Business Plan

MEVATEC Corporation MEVATEC Corporation Phone 256-890-80001525 Perimeter Parkway, Ste 500 Fax 256-890-0000Huntsville, AL 35806

Business Plan

Human Resources Outsourcing Initiative

Note:

This business plan reflects the present value of the contract for the Outsourcing of Human Resource services. This number is subject to minor change during contract negotiations between the State and the potential Outsourcing Services Provider. In addition, the residual organization may be adjusted slightly to accommodate agency requests.

September 25, 2001

Business Plan STATE OF FLORIDAHUMAN RESOURCES OUTSOURCING INITIATIVE

Table of Contents

1.0 INTRODUCTION.................................................................................................3

2.0 EXECUTIVE SUMMARY...................................................................................5

2.1 OVERVIEW................................................................................................................52.2 OUTSOURCING..........................................................................................................52.2.1 Privatization vs. Outsourcing..............................................................................62.2.2 Program Objectives and Scope...........................................................................62.2.3 FFMIS History.....................................................................................................72.3 PROGRAM STRUCTURE.............................................................................................82.4 METHODOLOGY........................................................................................................92.5 FINDINGS AND RECOMMENDATIONS......................................................................11

3.0 METHODOLOGY..............................................................................................12

3.1 INITIAL BUSINESS CASE.........................................................................................123.2 DATA COLLECTION................................................................................................123.2.1 Workload Data...................................................................................................123.2.2 Cost Data...........................................................................................................133.3 GOVERNMENT-IN-NATURE ANALYSIS...................................................................143.4 SELECTION OF OUTSOURCING SERVICE PROVIDER................................................143.4.1 Invitation to Negotiate Development.................................................................143.5 SOLICITATION AND EVALUATION..........................................................................143.5.1 Step 1.................................................................................................................153.5.2 Step 2.................................................................................................................153.5.3 Step 3.................................................................................................................153.6 NEGOTIATION AND SELECTION..............................................................................153.7 DEVELOPMENT OF RESIDUAL ORGANIZATION.......................................................163.8 FINALIZATION OF BUSINESS PLAN.........................................................................173.8.1 Award.................................................................................................................18

4.0 FINDINGS............................................................................................................19

4.1 NET CHANGE IN COST POSITION............................................................................194.2 PERFORMANCE IMPROVEMENTS IN SERVICES........................................................214.3 RISK PLANNING AND MITIGATION.........................................................................214.3.1 Core Business....................................................................................................214.3.2 Financial Capability to Perform.......................................................................214.3.3 Default or Poor Performance............................................................................234.3.4 Termination and Phase Out...............................................................................234.3.5 Contract Oversight and Management...............................................................234.3.6 Stability and Soundness of Management Team.................................................234.4 Summary of Benefits of Human Resource Outsourcing.......................................23

September 25, 2001


1.0 INTRODUCTION

The State of Florida continues to be one of the fastest growing states in the nation. State government is the largest single employer in the State of Florida with 172,511 established positions at December 31, 2000. There are seven different personnel systems within the State of Florida, each with its own rules and regulations, collective bargaining agreements, and wage and benefit packages. This initiative affects approximately 135,000 employees serviced from the 30 agencies. Within the State Personnel System, each agency head manages the human resource functions autonomously. In the commercial environment, these functions are generally treated as a shared service that is centrally managed. The decentralization of the state’s present operational structure limits the number of opportunities to realize economies of scale that are inherent in an operation of this size. Commercially, employee self service features have vastly improved the shared services environment for the human resource function, both in terms of reduced cost of the operation and in improved delivery of service to the management and employee workforce. The state’s existing personnel information system, the Cooperative Personnel Employment Subsystem (COPES), is approximately 20 years old and involves significant paper-driven processes, interface challenges, and operates in a proprietary mainframe/limited technology environment (not web accessible, limited employee access to data and limited management tools). Moreover, because of its age, COPES must be replaced. The state should not prioritize a purchase of over $80 million on software, when there are more pressing needs such as education, care of the elderly, public safety, and transportation.

In the commercial sector, it has been reported that some 80% of U.S. companies either fully or partially outsource some percentage of their human resource functions1. The purpose for this outsourcing is threefold:

1. Improve the value of services by driving down cost and improving delivery of services,

2. Leverage the investments and advancements in technology that have been made by commercial outsourcing providers, and

3. Enable workforce and management to focus on core-mission functions.

With these business objectives in mind, the Governor directed the Department of Management Services to research the feasibility of outsourcing the human resource functions for the state. The purpose of this business plan is to document the process, methodologies and findings of the outsourcing initiative. The business plan will be submitted for approval to the Executive Office of the Governor, the President of the Senate, the Speaker of the House of Representatives, the Chairman of the Senate Appropriations Committee, and the Chairman of the House Fiscal Responsibility Council.

The business plan includes:

a) The costs associated with contracting for outsourcing of human resource services;

b) The costs associated with providing those human resource services not outsourced; and,

c) The cost savings anticipated by the state.

1 Cook, Mary F., Outsourcing Human Resources Functions, Strategies for Enhanced HR Services at Lower Cost, American Management Association, 1999

September 25, 2001 3 INTRODUCTION


This business plan substantiates the decision to outsource the human resource service as the preferred alternative for the State of Florida based on the value of improved performance of service levels for human resource transactions at a reduced cost. The state must have a system to produce payroll. A replacement system is necessary in the near future to ensure continuity of service. This business plan sets forth the basis for supporting a contract with a service provider for outsourcing.

Section 2 provides an Executive Summary of the entire initiative. Section 3 provides a detailed summary of the methodology, to include the selection of the outsourcing service provider in the acquisition process and details concerning the development of the residual organization. In addition to Sections 2 and 3, this business plan includes several exhibits showing the detailed breakouts of cost for the transition and the residual human resource organization for each of the state agencies. Section 4 provides a summary of the opportunities for cost savings and the other benefits identified by the project team.

September 25, 2001 4 INTRODUCTION


2.0 EXECUTIVE SUMMARY

2.1 OVERVIEW

This business plan is intended to serve as a decision document and management tool for determining the best solution for providing human resource services for the State of Florida. The purpose of this section is to provide an executive level summary of the program's objectives, scope, structure, methodology, and the findings and recommendations of the human resource outsourcing initiative.

This initiative involves the total performance of the human resources transactional services for 135,000 employees across 30 agencies. It also provides for additional “seats” for those governmental or state entities that may wish to participate, but are not currently users of the COPES system.

The state has historically considered various approaches to address the technology challenges and associated investments of money, manpower, and other resources. Last year, the Governor set in motion the effort to determine the feasibility of outsourcing the state’s human resource services to a service provider. The goal of this effort was to achieve savings through economies of scale and avoid the significant investment required to replace the aging, costly, and increasingly inefficient COPES system. The growing trends in commercial, federal, and state organizations for successful outsourcing projects supported this decision.

2.2 OUTSOURCING

Outsourcing has, and continues to be, a growing practice in both the commercial sector and at all levels of government. While the principal objective initially is cost savings, many organizations that outsource also realize improved level of services. At the federal government level, there has been a significant increase in Office of Management and Budget Circular A-76 actions. The A-76 program has resulted in 43%2 of commercial activities being awarded to commercial outsourcing providers. These managed competitions are forecasted to involve a minimum of 5% of the civil servants associated with providing activities that are available through commercial industry.

Ensuing from the documented successes of the City of Indianapolis, both state and municipal governments have begun to outsource functions. The states of Virginia and Texas have active programs for outsourcing state functions. Virginia’s Commonwealth Competition Council uses a methodology similar to that of the federal government on the Office of Management and Budget Circular A-76 program. This business plan employs a similar methodology for determining the overall change in cost position for the State of Florida.

It should also be noted that outsourcing is not limited to non-core or support processes. American Express, for example, outsources the manufacturing of credit cards. CISCO Systems, a leading provider of Internet routers, fully outsources the manufacturing of the routers to an outside firm. CISCO views itself as a design firm. As such, it concentrates on design and customer interface, leaving the manufacturing to a dedicated outsourcing provider.

2.2.1 Privatization vs. Outsourcing

In the government arena, outsourcing is often confused with privatization. These are vastly different approaches and involve significantly different responsibilities. This initiative is not a

2 Annie Andrews, Assistant Director, OSD Competitive Sourcing & Privatization Office, Office of the Under Secretary of Defense (Installations), The Performance Institute Conference Briefing, 9 May 2001

September 25, 2001 5 EXECUTIVE SUMMARY


privatization of the human resource functions. When a function is privatized, a government entity “gets out of the business” in a particular area, and the privatized function is actually turned over to a private provider. The government entity either liquidates the assets or receives a discount for future services in exchange for title of the assets to the private provider. The private provider is responsible for determining policies and business practices. The government entity that privatized the function becomes a customer of the new provider. This practice has become especially popular at the federal level in the utilities and housing areas. In the municipal arena, refuse collection is a frequent candidate for privatization.

Conversely, when utilizing an outsourcing solution, government retains the responsibility and control of the process outputs while leaving the “how to” in the hands of the outsourcing provider. In addition, all activities that involve the exercise of discretion and obligation of the state will be retained by the state's residual organization.

2.2.2 Program Objectives and Scope

Governor Bush’s overall vision for the initiative is summarized as follows: “In an effort to better serve Floridians and meet the needs of the new millennium, I believe changes should be made to our State Personnel System. We are presently working on a plan to outsource many of the state's human resources functions. I am personally committed to working with the Department of Management Services to ensure the unqualified success of this effort.” The overarching objective of the human resource outsourcing initiative is to obtain a world-class service provider of human resource, payroll, and benefit administration services.

The current scope of services of this initiative impacts 1287.5 Full Time Equivalent positions across 30 agencies. For purposes of this outsourcing initiative, “state agency” was defined to include all state entities and government branches using the COPES system on March 15, 2001 (as provided in Section 49 of Enrolled Senate Bill 2002, FY 2002 Implementing Bill). The basic objectives, or value propositions of the outsourcing of human resource initiative are as follows:

Reduce the overall cost of providing human resource services

Leverage the technology investment made by the private sector in state of the art human resource systems

Provide the state workforce improved human resource services

The state uses COPES3 to provide human resource system information to support each agency’s personnel services. The present COPES system was initially developed to meet the needs of the State Personnel System almost 20 years ago. In addition to the current agencies, additional customers include the 67 county health departments, State Courts and the Justice Administration Commission. The basic scope of transactional services provided by COPES and the human resource staff of 1287.5 Full Time Equivalents are as follows:

Time, Attendance, and Leave

Applicant and Recruitment Services

New Employee and Orientation Processing

Employee Record Management

3 See § 110.116, Fla. Stat. (2000) (formation of the personnel information system); see also § 215.94(5), Fla. Stat., (2000) (defining of COPES functions).



Salary and Payroll Preparation Transactions

Benefits Administration

Flexible Spending Account Management

Retirement Enrollment Assistance

State Mandatory Training (agency specific training not in scope)

Currently, the State Comptroller is responsible for performing payroll production. The Comptroller has elected not to outsource the payroll production function at this time. The Invitation to Negotiate gathered the technical, performance, and pricing information for payroll production as an “option”. However, it is not proposed for outsourcing under this plan. If payroll production in addition to payroll preparation were to be outsourced, then the State University System, Legislature, and Auditor General would be impacted. Although it is believed that the outsourcing of this payroll production function could potentially result in additional cost savings to the state, information on payroll production “as is” costs was not provided to analysts to make this determination.

2.2.3 FFMIS History

The State of Florida passed the Florida Financial Management Information System (FFMIS) Act in 1980. The existing system is a series of statewide financial management subsystems, which include the Legislative Appropriations System/Planning and Budgeting Subsystem (LAS/PBS), the Florida Accounting Information Resource (FLAIR) Subsystem (formerly SAMAS), the State Purchasing Subsystem (SPURS), Cash Management Subsystem and COPES. The State of Florida has been conducting studies over the last seven years for the purpose of identifying user needs along with systems and interface requirements.

The state considered a project to evaluate the feasibility of purchasing integrated financial management software to replace the existing FFMIS statewide subsystems. This initiative was undertaken because existing financial management systems and processes used by the State of Florida to perform payroll, human resources, purchasing, accounting, and budgeting functions did not meet the state’s needs. Almost two decades after the passage of the original legislation, the FFMIS Coordinating Council initiated a program to implement an enterprise-wide Integrated Financial Management System (IFMS).

In 1999, the Florida Legislature passed the Modernization of State Government Financial Management Business Practices Study. The objective was to “develop a business plan study for enhancing or replacing the state’s current financial management subsystems while simultaneously changing the state’s associated financial management business practices.”

The existing FFMIS statewide subsystems are separate stand alone systems operating on different data platforms and locations with concerns including lack of standardization, lack of integration, duplication of data entry, insufficient management level information, insufficient reporting capabilities, lack of a single chart of accounts, complex external interfaces, and high maintenance costs. Agency managers, central management and control organizations such as the Office of Planning and Budgeting, the appropriations committees, end users, and the FFMIS subsystem functional owners are in agreement that the current systems are not meeting their current needs.

The program’s original goal was to replace all of the existing statewide FFMIS subsystems with purchased integrated financial management software. Integrated systems should result in greater efficiency in operations and effectiveness in the information available to staff and decision-makers. The time frame for the complete IFMS project was estimated to be at least five years.



In August of 1999, KPMG began a study completed in February 2000, which was to determine the best approach to replacing the software applications, but with retaining the “in-house” workforce to conduct the services.

Option 1 : Maintain the current systems “As Is” with no major modifications or upgrades.

Option 2 : Enhance current systems by adding new tools and functionality.

Option 3: Develop a new custom integrated information management system.

Option 4 : Implement a Commercial Off The Shelf Enterprise Resource Planning package.

Option 5 : Utilize a “Best of Breed” approach (i.e., a combination of the other options).

KPMG concluded that utilizing the “best of breed” was the desired approach with a project cost of $281 million4 to replace all the subsystems with a single, integrated system. It has been estimated that the COPES portion would be approximately $80 million.

In the fall of 2000, Department of Management Services initiated the human resource outsourcing initiative to determine the feasibility of outsourcing the human resource systems and functions. The project team has assured the FFMIS Board and Council5 that the selected service provider’s system will be compatible with the other subsystems that comprise the Florida Financial Management Information System. Both the Council and Board have agreed that this outsourcing initiative should continue so that the state is able to take advantage of state-of-the-art technology while being cost efficient.

2.3 PROGRAM STRUCTURE

The Governor of Florida selected the Secretary of Department of Management Services (the functional owner of the COPES subsystem) to lead the outsourcing initiative. A project team was established consisting of functional subject matter experts and acquisition personnel, representatives from the affected agencies, and contracted consultants (MEVATEC). A Steering Committee was also established to provide overall project structure and guidance, management oversight, and served as the initiative’s policy-making authority. The members of the Steering Committee are shown in Table 2.3-1. Working groups were formed to ensure agency participation in planning for the residual organization, identifying tasks and human resource functions, inventory of personnel and determining “as is” costs, implementation and transition planning, and communications. Weekly briefings were held to communicate the status of the initiative and permitted the project team to receive valuable feedback.

4 KPMG Business Case Study (February 15, 2000) located at: http://bcs.state.fl.us/ 5

? See § 215.90, Fla. Stat. (2000) (creates the Florida Financial Management Information System Act, which creates the FFMIS Board and Council).


http://bcs.state.fl.us/


HR STEERING COMMITTEE STATE TITLE

Executive Office of the Governor

Kathleen Shanahan Chief of Staff

Agency Representatives

Kim Binkley-Seyer (DBPR) Secretary, Department of Business and Professional Regulation

Tim Moore (FDLE) Commissioner, Florida Department of Law Enforcement

Jim Zingale (Revenue) Executive Director, Department of Revenue

Cabinet Representatives

Terry Rhodes (Agriculture) Asst. Commissioner, Department of Agriculture and Consumer Services

Greg Gay (Insurance) Deputy Commissioner Special Counsel, Department of Insurance

Cynthia Burt (Education) Deputy Commissioner for Technology and Administration, Department of Education

Legislature Staff Representatives of Appropriations CommitteesTable 2.3-1 Steering Committee Members

2.4 METHODOLOGY

The project team considered four alternatives as part of this analysis:

Alternative 1. This alternative represents the present organization continuing to function as it currently operates. This alternative, known as the status quo, or “as is”, represents the present organization continuing to function using COPES. Due to the functional limitations and absence of automated management tools, along with problems and challenges involved in continuing to maintain COPES, this alternative was not considered to be a feasible alternative.

Alternative 2. This alternative includes the present staffing organizational level but employing a new system. This alternative assumes the replacement of the COPES system and uses an estimate for replacement of COPES developed during a previous study.

Alternative 3. This alternative provides for an outsourcing of COPES and the associated human resource functions to an Application Services Provider while utilizing the existing staffing of the state to provide the supporting services. The Application Services Provider solution represents essentially the pure purchase of a “seat” on an application provider’s system.

Alternative 4. This alternative provides for outsourcing of the majority of transactional human resource services to include any requirements for technology, except for the retaining of policy and managerial decisions through a residual organization.

The preferred alternative is alternative 4, which involves the full outsourcing of COPES and transactional human resource functions to an outsourcing provider. Alternatives 1, 2 and 3 were reviewed by management and considered unacceptable for cost and performance reasons. Alternative 2 was also previously attempted by the state in the late 90’s. This initiative was terminated, and as such, was not considered further as a viable alternative. The state understands that the human resource functions are vitally important; however, these administrative functions are not considered core mission related.

Alternative 4 is considered the preferred alternative. As such, this business plan is based on a full outsourcing of the human resource functions to an outsourcing services provider, while retaining certain government in-nature functions to be performed by the state. Alternative 4 is compared to Alternative 2 to determine the net change in the cost position for the state.



The outsourcing team followed an outsourcing methodology that was adapted from the federal government and the states of Virginia and Texas. This six-step approach is set forth in Table 2.4-1.

STEP/ TITLE DESCRIPTION OUTPUTS

1) Data Collection

(Nov 2000)

This step involves development of a Work Breakdown Structure for all activities performed by the state. This data collection includes cost information, quantities, frequencies, and other quantifiable information. Workload, or Full Time Equivalents are allocated to the activities of the work breakdown structure.

Comprehensive listing of state functions with information to support development of Invitation to Negotiate, state residual organization, and activity costing analysis.

Data for the Invitation to Negotiate process.

2) Government- in- Nature Determination

(Nov 2000)

The functions in Step 1 are reviewed to determine which functions can be performed by a service provider and which functions involve policy, management, or discretion and thus should be performed by the state. Unique requirements are also identified.

Government in Nature listing of 264 tasks for use in planning residual organization, scope of services for Invitation to Negotiate, and ensuring statutory compliance.

3) Solicitation of Outsourcing Service Providers

(Jan 2001)

An acquisition approach is selected and solicitation documents developed. A performance-based work statement was developed using the work breakdown structure and other work count elements collected in Step 1.

Performance based approach utilizing an Invitation to Negotiate was selected as acquisition methodology.

4) Selection of Service Providers

(In progress)

Offers received and evaluated. Selected Service Provider

5) Development of Residual Organization

(In progress)

The functions that will be retained in-house are evaluated to determine the most effective means of providing services.

Residual organization and opportunity to re-engineer remaining functions.

6) Finalization of Business Plan

(Sep 2001)

The business plan was updated to document the process and the selection decision.

Business Plan

7) Award

(Not yet awarded. Anticipated

Nov 2001)

Final Negotiation and Award of contract. Commencement of transition of functions to the outsourcing provider and residual organization.

Outsourcing of Transactional Services and residual organization for policy and management.

Table 2.4-1 Human Resources Outsourcing Approach

The cost model used in the business plan consists of an “As Is” cost compared to the total cost of outsourcing. The cost of outsourcing is comprised of the service provider’s contract cost, the residual organization cost, and contract administration. The basic structure for the cost model is shown in Table 2.4-2 below and all dollars are shown in millions:



1 “As Is” Cost & COPES Replacement (7 years) $ 651.6

2 Total Cost of Outsourcing (7 years) $ 478.6

a Potential Service Provider Contract Expense $ 278.6

b. Residual Organization & Transitional Workforce Cost $ 200.0

c. Third Party Independent Contract Monitor* $ TBA

3 Total Potential Cost Savings Anticipated by the state

(Item 1 Less Item 2)

$ 173.0

Years 7

Average Annual Savings

$ 24.7

Note: A cost for the Third Party Independent Contract Monitor is not shown as a part of this exhibit. A cost line number is provided solely for the purpose of aiding in the understanding of the Total Cost of Outsourcing. The cost for this service is anticipated to be relatively insignificant and will not materially affect projected program savings opportunities.

Table 2.4-2 Costing Analysis Model Structure (dollars are shown in millions)

2.5 FINDINGS AND RECOMMENDATIONS

During the acquisition process the state experienced a high level of competition within the outsourcing service provider community. The pre-response conference was attended by 49 firms, and 20 firms responded to the Statement of Qualifications and past performance requirements. A total of 12 firms provided responses to the Invitation to Negotiate. Of those responding, five firms were chosen to provide oral presentations. This number was later reduced to four. Preliminary negotiations were held with these four outsourcing service providers. Based on submission of best and final offers and subject to final contract negotiations, an “intent to award” was announced September 5, 2001 allowing the state to proceed with finalizing the business plan for presentation to the Executive Office of the Governor, the President of the Senate, the Speaker of the House of Representatives, the Chairman of the Senate Appropriations Committee, and the Chairman of the House Fiscal Responsibility Council.

The business plan costing analysis model is based on Convergys’ solution as presented in Table 2.4-2. A potential total cost savings of $173.0 million over the period of performance is estimated when compared to the current “As Is” costs of the state’s human resource services program. In addition, the state will realize a significantly improved level of performance. Further, the enhanced functionality of SAP software and its employee self-service capabilities will also greatly reduce the cycle time associated with various processes.



3.0 METHODOLOGY

3.1 INITIAL BUSINESS CASE

In February 2001, an initial business case was developed to determine the likelihood of the state incurring savings if it pursued the outsourcing of the human resource suite of services. This was a high level analysis of the current “As Is” human resource costs, estimated residual costs, and estimated contractor costs. The initial business case captured the costs of the participating agency human resource operations. This included expenses as of June 30, 2000, and salaries and benefits using January 2001 payroll. The findings concluded that the state could expect sufficient savings and enhanced performance as a result of outsourcing human resource transactional services.

In the months following, all of the data used to support the initial study was updated. This business plan represents a detailed analysis of the current human resource program “As Is” costs and additional information on the residual workforce and transition of functions to the service provider. A comparison of organizational expenses as reported in February 2001 to the organizational expenses reported in this business plan is included in Exhibit 1.

3.2 DATA COLLECTION

The initial step of the program was the collection of an extensive amount of data. Data collected defined the frequency of the tasks and functions performed by human resource staff. In addition, the data collection was used to support the procurement process, define the scope of services, and determine recommended residual staffing needs of the agencies. Expenses, salaries and benefits were used to determine the "as is" costs and ultimately, the estimated potential savings to the state.

All agencies participated in the submission of data calls and expense reporting. Once the data was received, the submitting agencies were contacted to verify reported information or obtain missing information. Upon obtaining all data, the agencies were sent a consolidated reconciliation and asked to validate the compiled data in final form. Additionally, specific data calls for COPES, Division of State Group Insurance, Bureau of State Payrolls, and Division of Retirement were requested for data unique to these organizations. Although requested, data was not made available to analysts for purposes of determining “As Is” costs for payroll production functions. Therefore, potential cost savings for the payroll production function is not included in this business plan.

The data was organized utilizing a work breakdown structure. The work breakdown structure is a hierarchical structure of the process and activities performed by the current workforce. This work breakdown structure served as the foundation for the Statement of Objectives and for the development of the residual organization.

3.2.1 Workload Data

Workload data was collected from each agency, COPES, Division of State Group Insurance, Bureau of State Payrolls and Division of Retirement. Workload estimates were categorized and presented by functional area. This data served as the primary work counts of the Statement of Objectives within the Invitation to Negotiate presenting frequency and/or duration of tasks as applicable. The individual agency work counts were totaled for each data element. The agency-specific workload data was presented as Exhibit 1.3 of the Invitation to Negotiate.

September 25, 2001 12 METHODOLOGY


3.2.2 Cost Data

In July 2001, a follow-up data call went out to the agencies requesting an update to their personnel cost and expense data from initial reports. Expense data was collected for fiscal years ending June 30, 1999, 2000, and 2001. The purpose of the additional data call was to ensure that the first set of expense data collected for the fiscal year ending June 30, 2000 represented “typical” expenditures for the expense categories collected. By reviewing three years of actual data, analysts were able to determine if the initial expense reports included payments best described as routine, out of the ordinary, or were for non-recurring costs. The data review also provided the opportunity for assessment of agency expense data through partial trend analysis in developing business plan expense values that reasonably indicate actual and future costs.

All of the data call inputs were reviewed with agency representatives to clarify categories of expenses reported. The clarifications provided the team with a clear understanding of the source of the financial documentation and the methodology used to report the updated cost figures. These review sessions resulted in the development of agency cost profiles and were validated as accurate representations of actual expenses incurred.

3.2.2.1 Personnel

Actual personnel salaries and benefits were captured from COPES data as of April 2000 for the updated position data call that represented the current staffing of 1465.5 positions. The agency specific training and payroll accounting positions (178 Full Time Equivalents) were not within scope of the project (they represent human resource support functions only); therefore, the in-scope Full Time Equivalent positions of 1287.5 are represented in the cost details in this business plan.

3.2.2.2 Human Resource Operating Expenses

Expense data was captured from individual agencies to understand and estimate the state’s cost to provide human resource services for its agencies and employees. Cost data provided by agencies included actual costs that were identified through the state’s financial reporting systems, as well as in some cases the estimated values that were developed by the agency through allocation or pro-ration as the expense related to their human resource workforce and functions. The expense items fall into two general categories and are described below:

3.2.2.2.1 Human Resource Workforce Expenses

These expense items included costs directly attributable to providing human resource services to the state’s workforce: facility, equipment, maintenance, materials and supplies, telephone, computer system, travel, consulting, contracts for services, and other expenses.

3.2.2.2.2 Human Resource Functional Expenses

These expense items included: postage, archiving/data storage, printing, training, security, drug testing, job advertising, and employee assistance program counseling. These expense items include agency-wide costs that were identified or estimated in support of the agency’s organization and employee workforce as related to the specific human resource function. As an example, functional costs for recruiting and selection (such as job advertising, background checks, fingerprinting, drug testing and security badges) were directly related to the number of vacancies and hiring actions, rather than the number of human resource personnel within an agency.



3.3 GOVERNMENT-IN-NATURE ANALYSIS

Upon completing the data collection, the project team conducted an analysis of the HR functions and tasks to determine those that are "government in nature" and those which could be outsourced to a service provider. Government in nature functions are activities that are statutorily required to be performed by a state entity, involve policy or management decisions, or involve the discretion of an agency head. The non-government in nature activities (primarily transactional in nature) were subsequently used as the foundation of the Statement of Objectives for the Invitation to Negotiate. The government in nature activities became the foundation for the residual human resource organization. The residual organization is discussed further in Section 3.7 titled “Development ofResidual Organization”.

3.4 SELECTION OF OUTSOURCING SERVICE PROVIDER

Best value acquisitions allow the state to consider award to other than the lowest priced outsourcing service provider based upon a tradeoff determination. A cost/technical tradeoff permits tradeoffs between cost and non-cost factors, which in turn allows the state to accept other than the lowest priced response. As such, the Secretary must conclude that the perceived benefits of the higher priced response merits the additional cost. A best value acquisition was determined to be in the best interests of the state, and a performance-based Statement of Objectives was developed.

The performance-based Statement of Objectives focused on results rather than methods of performance. It described “what” the state requirements consisted of rather than “how” performance would be accomplished thus allowing potential service providers the ability to propose efficient and innovative solutions to the requirements. The Statement of Objectives provided service definition and performance standards for timeliness and/or quality. Service definition outlined the functional tasks required and coupled with workload allowed the potential service providers to take responsibility for completely analyzing the information and preparing a response that reflected a thorough understanding of the requirements, as well as outlining a logical work plan to accomplish performance. Performance standards provided the state with a measurable means of assessing the service provider’s performance.

3.4.1 Invitation to Negotiate Development

During the period January through March 2001, Department of Management Services analyzed the Human Resources requirements necessary for successful service provider performance, gathered workload (see data collection above), developed the Statement of Objectives, and prepared and released the Invitation to Negotiate.

3.5 SOLICITATION AND EVALUATION

The objective of the Invitation to Negotiate was to define format and content requirements in order that a uniform basis for evaluation of the responses was achieved. In a performance-based acquisition it is essential that clear, concise responses be received which address all evaluation criteria enabling an evaluation that results in responsive proposals reaching the negotiation phase.

In March 2001, the Invitation to Negotiate was released with the necessary provisions, response format, evaluation criteria, and Statement of Objectives to ensure a uniform evaluation. A Pre-response conference was held during April 2001 and was attended by 49 potential service providers. The purpose of the conference was to ensure potential service providers understood the performance-based acquisition process/documents.



To ensure successful evaluation of responses and selection of a competent outsourcing service provider, the state selected a three-step evaluation approach. The three-step evaluation approach is outlined as follows:

3.5.1 Step 1

An analysis and rating of the potential service provider’s written Statement of Qualification was conducted. The Statement of Qualification included the potential service provider’s specialized experience, past performance and the extent of performance for both prime and subcontract firms.

Upon conclusion of Step I evaluations, all potential service providers were advised, in writing, whether or not they were considered to be a viable competitor for the project based upon strengths, weaknesses, and deficiencies noted in their Statement of Qualification response. All potential service providers were informed that notwithstanding the advice provided by the state in response to their Step I responses; they could participate in Steps II and III of the evaluation process. Upon conclusion of the Step I evaluations, potential service providers were allowed to submit financial information, technical and management, and Cost responses in Step II.

The purpose of Step I was to allow evaluation of past performance as well as provide potential service providers with an opportunity to discontinue allotting resources to an effort where it was unlikely that the potential service provider would be successful (i.e., voluntary removal from the process resulting in reduced state exposure to protest actions).

3.5.2 Step 2

This step consisted of potential service providers submitting a financial information response, a technical and management response, and a cost response. Of the 20 Statement of Qualification respondents, 12 submitted written responses for Step II.

3.5.3 Step 3

Written responses were submitted and evaluated. Upon completion of the evaluation a competitive range was established. The competitive range allowed for five potential service providers to provide oral presentations as a further clarification to their written technical and management response. Upon conclusion of the oral presentations, state evaluators adjusted their evaluation scores and provided a recommendation for negotiations.

3.6 NEGOTIATION AND SELECTION

During July 2001, the state entered into preliminary negotiations with four potential service providers. The first meeting consisted of clarification discussions on potential service provider solutions and requirement understanding. Upon conclusion of the clarification discussions, the state posted a request for clarification to ensure proposed costs included the clarification meeting agreement.

Upon conclusion of preliminary negotiations, a Request for Best and Final Offer was posted on August 23, 2001. Each best and final offer submitted by the potential service providers was evaluated. Results of the evaluation were presented to the Steering Committee on September 5, 2001 to include a recommendation that the apparent Best Value service provider was Convergys. The Steering Committee voted on and passed a motion to enter into final negotiations (intent to award) with Convergys without severing ties to the remaining potential service providers in the event it becomes necessary to enter detailed negotiations. In the event the State of Florida and Convergys are unable



to reach a contractual agreement, the state will proceed to negotiate a contract with the next highest scored potential service provider. This will be continued until a contract is negotiated and finalized.

BEST AND FINAL OFFERS (WITHOUT PAYROLL PRODUCTION)

5 Year Annual 7 Year Annual

Convergys* $205,000,000.00 $41,000,000.00 $278,600,000.00 $39,800,000.00

CSC $277,500,000.00 $55,500,000.00 $381,500,000.00 $54,500,000.00

EPIX $345,017,059.00 $69,003,411.80 $493,300,665.00 $70,471,523.57

IBM $219,098,154.00 $43,819, 630.80 $299,347,540.00 $42,763,934.29

*In addition to being the lowest proposed cost, the proposed technical and management solution from Convergys was ranked #1 by the evaluation team.

Table 3.6-1 Best and Final Offers (listed in alphabetical order by potential service provider)

3.7 DEVELOPMENT OF RESIDUAL ORGANIZATION

To determine the needs of a residual government organization, a residual working group was formed to validate government in nature activities and identify activities or processes for consolidation, improvements or full reengineering. The group met two days a week from April through July in a workshop environment and identified the specific needs within each agency. The project team employed an activity-based approach to further refine the “As Is” costs and the “To Be” residual organization personnel and costs. The approach featured the following steps:

1) Reviewed/Refined the activity lists with the working group

2) Discussed the cost drivers, or causal factors, for the activities

3) Accumulated process charts for each of the main roles for government in nature

4) Identified areas for consolidation and process improvements

5) Conducted a new data call and updated expense information for the last three years

6) Updated the personnel resource information

7) Developed a revised “As Is” human resource costs using an activity based costing methodology and model

8) Developed a residual organization costs using activity based management methodology

A target residual of 15% was established for each agency. This 15% target was based on historical data obtained from the Department of Defense. Over the past 20 years, the Department of Defense has outsourced a large number of functions. These initiatives are tracked by several key metrics to determine the value of each outsourcing program. Each agency was subsequently given the opportunity to justify an increase to the 15% targeted residual based on agency specific need. The total “requested residual” obtained from each agency represented approximately 32% of the present human resource staffing levels (1187 Full Time Equivalent human resources positions). This requested residual was used as the point of departure for development of the “recommended residual” organization. Analysts reviewed justifications given for each agency and recommended additional positions above the targeted 15% goal for specialized recruitment, reorganizations, and unique needs.



The costs for the “recommended residual” organization and the transitional workforce are used in years 1 through 3 of the costing analysis. The project team determined that a 26% “recommended residual” organization (316 Full Time Equivalents) would ensure that agency unique needs would be accommodated, and would also significantly reduce risk to the successful transition and implementation of the potential provider’s solution. Information received from the agencies during the “requested residual” staffing level exercise is sensitive in nature. The project team recommends that before disclosure is made of the agency responses, affected employees should be contacted with opportunities to transition to other positions in state government as vacancies occur, or be offered employment opportunities for positions for which they may qualify with the selected service provider.

The manner in which the residual organization performs its duties is heavily dependent on the services offered by the potential outsourcing provider and the functionality of the proposed system. Due to the sensitivities and restrictions involved in the acquisition process, the residual working group was unable to have a demonstration of the potential provider's solution. As a result, agencies were conservative in their residual estimates without knowing actual system capabilities and services offered to support their needs. Upon successful transition to a fully implemented solution, (years 4 through 7), the project team recommends a “sustained residual” of no more than 15% of the existing human resource staffing levels (179 Full Time Equivalents). As a part of the implementation and transition “roll out” phase, the residual working group and agency personnel officers will be involved in the blueprinting of the recommended service provider’s solution to ensure that unique agency needs are addressed and should re-assess residual staffing needs.

This residual organization does not include the positions for payroll accounting and agency unique training since these functions are currently out of the scope of services for this project.

3.8 FINALIZATION OF BUSINESS PLAN

In order to determine the potential savings available to the state as a result of the decision to outsource the human resource functions, a detailed analysis of costs was developed to determine resources required to successfully transition the “As Is” organization to the “recommended residual” organization, resulting in a fully implemented solution. The length of the transition period is based on the "functional roll out" plan that has been proposed by the recommended service provider.

The project team prepared a variety of cost exhibits and breakouts to support the Office of Planning and Budget's (OPB) preparation of the budget for the fiscal years covered during the length of the proposed contract. These supplemental reports and appendices are as follows:

1. Comparison of February 2001 Business Case to September 2001 Business Plan (Exhibit 1)2. "As Is" HR Organization Expense Summary (Exhibit 2)3. “Recommended Residual” HR Expense Summary (Exhibit 3) 6

4. Human Resource Full Time Equivalent Comparison by Agency (Exhibit 4)

3.8.1 Award

Convergys’ proposal was ranked as both the best technical response and the lowest cost solution. As such, they represent the best value solution for the state and have been selected (intent to award) as the potential outsourcing service provider. After reviewing various periods of performance

6 Due to the sensitive nature of the detailed position information contained in the planned residual organization for each agency, ONLY the summary cost and position values are included in Exhibit 2 in this business plan. The state should make every effort to protect this information until transition plans are completed for each and every employee affected and a contract is finalized for a selected service provider.



options (five or seven year terms), the project team recommends a seven year period of performance. Award to the service provider is contingent upon final contract negotiations and approval of appropriate state authorities.



4.0 FINDINGS

4.1 NET CHANGE IN COST POSITION

The State of Florida can expect that significant budgetary savings can be achieved through successful implementation of an outsourcing solution for human resource services. This analysis indicates that this initiative would provide agencies and the state the opportunity to achieve approximately $173.1 million dollars in savings over the seven years of the potential contract for an average annual savings of $24.7 million. Summary detailed information is provided Table 4.1-1.

September 25, 2001 FINDINGS19


September 25, 2001 20 FINDINGS

Table 4.1-1 Estimated Potential Program Savings

FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009* Total

"As-Is" HR ProgramCurrent "As-Is" Program Costs (1287.5 FTE)

Current FTE Salaries & Benefits 55.6$ 57.0$ 58.4$ 59.9$ 61.4$ 62.9$ 64.5$ 21.5$ 441.1$ Current Expenses 17.8$ 17.8$ 17.8$ 17.8$ 17.8$ 17.8$ 17.8$ 5.9$ 130.5$ Total "As-Is" Program Costs 73.4$ 74.8$ 76.2$ 77.7$ 79.2$ 80.7$ 82.3$ 27.4$ 571.6$

COPES Replacement / Upgrade 80.0$ 80.0$ Total "As-Is" and COPES Costs Annual 153.4$ 74.8$ 76.2$ 77.7$ 79.2$ 80.7$ 82.3$ 27.4$ 651.6$

Cumulative 153.4$ 228.2$ 304.4$ 382.1$ 461.3$ 542.0$ 624.2$ 651.6$

HR Outsourcing Program Business PlanHR Services Potential Provider Contract 14.0$ 41.8$ 41.8$ 41.8$ 41.8$ 41.8$ 41.8$ 13.8$ 278.6$

Transition Workforce by Phase (922 FTE) 44.3$ 34.6$ 78.9$ Vacancies (200 FTE) (9.3)$ (9.3)$ Benefits (Group 1 - 112 FTE) (1.9)$ (1.9)$ General HR (Group 2 - 440.5 FTE) (20.8)$ (20.8)$ Recruitment & Selection (Group 3 - 169.5 FTE) (7.4)$ (7.4)$

Subtotal Transition Workforce Costs 33.1$ 6.4$ 39.5$

Residual FTE & Expenses (316 FTE) 20.7$ 21.2$ 21.7$ 22.2$ 22.7$ 23.2$ 23.7$ 7.9$ 163.3$

Subtotal State Workforce (1238 FTE) 53.8$ 27.6$ 21.7$ 22.2$ 22.7$ 23.2$ 23.7$ 7.9$ 202.8$ Credit for Abolished HR Positions (49.5 FTE) (2.1)$ (2.1)$ (2.1)$ (2.1)$ (2.1)$ (2.1)$ (2.1)$ (2.1)$ (16.8)$ Functional Expenses: Recruitment/Selection + Expenses 1.9$ 1.0$ 2.9$ Systems Expense: COPES and TimeDirect 5.5$ 5.5$ 11.0$

Final Adjusted Transition Workforce + Other (1287.5 FTE) 59.1$ 32.0$ 19.6$ 20.1$ 20.6$ 21.1$ 21.6$ 5.9$ 200.0$

Total HR Services Provider and State Workforce 73.1$ 73.8$ 61.4$ 61.9$ 62.4$ 62.9$ 63.4$ 19.7$ 478.6$

Potential Cost Savings Relative Annual 0.3$ 1.0$ 14.8$ 15.8$ 16.8$ 17.8$ 18.9$ 7.7$ 93.1$ to "As-Is" HR Program Cumulative 0.3$ 1.3$ 16.2$ 31.9$ 48.7$ 66.5$ 85.4$ 93.1$

Potential Cost Savings Relative to Annual 80.3$ 1.0$ 14.8$ 15.8$ 16.8$ 17.8$ 18.9$ 7.7$ 173.1$ "As-Is" and COPES Replacement Cumulative 80.3$ 81.3$ 96.2$ 111.9$ 128.7$ 146.5$ 165.4$ 173.1$

Potential Savings 173.1$ Program Years 7

Average Annual Savings 24.7$

Note 1: Current As-Is and Residual Estimates do not include HR Support Personnel - Payroll Accounting and Agency Specific Training (178 FTE).Note 2: Estimated Residual/Savings for Attorney Fees are not included due to variable causal factors.Note 3: FY2009 includes the pro-rated values for four months of operations to complete the contract period of performance (84 Months).Note 4: All Salaries and Benefits costs include 2.5% annual escalation.

HR Outsourcing InitiativeEstimated Potential Program Savings

(Dollars In Millions)


4.2 PERFORMANCE IMPROVEMENTS IN SERVICES

Based on the service provider's total solution (technology and services), it is expected that efficiencies and process improvements will be made in providing human resource services in the following areas:

Cost per payroll transactions

Error rate per payroll preparation transaction

Cost per hiring action

Cost per employee for benefits administration and retirement enrollment

Time required to advertise and fill vacancies

Receipt, screening and qualification of applications

Time required to perform employee appraisals/evaluations, tabulation, and obtain peer input review

Work process improvements and routing of information for approval and review

Overall cost per employee for human resource services

It is recommended that subsequent to full implementation a cost comparison be performed of these efficiency measures to current human resource performance indicators and baseline measures.

4.3 RISK PLANNING AND MITIGATION

There are risks inherent in any initiative of this size and complexity. The Project team has identified potential program risks and has taken steps to mitigate or minimize these potential risk areas. The potential risk areas and the DMS steps are discussed further in this section.

4.3.1 Core Business

The project team believed that the outsourced human resource function should be a core business area of the service provider. This would ensure that the resulting contract: a) received high level attention within the executive management team of the outsourcing service provider, b) would likely benefit from a continued investment in technology that the service provider would have to make in order to remain competitive in the human resources business, and c) would greatly reduce the performance risk. This function represents a core business for Convergys.

4.3.2 Financial Capability to Perform

A standard rigorous review was performed from financial data supplied by Convergys. The company financial data was taken through typical banking industry analyses utilizing various ratios to indicate any strengths or weaknesses of Convergys from a financial standpoint. Past performance information was obtained from its clients to determine the quality of service, experience and professionalism received from Convergys.

Financial overview was conducted from Convergys financial statements for the past 4 complete years. Ratios were analyzed to determine Convergys financial performance:

Cash Flow capabilities



Shareholder equity and return

Other important financial ratios

Past performance data with customers

Based upon Convergys’ financial performance during the past four years, the company appears to be strong and an industry leader in providing quality human resource services to customers who have outsourced these functions. Figure 4.3.2 provides three of the major financial performance indicators of Convergys revealed in this analysis.

Figure 4.3.2 Convergys’ Financial Analysis Graphs

Past performance was conducted by surveying and collecting information from Convergys customers relating to the type of services provided, blueprinting techniques, system availability and reliance, quality of customer support, and overall reasons for choosing Convergys. This information was obtained from key personnel from each customer who was directly involved with each step of the outsourcing initiative. The surveys were compiled and reviewed to identify any areas where Convergys may not be meeting expectations. After a careful and analytical review of the surveys, Convergys


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seems to be providing a high degree of confidence in its expertise in IT knowledge, customer support, blueprinting process, system functionality and reliability, and is retaining an excellent relationship with its customers.

4.3.3 Default or Poor Performance

The state contract with Convergys includes provisions for both default and poor performance. To ensure performance, the contract requires a performance bond. To mitigate a default situation, a liquidated damages provision has been included requiring payment of damages to the state. The Invitation to Negotiate also stated that the resulting contract will contain a schedule for incentives and penalties relative to the outsourcing service provider exceeding or failing to meet agreed to metrics. During the blueprinting phase of transition, key metrics will be identified. These will be incorporated into the resulting contract upon completion of the blueprinting phase of transition.

4.3.4 Termination and Phase Out

In the event that the state elects to terminate the contract, a provision has been included in the contract that provides for termination and phase-out of Convergys to either a new outsourcing provider or resumption of performance of the human resource function by the state itself. The phase out plan includes portability of the system and data to facilitate continuous operations.

4.3.5 Contract Oversight and Management

Key to a successful contractual relationship is monitoring the service provider's performance on a continuous basis. The state will obtain the services of an independent third party contract monitor. This monitor will generally oversee performance, but will also be responsible for identifying performance issues, analyzing options, and facilitating solution implementation. The cost for these services is not anticipated to be materially significant and will not affect the projected program savings opportunities.

4.3.6 Stability and Soundness of Management Team

The project team is in the process of verifying the background of all of Convergys’ principals and the key personnel that will support this contract. This background check will be completed prior to signature of the contract. Any change in the key personnel structure of the contract will require a subsequent verification by the state prior to supporting the contract.

4.4 SUMMARY OF BENEFITS OF HUMAN RESOURCES OUTSOURCING

This project provides significant benefits for the state's workforce, management and staff, and the citizens of the State of Florida. Managers and staff receive improved performance in delivery of human resource services. The citizens and government of the State of Florida realize a greatly reduced cost of performance, as well as the avoidance of the cost for upgrading the current COPES system. Both groups will benefit in the delivery of service through the use of a world-class service provider, Convergys. A summary of potential benefits identified by the project team are identified in Table 4.4-1



BENEFIT AREA BENEFIT

Management Related

Allow agencies to focus on core business and mission Access to state-of-the-art technology – improve services for employees and

supervisors Leverage technology and human resource best practices (case management,

cost accounting, analysis, data collection) Automation of routine transactions – uniform business rules, routing

shortens time needed for approval Redeployment of personnel to higher talent uses – no longer just processing

paper, focus on management and policy Managers will have time for “high touch”, coaching, mentoring, and

performance evaluation, efficiency, and productivityCustomer or Employee Related

Better service and management tools for our employees and managers Improve applicant services: one application – multiple vacancies Improve ability to communicate and provide information – links to other

sites, programs, resources “Real time” answers to status, approvals, benefit eligibility; 24/7 access and

action Assist in making the transformation to an e-culture, enable employees to

learn on their own and access their own information – self-reliance and ability to make better decisions

State Portability of the information and data system – potential provider solution will use SAP, R3 software and can be easily integrated with proposed IFMS subsystems

Reduce expenses - $73 million annual “As Is” costs, 1287.5 employees Potentially generate an estimated $15-$20 million each year in savings Cost avoidance – estimated $65 - $90 million to replace COPES Redirect savings to accomplish other priorities (children, education, care of

the elderly, transportation, public safety and environment) Partnership with industry for enterprise solution Redefinition of the human resource function itself – administrative experts

become strategic partnersWorld-Class Provider – Convergys Corporation

A member of the S&P 500 and the Forbes’ Platinum 400 is the global leader in integrated billing and customer care services provided through outsourcing or licensing. Customers include top companies in telecommunications, Internet, cable and broadband services, technology, financial services, and other industries in more than 30 countries.

Convergys™ employs over 45,000 people in 49 customer contact centers and in data centers and other offices in the United States, Canada, Latin America, Israel, and Europe. Convergys is on the net at www.convergys.com. Convergys is headquartered in Cincinnati, Ohio.

In Florida, Convergys employs more than 7,500 people in: Jacksonville, Orlando, Ft. Lauderdale, and Ft. Pierce. A service center will be opened in Tallahassee to service the state’s employees.

Table 4.4-1 Benefits of Outsourcing Summary


http://www.convergys.com/


September 25, 2001 EXHIBIT 1

Net DifferenceSalaries and Benefits Salaries and Benefits

HR Personnel (1299) 56,353,301$ HR Personnel (1287.5)** 55,565,821$ (787,480)$ HR Support Personnel (85)* 2,881,194$ HR Support Personnel (178)*** 8,253,122$ 5,371,928$ Total Personnel Cost (1384) 59,234,495$ Total Personnel Cost (1465.5) 63,818,943$ 4,584,448$

Expenses ExpensesMaterials & Supply 3,638,897$ Materials and Supply 666,103$ (2,972,794)$ Facilities 1,314,007$ Facilities 4,204,501$ 2,890,494$ Equipment 1,392,646$ Equipment 263,680$ (1,128,966)$

Maintenance 221,530$ 221,530$ Telephone 510,402$ Telephone 630,125$ 119,723$ Postage 551,128$ Postage 451,961$ (99,167)$ Security 206,753$ Security 47,530$ (159,223)$ Archiving/Data Storage 23,260$ Archiving/Data Storage 44,871$ 21,611$ Printing 565,202$ Printing 538,103$ (27,099)$ Computer System Expense 6,834,034$ Computer System Expense 7,159,995$ 325,961$ Training 21,055$ Training 381,855$ 360,800$ Travel 709,903$ Travel 475,341$ (234,562)$ Attorney Fees 514,912$ Attorney Fees*** 3,806,446$ 3,291,534$ Counseling 316,226$ Counseling 989,672$ 673,446$

Job Advertising 433,190$ 433,190$ Drug Testing 473,908$ 473,908$ Consulting 77,584$ 77,584$ Contracts for Services 76,554$ 76,554$

Other 999,131$ Other 647,653$ (351,478)$ Casualty Insurance 854,724$ Casualty Insurance***** N/A (854,724)$ Total Expenses 18,452,280$ Total Expenses 21,590,602$ 3,138,322$

Total 77,686,775$ Total 85,409,545$ 7,722,770$ *HR Support Personnel including Payroll Accounting and Agency Specific Training within the 1/17/01 HR Personnel Inventory.**Abolished HR Personnel Positions (49.5) included in the 1/17/01 HR Personnel Inventory with a realized savings of $2,118,212.***HR Support Personnel including Payroll Accounting Positions and Agency Specific Training Positions within the 4/30/01HR Personnel Inventory.****Attorney Fees are not included in anticipated savings forecasts or residual and As-Is cost estimates.*****Casualty Insurance was eliminated from the July HR Expenses Data Call.

HR Outsourcing InitiativeBusiness Plan Expenses Data Call Comparison for "As-Is"

Feb 01 Business Plan Sep 01 Business Plan



Salaries and BenefitsHR Personnel (1287.5) 55,565,821$ Total Business Plan Personnel (1287.5) 55,565,821$

Operational Variable Expense ItemsMaterials and Supply 666,103$ Equipment 263,680$

(Copiers, Printers, Fax Machines,Scanners, Imaging, and Other)

Telephone 630,125$ Postage 451,961$

(Postage, Express Mail,and Other Delivery Services)

Archiving/Data Storage 44,871$ Printing 538,103$ Computer System Expense 1,626,615$

(LAN Connectivity and ComputerServices and Storage)

Training 382,265$ Travel 475,341$ Consulting 77,584$ Contracts for Services 76,554$ Other 647,653$ Total Operational Variable Expense Items 5,880,854$

Operational Fixed Expense ItemsFacilities

(Facilities, Utilities, Electricity, HVAC, 4,204,501$ Janitorial Services, and Other)

Maintenance 221,530$ (Facility, Copiers, Printers, Fax Machines, Scanners, Imaging, Impromptu, and Other)

Total Operational Fixed Expense Items 4,426,031$ Functional Expense Items

Recruitment & SelectionSecurity 47,530$

(Background Checks, Fingerprinting,and Security Badges)

Drug Testing 473,908$ Job Advertising 433,190$

(Specialty and Non-Specialty Job Advertising)Total Recruitment & Selection Expense Items 954,627$

Employee Assistance Program CounselingEAP Counseling 989,672$ Total Employee Assistance Program Expense Items 989,672$

Systems Related Expense ItemsCOPES 5,396,485$ TimeDirect 136,895$ Total Systems Related Expense Items 5,533,380$

Total Business Plan "As-Is" HR Organization Expenses 73,350,385$ NOTE 1: HR Personnel Cost includes abolished HR Personnel positions includedin the 1/17/01 HR Personnel Inventory with a realized savings of $2,118,212.NOTE 2: Attorney Fees ($3,806,446) are not included in the Business Plan.

HR Outsourcing Initiative"As-Is" HR Organization Expense Characterization



Salaries and BenefitsHR Personnel (316) 18,160,586$ Total Business Plan Personnel (316) 18,160,586$

Operational Variable Expense ItemsMaterials and Supply 167,875$ Equipment 37,716$

(Copiers, Printers, Fax Machines,Scanners, Imaging, and Other)

Telephone 142,774$ Postage 68,351$

(Postage, Express Mail,and Other Delivery Services)

Archiving/Data Storage 14,530$ Printing 55,833$ Computer System Expense 143,822$

(LAN Connectivity and ComputerServices and Storage)

Training -$ Travel 304,042$ Consulting 23,508$ Contracts for Services 13,761$ Other 101,777$ Total Operational Variable Expense Items 1,073,989$

Operational Fixed Expense ItemsFacilities 1,087,138$

(Facilities, Utilities, Electricity, HVAC,Janitorial Services, and Other)

Maintenance 62,466$ (Facility, Copiers, Printers, Fax Machines, Scanners, Imaging, Impromptu, and Other)

Total Operational Fixed Expense Items 1,149,605$ Functional Expense Items

Recruitment & SelectionSecurity -$

(Background Checks, Fingerprinting,and Security Badges)

Drug Testing -$ Job Advertising 351,187$

(Specialty Job Advertising)Total Recruitment & Selection Expense Items 351,187$

Employee Assistance Program CounselingEAP Counseling -$ Total Employee Assistance Program Expense Items -$

Systems Related Expense ItemsCOPES -$ TimeDirect -$ Total Systems Related Expense Items -$

Total Business Plan "As-Is" HR Organization Expenses 20,735,366$ NOTE 1: Attorney Fees ($3,806,446) are not included in the Business Plan.NOTE 2: Does not include HR Support Personnel (Payroll Accounting and AgencySpecific Training) positions included in the 4/30/01 inventory.

HR Outsourcing InitiativeExpense Characterization

"Recommended Residual" HR Organization



Agency

Number of Salaried

Employees 9/17/01

Number of OPS

Employees 9/17/01

Inventory HR Positions*

Agency Requested

State 15% Goal

Difference between 15%

Goal and

Requested

ProjectTeam

RecommendedResidual Justification

AHCA 1,655 72 21 4 3 1 3AWI 1,453 566 11 3 2 1 4CITRUS 99 15 3 2 1 1 3DACS 3,347 1,739 29 10 4 6 10DBF 852 47 11 3 2 1 3 DBPR 1,423 341 19 4 3 1 3DC 24,592 268 303.5 85 46 39 85 Specialized RecruitingDCA 335 98 5 2 1 1 3

DCF 23,574 2,591 334 122 50 72 82

**Title VI & VII ComplaintsCommunity Based Care TransitionG.Pierce Wood & Landmark Closures

DEP 3,414 1,070 21 6 3 3 6Requesting 1 additional FTE 12 months and 1 additional for a 24 months period (Worker's Comp., Medical Monitoring and record archiving).

DJJ 5,180 312 42 7 6 1 8 Specialized RecruitingDLA 1,033 64 8 2 1 1 3 Specialized RecruitingDMA 258 17 6 5 1 4 5 Military PersonnelDMS 1,410 46 14 3 2 1 3 DOAH 80 1 1 1 1 0 1DOE 2,864 507 16 5 2 3 6 ReorganizationDOEA 360 119 4.5 1.5 1 1 1DOH 13,272 1,874 49 21 7 14 17 CHD HR SupportDOI 1,418 90 19 9 3 6 5 Specialized RecruitingDOS 639 143 11 3 2 1 3DOT 8,773 213 127 30 17 13 20DVA 399 33 6 3 1 2 3EOG 258 40 3 1 1 0 1FDLE 1,678 129 16 5 2 3 5 Specialized RecruitingFPC 137 10 4 2 1 1 2FWC 1,662 511 10 4 2 3 4HSMV 4,566 58 28 10 4 6 10 Specialized RecruitingLES 893 93 9 6 1 5 3 ReorganizationLOT 475 12 11 3 2 1 3PSC 368 20 7 2 1 1 2 Requesting 1 additional FTE for Transition Phase.REV 5,391 211 38 12 6 6 9Subtotal 1187 376.5 178 199 316DSGI 81COPES 20Subtotal 111,858 11,310 1,288Courts 2,876 299JAC 7,691 477Total Emp. 122,425 12,086

* Includes complete 4/30/01 HR Personnel Inventory (HR Personnel, Vacancies and Abolished positions).**Project Team recommends that Time Limited Positions be used to support recognized agency requirements.NOTE: 15% goal assumes a staffing ratio of 1:650 with minimum operational staffing of 3 FTE unless otherwise requested by agency.

"As-Is" HR Organization

HR Outsourcing Initiative

HR Services FTE Comparison by Agency

Residual HR Organization

Business Plan

Documents

core business

finalization of business

initial business case

cost data

contract negotiations

contract oversight

data collection

workload data