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The trend toward outsourcing and a need to cut costs both suggest an increasing reliance on contract and contingent manpower to meet the changing labor needs of the government market. Governments need information technology (IT) experts, office/clerical workers, industrial/engineering specialists, janitors, security guards and even professional positions, any of which could fit into the category of contract or temporary staff. Efficiently managing a contract workforce can be especially challenging, given the fragmented staffing market; the need for dependable, productive labor at affordable costs; and the variety of staffing needs across diverse parts of a government entity.

Managed Service Providers (MSPs) sometimes are contracted to manage multiple staffing vendors and to measure their effectiveness in filling positions according to a customer's standards and requirements. In effect, the MSP serves as a "neutral" party that offers the customer a complete workforce solution while ensuring efficient operation and leveraging multiple staffing companies to obtain competitive rates. MSPs typically use a Vendor Management System (VMS) as a software tool to provide transparency and efficiency — along with detailed metrics to the user — related to every aspect of the contingent and contract workforce. The model has proven its usefulness in the private sector, notably among Fortune 500 companies, and is poised to become more common in the government arena.

In the course of managing the overall program and related processes, the MSP uses a VMS software program to handle fulfillment of requisitions by various staffing companies and to consolidate billing to the user. The user pays one bill to the MSP, which distributes payment to the various staffing companies, keeps a percentage and pays a rebate to the user. Efficiency cost savings, competitive rates and the benefits of consolidating the buy all contribute to making the net fee the user pays to the MSP the same or less than it would cost to requisition the individual contract positions. In this way, the MSP service can be "free" to the user. The MSP uses aggressive and competitive processes to staff each position and nets savings of 5 to 15 percent for the customer (after the MSP-VMS administrative rebate). This funding model is referred to as the "percentage of spend" model. (See sidebar, page 15.)

Advantages of MSPs

An advantage of MSPs for the customer is having a single point of contact to manage a temporary workforce. There is also a level of built-in accountability and transparency related to spreading the buy among several staffing suppliers. The MSP is also continuously reviewing rates and rate card structures, comparing rates to marketplace indices such as staffing.com, USDOL Regional Wage Rates, State DOL Wage Rate data, and Staffing Industry Analysts (SIA) as well as Gartner research data.

John W. Healy, vice president of Enterprise Workforce Solutions for Kelly, says MSPs fulfill a customer's desire to save costs, to comply with audit or regulatory requirements, to leverage a range of talent from various suppliers and to have access to actionable information on the size, scope and efficiency of the contract labor spend. Most MSPs have developed as offshoots of staffing companies and as separate businesses. In the case of Kelly, Healy says the MSP business is completely "vendor-neutral" and independent of the staffing business.

Dealing with a single vendor can be easier than dealing with possibly hundreds of staffing companies that might solicit for contingent positions or contract labor. Also, there are enterprise-wide advantages from one entity handling the staffing needs of the larger organization rather than using a one-off approach among a variety of departments. A benefit to procurement is also the availability of additional metrics about the spend. Because the system is integrated, the customer can see, for example, which suppliers are performing better. The benefits for the staffing company may include getting paid faster.

"An MSP can manage tens to hundreds of temporary or contingent workforce staffing companies to realize savings of generally 5 to 15 percent of total net spend across the contingent or temporary workforce," says David M. Candler, senior director, Government Services at TAPFIN Process Solutions, and a former administrator of Georgia's first MSP/VMS program. TAPFIN is a division of IT staffing company COMSYS.

Knowledge of available suppliers and capabilities is another benefit MSPs provide, according to Carlton Hardee, vice president of the Government Solutions Group at Volt Information Sciences. Volt also operates its MSP business separate from the staffing operation. "If a municipality has a certain requirement, the MSP would have information about the capabilities of various staffing companies, and push it out only to those companies [that qualify]." Full transparency avoids the appearance of the "fox guarding the henhouse."

Among 10 vendors, for example, an MSP could show who is performing well and who is not. Tracking how vendors are doing in specific categories can point to a need to introduce additional vendors.

MSPs can also work faster. To illustrate, they might be able to fill a position from creating a requisition to on-boarding the employee within 10 days. "All steps are incredibly quick compared to the minimum 70-to 90-day cycle that is typical of most government hiring processes," says Candler.