New Federal E-Payroll Program May Save More Than $1 Billion

The Office of Management and Budget (OMB) has directed federal agencies to consolidate from 22 payroll providers to two, and has 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.

“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. The new program will consolidate 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.

To ensure timely and effective results for e-Payroll, the OMB issued 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.