Skip to main content E-Gov logoPowering America’s  future with technology.


Press Releases: Internal Efficiency & Effectiveness

January 15, 2003

New E-Payroll Program Estimated to Save More Than $1 Billion

OMB Directs Agencies to Consolidate from 22 Providers to Two Payroll Partnerships

WASHINGTON D.C. - Today the Office of Management and Budget (OMB) and the U.S. Office of Personnel Management (OPM) announced the selection of two payroll partnerships to consolidate federal payroll systems and save the federal government an estimated $1.2 billion over the next decade. A copy of the memo that issues guidance for agencies on how to proceed with payroll consolidation follows this release.

”Twenty-two payroll providers running 22 different systems is all too typical of government when no one feels accountable. President Bush has told his appointees that he holds us responsible to leave government better run than we found it, and today’s reform responds to his instruction to the benefit of both government workers and taxpayers,“ said OMB Director Mitchell E. Daniels, Jr.

”E-Government is about making the government efficient and responsive to American citizens. The e-Payroll initiative saves taxpayer money through consolidating IT investments and eliminating costs of duplicative payroll systems,“ said Mark Forman, Associate Director of E-Government and Information Technology at OMB.

As the managing partner of the e-Payroll initiative, OPM conducted an internal competition and recommended that two payroll partnerships be formed - one partnership between the Defense and Accounting Service (DoD) and the General Services Administration and the other between the National Finance Center (USDA) and the National Business Center (DOI). DOD and USDA are currently two of the largest government providers of payroll processing.

Currently, the 22 federal payroll providers serve anywhere from 1,250 to 680,000 government employees at an average annual cost of $77 per employee. Last February the President’s budget identified an objective of consolidating the current payroll providers into two by FY 2004. With the selection of two payroll partnerships, the payroll processing will be consolidated into four agency providers for the entire federal government.

Pursuant to Section 5113 of the Clinger-Cohen Act of 1996, OMB evaluates the management practices of Executive agencies including performance and IT investments.

  • To ensure timely and effective results for e-Payroll, the memo issues agencies the following guidance:
    • DoD, GSA, DOI and USDA will proceed with payroll processing migration, consolidation to two processing partnerships, and standardization under OPM’s leadership
    • Agencies who receive payroll processing from DoD, GSA, DOI or USDA will remain with those providers through September 30, 2004.
    • Agencies identified to migrate to a new provider must confirm selection of a payroll processing provider with OPM no later than February 3, 2003.
    • Agencies other than DoD, GSA, DOI and USDA should not spend FY 2003 funds for modernization of payroll processing unless it is an IT investment that will facilitate the agency migration to one of the payroll providers.

E-Government is an integral part of the President’s Management Agenda to make it easier for citizens and businesses to interact with the government, save taxpayer dollars and streamline citizen-to-government transactions. A copy of the President’s E-Government strategy, which includes information on each of the E-Government Initiatives, is available on the OMB Web site at

back to top