GAO-12-342SP: International affairs: 20. Overseas Administrative Services

International affairs > 20. Overseas Administrative Services

U.S. government agencies could lower the administrative cost of their operations overseas by increasing participation in the International Cooperative Administrative Support Services system and by reducing reliance on American officials overseas to provide these services.

Why This Area Is Important

As of fiscal year 2011, the U.S. government employed over 23,500 Americans overseas, including nearly 15,000 with the Department of State (State), at more than 250 diplomatic and consular posts. The operation of these posts requires a wide variety of administrative support services for overseas personnel, such as building maintenance, vehicle operations, and travel services, among others. U.S. government agencies may obtain these services through the International Cooperative Administrative Support Services (ICASS) system, the principal means by which the U.S. government provides and shares the cost of common services. ICASS is an interagency system established in 1997 for distributing the cost of administrative services at overseas posts and is intended to ensure that each agency bears the cost of its overseas presence. The ICASS Executive Board, chaired by State and comprised of senior representatives from participating agencies, sets the strategic vision and policy for ICASS.

State is the principal—and most often the only—administrative service provider at most posts worldwide, and its personnel provide virtually all ICASS services. The cost of ICASS, which totaled over $2 billion in fiscal year 2011, is shared with over 40 participating federal agencies, of which State, the U.S. Agency for International Development (USAID), and the Departments of Agriculture, Commerce, Defense, Health and Human Services, Homeland Security, and Justice are the largest, accounting for nearly 95 percent of all ICASS costs. Participation is mostly voluntary, as agencies may obtain any or all of 31 different services at each overseas post or opt out of ICASS by providing services for themselves or obtaining them from another source.

As GAO reported in September 2004, since the establishment of ICASS, many agencies had not signed up for ICASS services and decided instead to provide similar services for their own staff independently. GAO found that this resulted in duplicative administrative systems that limited ICASS’s ability to achieve economies of scale and deliver administrative services efficiently.

What GAO Found

Since 2004, State and other agencies operating overseas have made limited progress in reducing the cost of administrative support services overseas. Agencies continue to provide many services independently, despite economies of scale available through greater participation in ICASS. Furthermore, State, the primary provider of ICASS services, has not implemented other cost containment measures that would significantly reduce the need to employ American administrative staff overseas.

Opting out of ICASS results in potential duplication of administrative services and increased costs to the U.S. government. GAO’s analysis of ICASS data from 2011 shows that agencies continue to obtain administrative support services outside of ICASS at overseas posts, duplicating services provided through the ICASS system. GAO found that when customer agencies had a choice to obtain services outside of ICASS, they did so about one-third of the time, on average. ICASS participation rates vary widely by agency, but individual agency rates have remained relatively constant since 2005, with the exception of USAID. USAID has experienced a marked increase in participation since it began consolidating its administrative operations with State in 2005.

GAO directly observed duplication of administrative services during site visits to four overseas missions. For example, at each post visited, GAO found that instead of participating in the ICASS-managed motor pool, several agencies operated or maintained their vehicles independently. In addition, several agencies procured their own appliances or shipped their own furniture, declining to participate in ICASS furniture and appliance pools, where this would be done collectively by ICASS staff. According to the financial management officer in Manila, this not only reduces the opportunity to realize lower procurement costs through larger bulk purchases, it entails other hidden costs, including increased labor and wear and tear on the property, as furniture and appliances are removed and reinstalled when agency staff move in and out of embassy-managed residences. He noted that over a 6-month period in 2010, ICASS service providers had to remove and reinstall furniture and appliances at embassy-managed residences 67 times as a result of agency officials being replaced in a home by officials from a different agency. Such additional work would not have been necessary if all agencies subscribed to one furniture and appliance pool, as this property would have remained in the home where it was originally installed, regardless of the occupant.

GAO’s analysis of ICASS cost and workload data confirms that State and other agencies participating in ICASS have realized savings through economies of scale. For all 28 ICASS services GAO analyzed, GAO found that as ICASS workloads increased—for example, through increased participation in ICASS services or growth in staff posted overseas—service provision became more efficient and costs per unit of output decreased (see table below). However, GAO was unable to estimate the specific cost implications for new ICASS customers, as other agencies that had opted out of ICASS could not provide GAO with comparable cost data to those which ICASS collects.

ICASS Participation Rates for 2011 and Potential Savings through Economies of Scale for Selected Administrative Services

Administrative service

Percentage of agencies obtaining service through ICASS

Estimated change in unit cost with 10 percent increase
in workload

Property managementa

70.6%

-9.1%

Furniture, furnishings, and appliance pools

57.5

-8.4

Pouch services

50.2

-7.0

Travel services

70.7

-6.2

Photocopying services

28.0

-6.2

Shipment and customs

66.2

-6.1

Administrative supply

56.5

-5.6

Procurement services

75.4

-5.6

Motor pool services

45.1

-4.8

Source: GAO analysis of ICASS data.

aIncludes inventory management, warehousing, and issuance of office and residential furniture, furnishings, and appliances; does not include real property.

According to the results of GAO’s survey of agency representatives, decisions to opt out of ICASS services are based on various factors, the most frequently cited of which were concerns about cost. GAO’s survey results indicated that some agency representatives who obtained a specific service outside of ICASS believed that doing so was less expensive than obtaining this service through ICASS. However, several respondents indicated that their decisions to opt out of ICASS were not based on any formal cost analyses. Agencies also chose not to participate in ICASS for a variety of other reasons. In some cases, agency representatives said that they could obtain some services from their headquarters more efficiently than through ICASS. In other cases, officials indicated that they would be unable to fulfill their agency’s mission if they relied on ICASS services. For example, some Department of Homeland Security officials said they needed to maintain their own vehicles to have immediate, 24 hours-a-day access for them to conduct investigations. Also, several USAID and Department of Agriculture officials noted that their missions require them to take extended trips to the field that the ICASS motor pool is sometimes not able to accommodate.

Another frequently cited reason for opting out of ICASS was concern about the quality of ICASS services. While results from the annual ICASS survey and GAO’s survey of U.S. government agency representatives show overall satisfaction with the quality of ICASS services generally, some dissatisfaction with ICASS performance still exists, particularly among USAID staff. Officials from USAID and other agencies have indicated that performance problems could affect their ability to achieve their respective mission efficiently and effectively in some cases. In particular, USAID officials have cited the unavailability of ICASS motor pool vehicles for travel to distant project sites as a major impediment to its ability to monitor development programs. While agencies may have valid justifications for not participating in ICASS services, they generally do not document their rationales or formally share them with ICASS service providers or other customer agencies. Nor do State or ICASS systematically request such analyses or document the reasons why agencies choose not to subscribe to an ICASS service.

The voluntary nature of ICASS has permitted the continuation of duplicative services, as agencies often make decisions about participating in ICASS based on their own costs and not the costs to the U.S. government as a whole. GAO recommended in September 2004 that the ICASS Executive Board encourage greater ICASS participation. The board agreed and has taken some steps to reduce duplication of administrative services, particularly between State and USAID. However, according to ICASS officials, experience has shown that board members do not necessarily have the incentive to require their agencies to participate in ICASS. In this context, congressional action may be necessary to increase participation in ICASS.

One of ICASS’s primary goals is to contain or reduce administrative costs. Yet State, as the primary ICASS service provider, has made limited progress in containing costs by reducing the need for American administrative staff overseas. GAO recommended in September 2004 that, in addition to pursuing the elimination of duplicative administrative support structures, the ICASS Executive Board seek to contain ICASS cost by reengineering administrative processes and employing innovative managerial approaches through competitive sourcing, regionalization of services, improved technology, and adoption of other best practices developed by agencies and other posts. GAO further noted that State had undertaken several initiatives to increase the efficiency of ICASS services, primarily by reducing the need for administrative staff overseas.

However, according to ICASS management officials, State has discontinued these efforts without demonstrating significant progress in containing costs. For example, State did not fully implement a pilot effort to streamline services by requiring ICASS service providers and ICASS Councils to rationalize administrative staffing levels. Moreover, State did not execute its plans to relocate some administrative support activities from overseas to the Florida Regional Center in Fort Lauderdale, which State estimated in 2004 would save ICASS customers up to $140 million over 5 years. According to State and ICASS management officials, State discontinued these efforts because it determined that the potential cost savings did not outweigh the administrative burden of fully implementing them. Furthermore, they indicated that State has not undertaken any other comparable streamlining efforts that would lower costs significantly.

State has implemented a wide variety of smaller scale innovations that have increased the efficiency of ICASS service delivery and reduced costs. For example, State established a “post support unit” to provide vouchering services to more than 90 posts worldwide from three central locations. State also implemented a global network energy management program, which has reportedly reduced energy costs by almost $900,000 in its first 10 months. Other than this initiative, State has not identified the specific cost impacts of these innovations. State anticipates future cost savings from innovative approaches to procuring air freight pouch and mail services and information technology.

The ICASS Executive Board has had limited power to effectuate reengineering and innovation in administrative processes, as State maintains control over virtually all of these processes as both the primary provider and customer of ICASS services. Officials from nearly every agency GAO met with expressed concern about State’s failure to contain the cost of the ICASS services it provides. In particular, agency officials in Washington and at the overseas posts GAO visited commonly complained that State employed too many American staff overseas to provide administrative services instead of relying on much less expensive locally employed staff or outsourcing to local firms.[1]

Furthermore, State has not sought to maximize the cost-effectiveness of ICASS services by ensuring that the most appropriate agency deliver these services at all posts. In some instances of duplication GAO observed, GAO noted that USAID appeared to have more expertise in providing a particular service than the existing State ICASS provider, potentially making USAID a reasonable alternate ICASS service provider. For example, in Nairobi, USAID operates a copy center for its own staff inside the embassy compound, offering more specialized services, including digitization, than the ICASS copy center provides.

State’s Foreign Affairs Handbook recognizes that an agency other than State may be better positioned to be the principal provider of specific services for themselves and other agencies at a given post. It allows for the use of these alternate service providers in cases where an agency has a sufficiently large administrative support capability at a location and agrees to provide services to other agencies at that post. However, in 2006, State and USAID, in the interest of simplifying and expediting the consolidation of their administrative operations overseas, adopted a policy effectively restricting the establishment of new alternate ICASS service providers.

As a result, in 2012, only seven posts had such a provider for one or more ICASS service, potentially limiting opportunities for ICASS to achieve greater efficiency and effectiveness. In 2010, Task Force 11, a joint State-USAID group supporting the development of the Quadrennial Diplomacy and Development Review,[2] recommended that posts consider the use of alternate service providers in order to reduce costs. Task Force 11 also proposed that State and USAID establish a Joint Management Board and formulate a consolidation policy that considers the use of alternate providers. However, the Joint Management Board, created in August 2011, has not yet established such a policy.



[1]In 2004, we found that the per capita labor cost of an American direct hire staff was almost eight times higher than that of a local hire.

[2]Department of State and the U.S. Agency for International Development, Leading Through Civilian Power: The First Quadrennial Diplomacy and Development Review (Washington, D.C.: Dec. 15, 2010).

Actions Needed

To contain costs and reduce duplication of administrative support services overseas, GAO recommended in January 2012 that Congress may wish to consider

  • requiring agencies to participate in ICASS services unless they provide a business case to show that they can obtain these services outside of ICASS without increasing overall costs to the U.S. government or that their mission cannot be achieved within ICASS.

GAO also recommended in January 2012 that the Secretary of State should

  • increase the cost-effectiveness of ICASS services by continuing to reengineer administrative processes and seek innovative managerial approaches, including those that would reduce the reliance on American officials overseas to provide these services.

Furthermore, where agencies are able to demonstrate, through a compelling business case, that they can provide a service more efficiently than the existing State ICASS provider without adverse effects on the overall government budget, GAO recommended in January 2012 that the Secretary of State and the Administrator of USAID should

  • allow the creation of new ICASS service providers, in lieu of State, that could provide administrative services to the other agencies at individual posts.

How GAO Conducted Its Work

The information contained in this analysis is based on findings from the products listed in the related GAO products section. GAO analyzed data and documentation on ICASS participation and costs from 2000 through 2011; interviewed cognizant staff at the 8 agencies with the largest overseas presence; and surveyed representatives from these agencies at posts around the world. GAO staff conducted fieldwork in Japan, Kenya, the Philippines, and Rwanda, where they observed administrative services, met with embassy management officials, and conducted focus groups of ICASS customers. GAO performed its work from August 2010 to January 2012.

Agency Comments & GAO Contact

GAO provided a draft of its January 2012 report to State, USAID, and the Departments of Agriculture, Commerce, Defense, Health and Human Services, Homeland Security, and Justice for review and comment. State, USAID, and the Departments of Agriculture, Commerce, and Homeland Security provided written comments. The Departments of Defense, Health and Human Services, and Justice provided technical comments, which were incorporated as appropriate. State and USAID generally agreed with GAO’s recommendations. However, while State agreed that continued efforts are needed to increase the cost-effectiveness of ICASS services, it did not agree that such actions have not been undertaken or that such efforts would substantially reduce the need for the American management staff abroad. GAO added information about State’s other cost-reduction efforts to the draft, noting that they were of a smaller scale than those State had indicated in 2004 that it would undertake. Given the relatively high cost of posting American staff overseas compared to engaging staff locally, GAO believes that even minor modifications in staffing could have significant cost implications and should be thoroughly explored, in close coordination with ICASS-participating agencies.

The Departments of Agriculture, Commerce, and Homeland Security took issue with GAO’s finding that nonparticipation in ICASS services reflects potential duplication of administrative services overseas, and with GAO’s suggestion that Congress consider requiring agencies to participate in ICASS services unless they provide a business case to justify opting out. In particular, these agencies noted that ICASS customers have a variety of valid reasons for not participating in ICASS services and expressed concern that developing business cases to justify nonparticipation would be overly burdensome. GAO believes that, while agencies may have valid reasons for not participating in some ICASS services, the voluntary nature of ICASS has permitted agencies to opt out of the system without conducting rigorous cost analyses. Without such analyses, agencies are making decisions about participating in ICASS based on their own costs—or perceptions of cost—and not necessarily the overall cost to the U.S. government. GAO believes that if conducted in close coordination with the ICASS Service Center and other participating agencies, preparing business cases need not be overly burdensome and could lead to significant, long-term savings for the U.S. government that would justify the additional effort. As part of its routine audit work, GAO will track the extent to which progress has been made to address the identified actions and report to Congress.

For additional information about this area, contact Michael Courts at (202) 512-8980 or courtsm@gao.gov.