Embassy Management:

State Department and Other Agencies Should Further Explore Opportunities to Save Administrative Costs Overseas

GAO-12-317: Published: Jan 31, 2012. Publicly Released: Feb 27, 2012.

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What GAO Found

Agencies continue to provide potentially duplicative administrative services overseas despite slight increases in their participation in ICASS since 2004. When agencies had a choice to opt out of ICASS and provide services independently, they did so about one-third of the time, on average, in 2011. The U.S. Agency for International Development (USAID), however, has reduced duplicative administrative operations by increasing its participation in ICASS markedly since 2005. Agencies have cited several factors for opting out of ICASS, principally concerns about cost, but they do not usually provide any formal rationale to ICASS management and often have not conducted any cost analysis to justify their decisions. Some agencies also indicated that they cannot meet their mission requirements within ICASS. GAO’s analysis of ICASS cost and workload data shows that significant economies of scale can be achieved through greater participation in ICASS. Thus, while agencies may opt out of ICASS because they believe they can obtain less costly services on their own, doing so may actually increase the overall cost to the U.S. government. ICASS management’s ability to convince agencies that participating will save them or the U.S. government money is hampered by the lack of comparative cost data to demonstrate potential savings. In 2004, GAO recommended that the ICASS Executive Board—the highest level policy-making body in the ICASS system composed of customer agency representatives—encourage greater ICASS participation. However, experience has shown that board members do not necessarily have the incentive to require their agencies to participate in ICASS, especially if they are unconvinced that it is in their agencies’ individual financial interest. In this context, Congressional action may be necessary to increase participation and achieve greater economies of scale. Separately, State has made limited progress improving the cost effectiveness of ICASS services in other ways, such as reducing the need for American staff overseas or using other qualified agencies, such as USAID, to provide some ICASS services.

Results from annual ICASS customer satisfaction surveys as well as GAO’s own survey show overall satisfaction with ICASS services. For example, data from the annual ICASS survey indicate that, on a scale from 1 to 5, the average overall score increased from 3.95 in 2005 to 4.03 in 2011. Data from GAO’s survey show that nearly 80 percent of agency representatives participating in ICASS indicated that the quality of services was “good” or better. Nonetheless, some dissatisfaction persists, potentially hampering participation. In some cases, performance problems and service limitations could affect agencies’ ability to achieve their missions efficiently and effectively. For example, USAID officials have cited the unavailability of ICASS motor pool vehicles for travel to distant project sites as a major impediment to achieving their mission. State’s service delivery data suggest that these concerns have merit, as ICASS service providers fulfilled about 70 percent of the requests for non-local transportation in 2011. State has implemented new monitoring tools to improve ICASS managers’ ability to evaluate performance, but they do not address some agencies’ concerns involving billing errors, inequity, and problems with certain critical services.

Why GAO Did This Study

The U.S. government employs more than 23,500 Americans overseas at more than 250 diplomatic and consular posts. These posts require a variety of support services, such as building maintenance and vehicle operations. Agencies may obtain these services, primarily from the Department of State (State), through the International Cooperative Administrative Support Services (ICASS), but participation in most services is voluntary. A 2004 GAO report found that ICASS had not eliminated duplication of support services and that customers generally approved of the quality of ICASS services, but that the level of satisfaction was difficult to quantify.

For this report, GAO assessed (1) how changes in ICASS participation have affected the duplication and cost of support services and (2) customer satisfaction with the quality of ICASS services. GAO surveyed ICASS customers, analyzed ICASS data, interviewed officials from State and seven other agencies, and conducted fieldwork in four countries.

What GAO Recommends

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 is also making recommendations regarding the reengineering of administrative processes, use of non-State ICASS service providers, and improvement of service standards. State and U.S. Agency for International Development generally concurred.

For more information, contact Michael Courts at (202) 512-8980 or courtsm@gao.gov.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: State partially concurred with GAO's recommendation. In response, State has taken several steps to increase the cost-effectiveness of ICASS services, such as the adoption of a common furniture pool policy in 2012. In addition, State has contained the number of American and locally employed service providers at high-threat posts in Afghanistan, Iraq, and Pakistan-where services are more expensive than at other posts within the region-by expanding regional support models to provide administrative services from less expensive posts in the region or in the United States.

    Matter: In order to contain costs and reduce duplication of administrative support services overseas, 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.

Recommendations for Executive Action

  1. Status: Open

    Comments: State partially concurred with this recommendation. It said that reengineering processes and developing innovative solutions are can be undertaken to improve service and cost effectiveness, but it disagreed that such actions have not been undertaken or would substantially reduce the need for American management staff abroad. State provided additional information about its cost reduction efforts, which GAO added to the final report. GAO continues to believe that even minor modifications in staffing could have significant cost implications and should be thoroughly explored, in close coordination with ICASS-participating agencies. GAO continues to monitor State efforts to act on this recommendation.

    Recommendation: 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.

    Agency Affected: Department of State

  2. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, State and USAID released guidance in February 2012 providing direction to posts considering establishing alternate service provider for administrative services. According to this guidance, USAID may provide administrative services in place of State where the model can be demonstrated to achieve savings to the U.S. government and provide superior levels of customer satisfaction with services. Furthermore, in April 2012, State issued a cable to all posts endorsing the creation of alternate service providers where appropriate, consistent with GAO's recommendation.

    Recommendation: 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, the Secretary of State 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.

    Agency Affected: Department of State

  3. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, State and USAID released guidance in February 2012 providing direction to posts considering establishing alternate service provider for administrative services. According to this guidance, USAID may provide administrative services in place of State where the model can be demonstrated to achieve savings to the U.S. government and provide superior levels of customer satisfaction with services. Furthermore, in April 2012, State issued a cable to all posts endorsing the creation of alternate service providers where appropriate, consistent with GAO's recommendation.

    Recommendation: 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, 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.

    Agency Affected: United States Agency for International Development

  4. Status: Open

    Comments: State partially concurred with this recommendation, but said it should be expanded to include the active participation of customer agencies. It said it agreed with the premise of the recommendation, as demonstrated by its ongoing effort to develop the next generation quality management system that is to be deployed in 2012. Part of this effort will include collecting data to evaluate customer satisfaction, recalibrate existing service standards, and develop new standards. GAO modified the recommendation in the final report to emphasize the important of customer agency participation in the development of service standards. We continue to monitor State efforts to respond to the recommendation.

    Recommendation: To help ensure that ICASS provides satisfactory and equitable administrative service, the Secretary of State, in close coordination with ICASS customer agencies, should develop additional uniform service standards and other performance measures that gauge ICASS service providers' progress in resolving major sources of customer dissatisfaction.

    Agency Affected: Department of State

 

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