The Tax Processing and Accounting Division (TPAD) of California's Employment Development Department (EDD) collects payroll taxes from some 900,000 employers, taking in about $85 million in business taxes every day. On peak days, TPAD receives, processes and deposits nearly 75,000 checks by about 3 p.m., and collects, records and stores all of the pertinent data from the checks within a day.

It wasn't always that way.

Just a few years ago the process of collecting and recording the data took several weeks and about 50 people. The process is now done by one set of hands, and some new technology, in about a day.

That collection process was one of several that saw its inefficiencies and excesses eliminated by the Tax Engineering and Modernization (TEAM) Project that developed from a partnership between EDD and Unisys.

As part of the project, Unisys implemented its e-action Workflow Solution, which helps EDD scan, capture, process and archive tax forms. But it did so on terms that are not so common in a vendor/agency relationship.

Alternative Procurement

Alternative procurement projects are not very popular, and when you talk to Unisys and EDD representatives, you can see why.

"They're not a piece of cake," said Randy Oliver, division chief of TPAD. "You need a lot of attorneys and all kinds of representatives in on it."

It works something like this: EDD puts out a bid that says to potential vendors, "Here's our process; if you can streamline it with demonstrated savings in dollar amounts, among other things, you get to keep 83 percent of the savings as your payment."

Alternative procurement, or performance-based procurement, gives the consumer leverage and the vendor incentive to do a bang-up job of streamlining processes.

"It's not just the vendor throwing over the wall a system and saying, 'Good luck,' and then we find we're spending more resources than before," said Bob Affleck, deputy director of EDD's Tax Branch. "It's in the vendor's and our best interest to make sure this thing is going to work and produce the results because that's how they get paid."

Determining just how and where inefficiencies can be trimmed is part of the contract-negotiation process, which sometimes needed to be resurrected as the project was phased in. Determining where Unisys would collect on savings was a matter of determining how to eliminate personal years (PYs), which is the equivalent of one full-time employee's annual salary.

So if a process that took two $40,000-a-year employees to accomplish was streamlined so that it now takes only one of those employees, you've trimmed one PY, or $40,000, and the vendor would get 83 percent of the $40,000.

But in this case, no full-time employees were laid off.

"That was one of the criteria as part of the contract," Oliver said. "EDD management said we're not going to have any layoffs, we're going to take care of this through attrition." At the time, EDD employed a large number of part-time intermittent employees, for which the turnover rate was high. That gave the agency opportunities to save PYs.

Some of the full-time employees, however, were transferred to different departments. "We did a lot of career counseling," Affleck said. "A lot of those folks ended up better off than they were before because they were forced into looking for better jobs."

The final product cost was a little over $60 million, which is what Unisys got to pocket through demonstrated savings. Any savings over that contracted $60 million mark would stay with EDD.

But figuring out how and where the savings would be accrued was a formidable task that took a lot of negotiating.

"We identified various workloads, figured out what it cost us under the old system and measured

Jim McKay, Justice and Public Safety Editor  |  Justice and Public Safety Editor