4 Ways Arizona Management Systems' Principles Are Improving State Processes, Saving Millions

Focusing on customer value and continuous improvement, and engaging employees to improve productivity, quality and service has helped Arizona save millions of dollars so far.

by / May 3, 2017
Arizona CIO Morgan Reed says that the lean initiatives already completed — like slashing the timeline for help desk tickets from an average of around 20 days to four hours and making the state’s hiring process largely paperless — have improved morale and outcomes. David Kidd/e.Republic

It’s been more than four-and-a-half years since former Arizona Gov. Jan Brewer established the state’s Government Transformation Office, tasked with helping agencies design processes to improve their performance. And under her successor, Gov. Doug Ducey, operating under so-called lean principles is paying off.

Ducey was in on this change from the start; Brewer put him on the also-new Government Transformation Committee in August 2012. Meanwhile, the then-state treasurer was forthcoming about the changes that lay ahead, telling the Sonoran News the two new bodies would “create an extra measure of accountability” and ensure agencies focus on "improvements that will ultimately translate into savings.”

The state’s deployment of the Arizona Management Systems (AMS), based on “principles of Lean,” the governor’s office explains online, hones in on “customer value, continuous improvement and engaged employees to improve productivity, quality and service.”

In his yearly State of the State address in January, Ducey pointed out that citizens invest $42.5 billion annually in state government and said plainly: “They deserve value for their dollar.”

That’s exactly what they’re getting, as shown in a number of initiatives pursued through the Department of Administration (DOA), the state’s business and operations center. Updated processes and policies spread across state government from security services to workers’ comp have yielded millions in combined savings.

Arizona CIO Morgan Reed noted that of five statewide areas of focus, the state is executing on cyberstandardization and migrating services online. Three other areas — going paperless, moving from about 30 different email systems to one, and adopting a cloud first/data center consolidation policy — are in planning phases.

But he said lean initiatives already completed, like slashing the timeline for help desk tickets from an average of around 20 days to four hours and making the state’s hiring process largely paperless, have improved morale and outcomes.

“It’s broken down the silos of government,” Reed said, noting that adopting a lean bottom-up philosophy of involving employees on the front lines has brought accolades to staffers who hadn’t been recognized for some time and let them demonstrate their creativity.

1. The Lean Approach to Cyber

The DOA’s Arizona Strategic Enterprises Technology (ASET) Division first identified gaps in cybersecurity last year. Since then, officials have scrutinized operations in 38 cabinet agencies with the goal of having enterprise-level security controls in place by July.

Working down a list of 20 key suggested actions from the Center for Internet Security (CIS), the agency has 51 percent of controls in place. Installation of another 33 percent are scheduled, with the final 16 percent remaining to be scheduled.

Chief Information Security Officer Mike Lettman said Arizona wants to reduce its in-house services and platforms; continue migrating to Amazon Web Services and Microsoft Azure, its two main cloud vendors, to get out of the data center business; and introduce economies of scale in purchasing.

Its findings so far, Lettman said, include a lack of enterprise-level commonality in software, and in purchasing and security controls. This is evidenced by the fact that computers in some cabinet agencies had no spam filters, Web application firewalls or ability to filter Web content. Among machines with spam filters, he said, were a total of four different versions.

Standardizing software purchases, implicit in the CIS recommendations, led to “enterprising” across state agencies, predicated on the idea that “we’re all connected and we all exchange data,” the CISO said, as well as opening up state-level contracts through the State Purchasing Cooperative for counties and cities to buy from as well, at better costs.

“My thought was, as we standardized on security controls we could drive efficiencies and economies of scale by reducing the number of resources to manage,” Lettman said. “This is about protecting the state and not necessarily driven toward saving dollars, but what we realized is we could save dollars.”

He estimates the state will save roughly $2 million to $2.5 million once the remaining roughly 25 percent of 211 controls are implemented. When the entire project is completed, savings could be as high as $10 million to $12 million.

Reed praised the progress made, but said in examining cybersecurity through AMS, officials had “set some goals that were maybe too aggressive” and “are now recalibrating to say, ‘How can we take a different approach to overcome those objections?’”

Completing the cybersecurity update, Reed said, will likely take another six months, but in this case, officials have learned the importance of collaborating with agencies early on to increase their buy-in.

2. Data-Driven Procurement

ASET and the DOA’s State Procurement Office have also scrutinized how Arizona buys technology since Ducey was sworn in on Jan. 5, 2015.

It’s a new approach that has necessitated an ongoing cultural change for officials and prompted some difficult conversations with vendors — but as State Procurement Manager Charlotte Righetti points out, has yielded six consecutive quarters with $10 million in reduced contract rates.

AMS and the state’s new administration encourage officials to “think outside the box,” Righetti said, “and really look at data and make data-driven decisions,” setting contract price points based in part on benchmark data. Those, she said, were “things we might not ever have made time for in the past given the processes in place."

One example is a contract renegotiation Righetti inherited in 2015 and finished last year, for network equipment service rates — buying and maintaining everything from routers to security equipment and software and monitoring.

Arizona was only about three-and-a-half years into a five-year contract with 42 vendors, but did a new RFP anyway to cut its costs. Sixty-four companies responded, and from a short list of 20, the state signed with seven — after letting vendors know, Righetti said, the state was not “going to accept the status quo.”

The agreement ultimately reached wasn’t a specific contract but rather one brokered with seven vendors across their product ranges. But the average discount for one major supplier — the smallest discount achieved — rose from 40 percent in the old contract to 46 percent in the new pact.

And the standard hourly rate for an Engineer 3 worker assigned to everything from design to maintenance dropped 60 percent, from $225 an hour to $90.

Because Arizona is cooperatively run, more than 650 schools, counties, cities, even other states could all jump on board and use those same contract terms for their tech needs. Combined, that represented a $50 million spend, though Arizona’s share was just 40 percent or $20 million.

Across tech contracts statewide, Arizona achieved savings of $20.4 million for fiscal 2016, ending June 30, 2016.

“The way we’re saving money ... I think we can start to help the governor achieve all his goal council objectives, putting money back into rehabilitating inmates or helping with the foster program," she said, "and putting money back into the areas to improve the state."

3. Outsourcing Pieces of Workers' Comp

DOA’s Risk Management Division succeeded in outsourcing the state’s Workers’ Compensation Medical Processing and Cost Containment Program, an idea that might sound counterproductive, particularly when it comes to the care of injured employees.

Not only were no jobs lost, but care improved, according to Sydney Standifird, workers compensation claims manager for risk management.

Arizona began researching changes to workers’ comp in 2013, implementing them in May 2015 and launching that June. Officials found employees still used a voice-prompted reporting system to notify the state of an injury; and that state staffers or insurance adjusters had at times made decisions about medical care.

Additionally, once claims were reported, getting them into the computer system and activated took an average of seven days. That disruption in care was the biggest problem, Standifird said, but the state also “had the adjusters making decisions they were uncomfortable making, decisions about medical care and they knew they were unqualified to do it.”

Instead, the state hired Irvine, Calif.-based CorVel Corp. to replace that the voice-activated reporting system with a live nurse triage advocacy program to counsel injured workers. During utilization review, when workers might have spoken to an adjuster, they are now able to speak to a registered nurse — and if the nurse is unable to decide on their care, that decision is referred to a doctor.

“Many times, if you’re out on the road and your supervisor is not available, you would have to wait until the next day to talk to somebody. Now, we’re at the side of the injured employee and helping them get through this quickly,” Standifird said, noting the state is believed to be one of Arizona’s first public employers to implement the program, which covers employees at 142 agencies.

Since implementation, the percentage of injured employees being referred to the emergency room has dropped from more than 15 percent to just over 5 percent — the result of not overprescribing care — and the state now has access to claims within about two hours.

Arizona saved $1 million in fiscal 2016 after accounting for medical inflation, and projects an additional annual savings of $1 million during the next four fiscal years.

It will also realize an additional $450,000 in annual productivity savings because employees are able to return to work faster. Partly through attrition, its actual workers’ compensation department has been reduced to 12, though again, no one was laid off.

4. Printing Device Reduction

A DOA project team even thinned the ranks of the state’s printing devices.

Asked to lead scrutiny of the state’s printer and copier fleet by DOA Director Craig Brown, Executive Assistant Heather Ryan said officials looked at procurement and retention policies and counted units — and ultimately discovered they had 118 copiers and desktop printers.

Immediately reducing inventory by 20 percent by offering units to other agencies and university partners saved $13,000 annually on ink and toner. Investigating their own process made officials realize purchasing printers and copiers had become siloed, with no policy and no standard worth.

Among its shortcomings, units that had outlived their lifespans and warranties — meaning no more free repair calls — were elevating the average annual unit repair cost to around $500.

Officials consulted with IT and procurement experts, and wrote a series of policies and procedures that spelled out how purchases would be handled going forward. Employees who asked, for example, to have a printer at their desk would have to justify it to a supervisor, and all printer and copier purchases would be centrally tracked by IT.

Implementation at the first agency, the DOA, took several months, but saved roughly $20,000 by reducing inventory.

That figure was duplicated at the Arizona Lottery, the second agency where printers and copiers were examined; and there, implementation took less than two months. Similar efforts are scheduled at five other agencies — and expanding the effort to include multifunction devices like all-in-one printer-copier-fax machines could add roughly another $10,000 savings per agency.

All told, Ryan said the effort should yield an estimated $150,000 savings within six months. When expanded statewide, that savings figure could reach $500,000.

Rolling out the printer-copier rollback, she said, is one more way state employees have been introduced to AMS — principles she said are “like magic.”

“You’ll find it doesn’t just work on one thing, it works on all things,” Ryan said of AMS, relaying how surprised a state lottery employee was to realize the extra cost of printing color copies.

Reed, who became CIO in October 2015, said he arrived “around the time that AMS started taking hold” and praised the innovation accomplished using its framework for measuring progress.

“I would love to say that I left a state where there’s no more paper. I don’t know if we’ll ever get there. Or that there’s no servers in any building, they’re all in the state data center or in the cloud,” he said. “But being realistic, it’s a journey and we’re starting off on that journey, and things are looking up.”

Theo Douglas Staff Writer

Theo Douglas is a staff writer for Government Technology. His reporting experience includes covering municipal, county and state governments, business and breaking news. He has a Bachelor's degree in Newspaper Journalism and a Master's in History, both from California State University, Long Beach.