"Designated providers are prevented from retaining and reinvesting earnings putting them at a disadvantage
The Office of Management and Budget's strategy for moving agencies to consolidated financial and human resources management systems is about to be put to the test. As agencies begin to adopt shared-services providers, federal experts question whether a 74-year-old law that applies to agency balance sheets will prevent some of the service providers from competing on level ground.
But chief among the concerns is whether COEs have the legal and financial latitude to support and sustain these systems over the long term, providing better and less expensive services. A related concern is how COEs would pay to remedy shortcomings in service-level agreements. Some experts are concerned that the COEs will not be able to compete with private-sector companies or even some other agency providers, known as franchise funds, that operate under a different set of rules that let them retain earnings for capital investment.
Three civilian COEs, led by the Interior Department's National Business Center, the Health and Human Services Department and Agriculture's National Finance Center, are stuck in a government time warp - unable to act like a private-sector business but being asked to compete like one and against them.
The time warp stems from the Economy Act, a law written in 1932 to govern how agencies procure services from one another."