January 10, 2003
MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES
The President's Expanding Electronic Government reform is focused on better using federal information technology spending to make the Federal Government more productive and responsive to citizens and business. In December 2001, OMB designated the Office of Personnel Management (OPM) as the managing partner to lead the e-Payroll initiative, a cross agency project to consolidate federal civilian payroll processing in light of numerous redundant IT investments. The President's FY 2003 Budget identified an objective of consolidating 22 federal payroll entities into two by Fiscal Year 2004. This memorandum provides an update on the status of the initiative. It also provides guidance for implementation of the e-Payroll initiative consistent with Section 5113 of the Clinger-Cohen Act of 1996 governing Federal IT investments.
Through you and your agency's support for this important initiative, agencies have documented good teamwork that resulted in a business case that will yield a better quality and more cost effective approach to government payroll processing. OMB approved the business case for e-Payroll. By consolidating duplicative payroll modernization efforts, the e-Payroll initiative should provide high quality service while saving over $1.2 billion in future IT investment costs from economies of scale and cost avoidance.
In August 2002, OPM conducted an internal competition for consolidated payroll processing providers. OPM Director Kay Coles James approved the Source Selection Advisory Board (Board) recommendation that two partnerships be formed - one partnership between the Defense Finance and Accounting Service (DoD) and General Services Administration (GSA), and another between the National Finance Center (USDA) and the National Business Center (DOI).
I am pleased to report that OPM and the partnerships have reached agreement on how to proceed with the consolidation. In order to ensure that the e-Payroll Project achieves results in a timely and effective manner, OPM will create and lead a Program Management Office to: consolidate federal Executive Branch civilian payroll providers, migrate agencies to two payroll processing partnerships, standardize federal civilian payroll policy, and to enable the pursuit of competitive sourcing. Executive Branch agencies will proceed with the consolidation in the following manner: