to
break into the procurement system. There are also a lot
of perceptions of conflict between VOs and contractors.
I’m interested in the Procurement System Improvement
Project. How will that, in a meaningful way, measure increases
in efficiency and procurement, the competitiveness of procurement,
as well as the long-term structural openness of procurement.
How will that be accomplished? (If you could characterize
your response in the context of a specific mission.)
Kopala:
We can use any overseas post as an example. If Washington
wants to find out in real time what an overseas post is
awarding competitively or what kinds of businesses to which
they’re awarding contracts or grants, Washington and
the post exchange and verify information on an ad hoc basis.
Reporting isn’t ingrained in our systems as part of
completing the award transaction process. To some extent,
the same mentality reins here in Washington, too. The performance
emphasis is on negotiating, getting the best business deal,
awarding the contract, etc. This is of course extremely
important – but so is the reporting and accountability:
to management, to Congress, to the White House, to the American
taxpayer. The internet technology will make the data transfer
and quality better, as well as improve interagency collaboration
and communication with the outside world. In terms of your
question about the long-term structural openness of procurement,
I’ve recently come on board to USAID and my job here
includes serving as the Agency’s Competition Advocate.
I will be very interested in hearing any ideas you or anyone
else may have with respect to this issue.
Due to the large turnover in the Agency, I am interested
in possible incentive programs that we can implement for
employee retention. Are we looking at student loan repayment
programs for people coming in as IBIs or PMFs, noting that
USAID is in a minority of government agencies not offering
it? Secondly, are we looking at ways for civil servants
to convert more easily to the Foreign Service if they so
choose? It seems like the models work well. After appropriations
have been made, can we maintain the needs versus performance
balance?
Brown: People who come
into the Agency as civil servants are attracted to our mission.
In the case of the Presidential Management Fellows, while
we sometimes very much want these highly capable people
to remain in the Civil Service, we understand that it sometimes
serves the larger needs of the Agency for some of them to
change to the Foreign Service. In fact, we have formalized
a Civil Service to Foreign Service Conversion Program, which
allows civil servants to temporarily fill a Foreign Service
overseas position while retaining the ability to return
to the Civil Service. We’re doing about eight conversions
this fiscal year, more than we usually do. Regarding student
loan repayment programs, as more and more Agencies offer
this important benefit, USAID is at disadvantage in the
recruitment and retention areas. We actually created a plan
to build funding for it into our budget a few years ago,
but it was rejected by OMB. It’s something that we
would like to do, and that we are looking at again very
seriously.
Joe Lombardo: I think your question is
related to what happens when we allocate funds in an operational
year budget. The strategic budgeting model focuses on the
formulation stage of the budget. We’re not constrained
as much by earmarks and directives. When we get an appropriation
bill after its gone through Congress, there are invariably
going to be additional constraints put on the budget itself.
We try to remain as close as we can to our criteria, but
we must keep in mind the statutory requirements. We can’t
possibly anticipate what all of the different earmarks will
be in the planning stage. That is why we often have a disparity
between what we expect and what actually occurs.
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