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Outsourcing to an Off-site Record Center This manuscript has been accepted for publication by ARMA International in the Information Management Journal. When published, copyright will then be vested in the association. The 21st century represents an era of great advances in the manner in which businesses handle information. The various elements of information and records management, from scheduling to retrieval, have been impacted by new technologies that have changed the manner in which information is created, maintained, and used. One element, however, has remained virtually the same and will continue to be used in the same general format – the records center. Started as a concept in government following WWII, adopted by private industry and introduced as a commercial operation in the late forties, records centers have continued to grow in size and in operational capabilities. The billions of cubic feet of records housed in records centers today verify that the "paperless society" theory is a myth. The decision as to whether to use an in-house records center or a commercial records center is the main theme of this article. By William Benedon, CRM, FAI Outsourcing, the transfer of an organization’s internal activity to an outside individual or organization, is a well-established business practice and may apply to any business activity. Its uses extend from janitorial services to manufacturing. In the information and records management field it can apply to computer operations, forms management, imaging, records center, or even the total records management program. In his book, "Business @ The Speed of Thought," Bill gates states, "An important reengineering principle is that companies should focus on their core competencies and outsource everything else." [i] The important word here is competencies. If a company has a fully implemented records management program and each of its elements provide more cost savings and efficiencies than can be provided elsewhere, those elements should remain internal. Mr. Gates also cites several such examples of this condition in the above referenced book. [ii] Outsourcing should never be done just for the sake of outsourcing. This article addresses the use of outsourcing for records centers (the use of commercial records centers) and the factors to consider in whether or not to use such an approach. Commercial records centers have been in operation for almost fifty years. They have always represented an alternative solution for the housing and servicing of an organization’s inactive and semi-active records. Evidence of the commercial records center growth was the formation of an association for commercial records centers called PRISIM (Professional Records and Information Services Management International). This organization supports the outsourcing concept through its conferences, publications and web site promotion. [iii] The commercial records center is probably the most publicized form of outsourcing in the information and records management field, and the most accepted. I recently reviewed a directory published by the Association of Records Managers and Administrators, Inc. (ARMA) Industry Specific Group. This valuable directory indicated the status of various information and records management functions within member organizations (software, charge-backs, vital records, imaging, bar coding and the like) as being in place, being implemented, or non/applicable. These are logical classifications for reporting on the use of standard records management elements. What surprised me was the use of the term in place for the element of outsourcing. The term Records Centers was not even listed as a function. I have to assume that in the mind of those preparing the directory, the terms records center and outsourcing are one in the same. Records centers have always been a showcase for records management. An orderly collection of company records, neatly maintained and promptly retrieved when needed. Tangible evidence to management and company personnel that the company’s valuable store of information was receiving proper attention. The records center gives life and meaning to retention schedules. It supports investigations and litigation. It covers the needs of general, vital, archival, and classified records. It is one of the most effective internal controls for records. The direct program control, procedural flexibility, and in-depth search capability provided by the in-house records center has not been and never will be completely replaced by outsourcing. Nevertheless, a well managed and standards compliant commercial records center can be a viable alternative. The primary objective of this article is to make certain that the decision to use commercial facilities is supported by standards that are at least equal, if not better than an in-house operation and that cost savings and efficiencies exceed those of an in-house operation. The National Archives and Records Administration (NARA) has been one of the best resources for practitioners in the field of information and records management. In a recent proposed amendment to regulations on the storage of Federal records, NARA addressed this above objective by stating, "Among the proposed changes is a new requirement that agencies maintain the same level of intellectual control over records stored in their own records centers and commercial records storage facilities, as is required in NARA records centers." [iv] My first exposure to commercial records center operations was as a records center clerk in Ed Leahy’s Business Archive Center (the first commercial facility) on 23rd street in New York City back in 1951. It was a duel position since we served as sales people a well. I can recall going from office to office in the Empire State building with a handful of records center containers (BACases) trying to sell businesses on the use of a commercial repository. As today, businesses having offices in major metropolitan areas do not want to spend the high rental costs for records storage. The key selling points haven’t changed. (You will save up to 90% of your storage costs! Your records are as close as your telephone!!). Neither has there been any significant change in the physical layout of records centers. The changes have been in administrative and operational controls -- bar coding, automation, and special facilities for digitized data. I have also had the opportunity to organize, install, and manage internal records centers in government and industry. I use these experiences for the positions taken in this article. To set the stage for our comparative evaluation, the following definition of a records center is used as being applicable to either an in-house or outsourced activity. The major difference is that there is a fee structure for the services provides by an outsourced activity. A records center is a centralized area for the housing and servicing of inactive and semi-inactive records whose reference rate does not warrant their retention in expensive office space and equipment. The effectiveness of a records center is based upon (a) its use of low-cost equipment which makes maximum utilization of space, (b) its ability to provide an orderly arrangement and control of records, and (c) its ability to employ procedures which assure prompt and efficient handling of records. This definition is supported by physical characteristics that make records centers a meaningful part of information housing and retrieval systems: Accessible Location – Close enough to operations to assure prompt and accurate service to needed records. Adequate Communications – The ability to provide multiple means of (telephone, fax, e-mail, messenger, mail) of communications between records facility and service requestors. Layout – The use of standard size shelving (single and multi-level) and multi-functional containers to house records with ample space for personnel, records processing, and administrative needs. Structure – Fire-resistant structures, usually stand-alone, and not adjacent to flammables/non-fire resistant buildings. Lighting – Adequate and properly spaced lighting that eliminates glares and shadows. Lighting concepts are different in commercial centers due to shelving height and number of walking levels. Most lighting sources are controlled on a sectional basis and can be used only when needed. Ventilation – Records preservation is assured through adequately ventilated facilities with proper humidity and temperature control, generally in the level of RH 50-60%, T 65-75oF Floor Load – Sufficient to support weight of containers and records. Security – Sprinkler systems, fire extinguishers, structural considerations, compliance with national, state, and local codes and ordinances, supervised alarm system, and documented procedures on emergency planning. The above NARA regulations provide valuable guidelines in this area, as does the "NAPA 232A: Guide for Fire Protection for Archives and Records Centers, 1995 Edition," published by the National Fire Protection Association. [v] Specific daily precautions also include overall cleanliness, check of stored combustibles, smoking prohibitions, checks of windows and doors working condition, systematic inspection of premises, off-hour inspections, periodic wiring inspection. All these characteristics must be part of the image a records manager has of his or her records center, regardless of whether he or she is responsible for the direct management of an in-house operation or overseeing the use of a commercial records center. If you need a primer on setting up a records center, there are some helpful sources available. [vi] Inspecting commercial records center sites with these factors in mind prior to contracting such services is critical, as well as after they have been contracted. This means all facilities that will be used to house an organization’s records. In the expanding commercial records center business, large records center companies may choose to put a customer’s records in one or more locations. While this does not negate the ability to rapidly retrieve your records, the ultra-modern facility used to negotiate the contract may not be the only one being used for your records. All possible housing locations should be inspected. There are three conditions that enter into consideration when addressing the possible use of the outsourcing records center. 1. Establishing a company (in-house) records center operation where one has not existed before. Outsourcing must certainly be one of the decision-making factors. A detailed cost comparison report must be prepared. Illustrations 1 and 2 provide an example of the major items to be included in such a comparison. In an outsourcing Request for Proposal (RFP), Illustration 2 criteria can be requested from the vendor. They provide a meaningful starting point and will be discussed in more detail below. A good source for additional information on budgeting and cost justification is the book by William Saffedy, "Cost Analysis Concepts and Methods for Records Management Projects." [vii] The book’s main emphasis is on microfilm and imaging projects cost analysis. However, it provides valuable guidelines and formulae for the comparisons being made here. 2. Transferring an in-house records center to a commercial records center. A company designed and operated records center can operate as efficiently and as cost effectively as a commercial records center. Where there is a company operated records center in existence, an outsourcing study can be based upon a more realistic comparison of costs and operating benefits. It is important to note that amounts already expended are not counted as comparative costs, nor as savings (building and equipment already purchased). If the center is an integral part of an overall successful records management program, the decision as to whether to outsource or not, will receive more careful analysis from management. Management’s awareness and support of a program generally results in a better understanding of cost benefits (not always expressed in dollars) and operating efficiencies from an internal center. They may well view the in-house center as an information asset, rather than a cost burden. It also means the records manager has a major role in the decision making process. An uninformed management and a passive records manager can be the open door to a wrong decision regarding outsourcing. 3. Combining the use of an in-house records center with a commercial records center. This approach takes advantage of low storage costs of a commercial records center for relatively inactive records. This accommodates company owned facilities by reducing the requirement for additional space requirements. Heavily referenced materials are not subject to the service charges that are the higher dollar items in commercial centers. On the other hand, you will not receive as attractive a storage rate if services are limited. "Outsourcing is a commitment that must be clearly understood, accepted by all levels of management, and fully supportive of the internal records management policy." Accepting this is a guarantee of its success. A decision must be made that provides contractual confidence and a long-term involvement. Changing back to an in-house center or moving from one vendor to another can be costly. The transition from an in-house program to outside sources, particularly when a program has been in operation, should be transparent to its users. Changes must be clearly explained and any program or procedural changes clearly documented. The records manager’s role has a new dimension since responsibility shifts from a managing responsibility to an overseeing one, and can involve many changes from prior administrative direction. Every decision also requires careful evaluation of the advantages and disadvantages of alternative approaches. Rather than list them as such, let us examine the general nature of these factors and how they figure in the analysis process. Reduction of head count and space costs. Outsourcing has been a way to temper workforce expansions and reduce overhead. Shifting these costs can be significant in terms of labor costs and benefits. If, in fact, there is an actual reduction in headcount. Internal labor requirements might only result in shifting the employees to other jobs in the organization even if such positions are not normally available. Space cost savings are real if a cost is actually eliminated or the space will be used for other needed purposes. If it is an owned building there is no savings unless the building is sold or the space replaces a planned construction. Competitive pricing. The large number of commercial centers operating today offers an excellent opportunity for competitive pricing. However, you are not only comparing one commercial center to another. You are comparing it to an existing or proposed internal center. The preparation of an in-house cost package is essential to complete a proper comparison. This includes costs, as we have noted, on everything from personnel to utilities - every cost needed as if the center were a totally independent entity. Since outsourcing companies generally charge a basic rental fee plus service costs, those costs are based upon unit charges for every activity performed. Some commercial companies will bundle services, providing a fixed service cost for a pre-determined volume of activity, at a lower cost, and make a surcharge for any services over those numbers. Others require the customer to maintain a minimum percentage of initial storage. All pricing methods will require constant monitoring. Overall cost allocation. A great advantage of outsourcing is that you get a complete cost figure for handling your inactive records. Nevertheless, you must add to this any costs that may still be incurred by the company outside the commercial center billing (certain transportation charges, internal controls, and the like). Accurate cost determination is sometimes difficult in an in-house operation due to (a) the possibility that several organizations (facilities, general services) being involved in the operation and (b) some cost are only allocated as a general expense. A commercial center can also provide a departmental cost breakdown of charges. Many company centers only allocate to branches or companies because of the added accounting requirement. Introduction of new ideas. Outsourcing exposes you to the experience commercial records centers have from working with many companies. This could be fertile ground for new ideas and technologies. One would assume, however that an experienced company records manager has been proactive in his technical management of the internal function. Knowledge is a two way street. Commercial centers have also benefited from practices used in company centers that are now customers. Improved performance. Dissatisfaction with service can be a chief factor is moving from an in-house operation to outsourcing. This condition can be determined best by a periodic survey of customer opinions. If negative reactions cannot be corrected, than a change may be in order. Such surveys are equally important in an outsourced condition and a critical part of such arrangements. Commercial records center personnel know their business, but you cannot replace in-house trained records center personnel with those in a commercial records center and get the same knowledgeable service. This will become evident in extended searches. Automated systems. Commercial records centers have built-in software systems for the management of outsourced records. This can be very beneficial if an organization has no such program. It is, however, a system that is used for all its clients. If a potential client company has a system in place that it uses for its scheduling and vital records as well as an in-house records center, conversion to a commercial center’s system could create significant problems. Generally, a company may have to sacrifice some of the benefits its own program provided. A commercial records center’s software program is generally a back-store system, concerned primarily with stored records, rather than a storefront system that includes schedule analysis, filing systems, equipment usage, and the like. There are, however, new software packages now being offered that improve the office-commercial records center computer tie-ins. The driving force behind many of these packages is DOD Standard 5015.2-STD (Design Criteria Standard for Electronic Records Management Software Applications). [viii] Schedule management remains an in-house responsibility. All of the above items must be taken into account when preparing your Request for Proposal (RFP). I would like to add some additional items. I also suggest you review an article by Michael J. Faber, "Selecting an Offsite Commercial Records Center." [ix] It complements rather than covers the comments made in this article. The RFP, as well as the final contract, must be the combined effort of the records manager, his immediate superior, the procurement, and the legal departments. The following items are critical to the RFP analysis: Type of records involved. Records covered by the proposal (inactive, archives, vital, classified) and volume of each type. There are different charges for different type of records since each category is usually handled differently. Period covered. It is a commitment, as we indicated, and something that is not easily changed. Allow sufficient time to smooth out all possible problems with an agreed to rate for the duration of the contract, as well as a cancellation cause "with justification." This is the place to identify (avoid) permanent removal fees and clarify other closure requirements (inventory listings, bar coding control, charge-out records, empty container inventory). Initial records pickup/Data entry. Who will pay these charges? Clearly identify locations where records are to be picked-up. The vendor benefits if you can download a system you have. If not, there is generally a charge for initial data entry. You must make certain to verify the data transferred by an audit of the pre-transfer data with a post transfer inventory report. Service requirements. List services required (storage, reference, delivery, inventory, charge-outs, access, destruction, copies, and the like). Special handling services may be required. Provide related statistical data for subsequent cost evaluation. The vendor should detail his pricing breakdown by using an outline similar to that shown in Illustration 2. Reports requirements. Type of reports needed as well as frequency of submittal with specific dates of submittal. Specify the format you want the reports to take as well as the sequence of data. If this is not clear at the beginning, you will have to take what is provided. Forget the advertising brochure formats. Verify the comparisons you made of reporting formats and put them to work. Know what you want and get what you want in reports. If you have a program, print out a set of the reports you prepare, mount them on a display board and compare them to what the vendor can provide. If you can download your data and the vendor can accommodate all your required information, so much the better. A complete apples for apples transition is rarely achievable. Inventory Count: Confirm the beginning inventory volume. Commercial records centers use varying measurements for counting volume. The historical cubic foot container (10"x12"x15"), counted as a cubic foot in virtually every in-house operation, is measured precisely by commercial centers as 1.2 cubic feet. A 100,000 cubic foot company holding could amount to 120,000 cubic feet when stored and billed by a commercial center. An engineering container (4"x4"x45") may be counted as .40 cubit feet. The commercial measurement could be .90 cubic feet. An X-ray or magnetic tape container (18" x 6" x 15") counted as 1 cubic feet internally, might be counted as 1.50 cubic feet in a commercial center. Commercial operations have various size containers. If a package or bundle cannot fit into a box, it will be given the next box size measurement. I have experienced a case where 30 bundles of illustrations were placed on a normally 12 box shelf (12 cubic feet) in an in-house operation but the commercial center measurement for billing was 48 cubic feet. Clarify these measurements when negotiating your contract, and carefully verify the beginning volume. Volume is a critical element in determining costs. If you have an in-house operation and have been using the standard cubic foot measurement, you may also want to keep a count based upon the 1.2 measurements. This may be significant in cost comparisons. Transportation services. Specify the type of delivery service you require, including frequency and delivery points. Charges may be made per stop. Check this out as well as the delivery costs for single and multiple box deliveries, special delivers, emergencies, and the like. Safety and Security Requirements. Identify the organization’s requirements for safety and security and measure them against those provided by the commercial center. Make your own checklist and comparison while doing a physical walk-thru of the commercial facility. Check the insurance replacement value provided by the vendor. It may not be adequate. Performance reports. Require a procedure for measuring performance by the commercial center. Balance this with periodic reports from users on their reactions to the use of the outside facility. Service Charges. Make certain that all pricing rates are specified for the storage (inactive, vital, archival, classified), servicing (new receipts, retrievals, re-filing, inter-filing, permanent removal, faxing, destruction), and transportation (regular, emergency, after hours, surcharges for courier services, delivery distance restrictions), as well as special or computer report charges. Conversion costs. Commercial records center costing practices are not uniform. They are negotiable depending upon volume, services provided, and category of records. You may have to pay for having your records picked up and keyed into the vendor’s system or there may be no charge for this transition. Regardless of who picks up the costs, it is the responsibility of the customer to check containers or packages as they are moved. It is the responsibility of the vendor to provide an inventory of records received and to reconcile any discrepancies. And there will be discrepancies. Termination Costs. This is perhaps one of the most controversial elements of outsourcing. Termination clauses and resulting penalties must be clearly stated. The term "hostage fees" has been miss-used and overused. The basis for termination and penalties, if any, must be acceptable to all parties. Penalties may apply to the vendor or the customer based upon the contractual commitments. There should be no surcharge for changing vendors after the completion of the contract period. It is understood that the customer will pay the cost to move the records to another facility, but these costs should be within the normal contract charges. Surcharge costs, if any, should be part of the initial cost analysis when comparing in-house to commercial center usage. An important part of any termination is "termination assistance." You want to be assured that the vendor will provide enough resources at a fair price to affect any orderly transition to a new service provider. [x] There are also standard requirements that must be considered, such as, insurance, billing procedures, disclosure agreements, access (timely availability and workable quarters), clearances, and property ownership. Commercial record centers today parallel the familiar concept of mom and pop stores and the supermarkets. There are local and regional centers and there are companies that have centers throughout the United States. The recent merger of the two largest nationwide commercial records centers has had a significant impact on the competitive negotiations for such operations. Commercial records centers are also well-established in countries throughout the world (mainly in Australia, Canada, Brazil, England, and on the European mainland). This later group can be important for companies having international operations. I am certain you are familiar with the concept behind the mom and pop operations – close at hand, direct contact, personal attention, system flexibility. You may pay a higher price for such operations, but you do it for these reasons. Business organizations with operations in many different states have a volume bargaining power for national agreements. Some have opted for their own central in-house facility, operating as a self-sufficient operation and billing their operating costs to using divisions of the company. Others have entered into national agreements with commercial companies. One of the approaches to providing national coverage and still maintain the mom and pop characteristics is the National Records Centers Consortium (NRCC). The Consortium is a group of independently owned and operated records storage facilities who have joined together to provide records managers a multi-market or national account alternative to the dominant companies in the market. [xi] All the approaches and evaluations covered in this article are equally applicable to any commercial records center concept. Larger commercial records centers are continually absorbing smaller ones. The records manager outsourcing his records center operations must keep abreast of these activities. Changes in ownership could result in changes in operating policies and procedures. These may occur even if pricing remains the same. In the event of a takeover, existing contracts must be critically examined to assure that existing contract commitments are honored or re-negotiations are undertaken for possible improvements. Outsourcing arrangements are typically extremely complex transactions to structure and successfully negotiate, and the potential legal and financial ramifications are always less familiar to the first-time customer than they are to the experienced outsourcing vendor. Given these significant hurdles, companies considering outsourcing should be prepared to comprehensively evaluate and address all aspects of the arrangement, including all scope, price and performance issues. In addition, companies should be prepared to proactively manage the outsourcing vendor throughout the term of the outsourcing relationship. [xii] It is the records manager’s responsibility to assure that the most cost-effective and efficient systems are used in the management of his or her organization’s records. This is true for current office requirements as well as inactive and semi-active records. Records managers have the option of establishing and maintaining their own records center or outsourcing this function. Regardless of which approach they take, they must have a full command of all the factors that need to be considered in operating a records center, as well as the role it plays in the inter-functional relationships of the overall records management program. Records managers must take the proactive role mentioned above. Too many outsourcing decisions are made independently by management and records managers are concerned about a "sour grapes" attitude if they oppose. The records manager is the only one that can make outsourcing work. He is the only one that can audit its cost effectiveness and efficiency. Outsourcing has, in my opinion, weakened many programs by being presented as a "cure-all" to problems internal program support cannot and will not address. The growth of the outsourcing concept for records centers has been fanned by the failure of management to fully understand or justify the records management function’s need, a failure to accept the legal value of new technologies, and the failure to evaluate the benefits from an all inclusive records management program. The negotiable nature of commercial records center arrangements and the understandable privacy of such arrangements limits the open-end discussion of case study comparisons. An occasional article on successful in-house, as well as outsourced records center operations would help to support the need for a definitive analysis of the two approaches. Whatever decision is made, it should reflect the pride an organization has in the records centers physical appearance, its operations, and its cost effectiveness.
[ii] Gates, pgs. 327-329. [iii] PRISM (Professional Records and Information Services International), 16 E. Rowan Street, Suite 400, Raleigh, NC 27609 (www.prismintl.org). [iv] National Archives and records Administration (Federal Register, April 30, 1999, Volume 64, Number 83 [ Pages 23510-23516], 36 CFR Parts 1220, 1222, and 1228. This ruling resulted in considerable discussion between commercial records center interests and NARA, particularly in the areas of shelving heights and room capacity. While certain content is expected to become "recommended" rather than "mandatory," the final ruling will provide valuable safety guidelines. [v] National Fire Protection Association, 1 Batterymarch Park, P.O. Box 9101, Quincy, MA 02269-9101 (www.nfpa.org). [vi] Mary F. Robek, Gerald F. Brown, and David O. Stephens, "Information and Records Management," Glencoe/McGraw Hill, Inc., Westerville, Ohio , 1995, pgs. 462-511; William Benedon, "Records Management," Prentice-Hall, New York, 1969, pgs. 65-124. [vii] William Saffady, "Cost Analysis Concepts and Methods for Records Management Projects," ARMA Publications, Prairie Village, KS. [viii] Assistant Secretary of Defense, 6000 Defense Pentagon, Washington, D. C. 20301-6000. This standard sets forth mandatory baseline functional requirements for Records Management Application (RMA) for software used by DoD Components in the implementation of their records management programs; describes required systems interfaces and search criteria to be supported by the RMAs; and describes the minimum records management requirements that must be met, based upon current National Archives and Records Administration (NARA) regulations. Proposed revisions to this standard are being reviewed for submission to the DoD. (http://jitc-emh.army.mil/recmgt/) [ix] Michael J. Faber, "Selecting An Offsite Commercial Records Center," Records Management Quarterly, January, 1997. [x] Richard Raysman and Peter Brown, "Key Issues in technology Outsourcing Agreements," (webmaster@brownraysman.com). [xi] National Records Center Consortium (NRCC), James Booth, Executive Director (jbooth@earthlink.net). [xii] Aaron M. Oser and David H. Rutchic, "Successfully Outsourcing IT Operations," New York Law Journal, NLP IP Company, New York, New York, May 10, 1999. Document Service Company Phone: 419-422-3330 Document Service Company is a division of Findlay's Tall Timbers Distribution Center, Inc.
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