Partnership Programs Gain Following

Partnership Programs Gain Following

David Moon

By Steve LeSueur, Staff Writer

Utah Chief Information Officer David Moon wanted a company to build and operate the state's Internet site but knew it could take more than a year to get the necessary funding in place, so he advertised for someone who would do it for free.

"We asked for a self-funded contract," he said. With today's fast-changing technology, the state "didn't have time to wait one and one-half years to get funding to do this."

Utah turned to the National Information Consortium of Overland Park, Kan., a company that helps governments use the Internet to cut costs and provide electronic services. But instead of charging the state to build and operate the Internet site, the company makes its money by charging fees for some of the online services the site provides to Utah businesses and citizens.

"Our revenue-sharing arrangement enabled us to get funding and resources from the private sector without any capital outlays on our part," said Moon. Utah's electronic gateway, called E-Utah, is slated to go live soon with electronic commerce applications.

Utah's partnership with the National Information Consortium is part of a growing trend by governments to enter into unique partnerships with the private sector to obtain cutting-edge information technology products and services. Such partnerships are expected to increase as governments look to new technologies, especially electronic commerce, to streamline operations and improve services to citizens, according to a new study.

The study, "Vision 2010: Forging Tomorrow's Public-Private Partnerships," is based on surveys and interviews with 700 government officials throughout the world, including nearly 100 U.S. officials, regarding how government organizations are expected to change over the next decade.

More than 85 percent of the U.S. respondents said that information technology and electronic commerce will be the leading drivers of change for governments.

"It was surprising that budget constraints were seen as less important in driving change," said Rob Berton, a top official in Andersen Consulting's state and local practice. The Chicago-based Andersen Consulting participated in the study with the Economist Intelligence Unit of the Economist Group Ltd. of London.

Cost always will be important to governments, said Berton. But it is significant that many U.S. officials foresee that providing service, and not tightening budgets, will be the dominant reason for change, he said.

As governments increase their reliance on the private sector to provide IT services, U.S. officials expect the nature of public-private partnerships to move away from traditional contract arrangements.

At a recent meeting of governors, Virginia Gov. Jim Gilmore (R) said that the velocity of change in technology likely would require new relationships with vendors.

"You may have to rent technology and work together with companies so you can remain light-footed, as this industry goes so fast," he said.
The "Vision 2010" study pinpointed two main types of emerging partnerships:

?Governments will develop a pool of preferred suppliers from which government departments and agencies can choose to do business.

?Governments will use private finance initiatives, such as Utah's partnership with the National Information Consortium.

Kentucky already has embarked on a program to create a pool of preferred IT vendors. In April, the state selected 15 companies that will have the right to bid on virtually the entire major IT work during the next three to five years.

The goal of the Strategic Alliance Services program is for the state's agencies to create close partnerships with the companies to identify problems and design solutions, said Aldona Valicenti, Kentucky's chief information officer. In addition, the selection of preferred vendors is expected to reduce dramatically the time it takes to buy IT services.

Virginia is also considering the establishment of a pool of preferred IT suppliers through a statewide, multivendor contract, said Mike Thomas, the state's deputy secretary of technology. Virginia's initiative likely would include more companies than Kentucky's Strategic Alliance Services program and have more narrowly focused contracts, but the goals would be similar, said Thomas.

"We look to the private sector to come to us with innovative and creative proposals. We don't want to box companies into a specific solution," he said.

Initiatives financed primarily or solely by the private sector also are more prevalent. American Management Systems of Fairfax, Va., for example, has installed major tax collection systems in a number of states under "benefits-funded" contracts.

Under this arrangement, AMS installs the system, which re-engineers the state's tax collection and services, and then is paid with a portion of the additional tax revenue that its system generates.

Officials in California, Hawaii, Kansas and Virginia hired AMS to implement benefits-funded tax systems after running into trouble getting their legislatures to fund modernization projects, said Steve Shubella, a vice president with AMS' tax and revenue practice.

But low cost and low risk are not the only reasons that benefits-funded projects are attractive to government, he said. The arrangement also helps AMS and its government customers avoid some of the confrontations and problems that can occur in traditional projects.

"It creates a partnership relationship where both parties are driving toward a common goal," said Shubella.

In Virginia, for example, AMS has a five-year, $122.9 million contract from which the state expects to reap $50 million to $60 million annually in additional revenue after the project is completed in 2003.

Thomas said Virginia would like other state agencies to use the model of funding IT modernization projects with the savings generated by the new systems.

Both Thomas and Shubella said this concept would be more difficult to apply because savings, in contrast to increased tax revenue, are more difficult to measure. But it could provide a way for states to improve services with relatively little outlay.

The emergence of electronic commerce and online services also is changing the way governments partner with the private sector.

In addition to Utah, eight other states have hired the National Information Consortium to operate their government Web sites.

In Kansas, the company actually generates revenue of $8 million to $10 million a year for the state. It pays state agencies for the information it sells to businesses and citizens, said Don Heiman, the chief information technology officer for Kansas.

A similar model was followed by Arizona and IBM Corp. to implement an online vehicle registration system. Armonk, N.Y.-based IBM paid to develop and install the ServiceArizona system, and now the company receives $1 for each online transaction and a portion of the state vehicle taxes and credit card processing fees.

In addition to streamlining the process for renewing license plates, ServiceArizona is expected to save the Motor Vehicle Department $1.25 million annually.

Dade County, Fla., is exploring a unique way to recoup an $18.5 million investment in new document management technology. County officials are negotiating a revenue-sharing partnership with Andersen Consulting to give Andersen exclusive rights to market and implement nationwide a system that the company developed for Dade's traffic court.

Dade officials say that up to 30 counties already have expressed interest in the Web-based system, called Simultaneous Paperless Image Retrieval Information Technology, which electronically processes traffic cases from the initial citation to final disposition by the Dade courts.

Andersen and Dade officials are still discussing the terms of the partnership, said Berton.

The Vision 2010 study sees the new public-private partnerships as part of a general trend by governments worldwide to outsource key functions, such as computer applications, IT and telecommunications services and data centers.

The report said barriers to public-private partnerships remain, including government regulations, funding procedures, and labor unions.

"The public sector of the United States is far more unionized than the private sector, and no outsourcing deal can fail to account for this powerful group," said the study.

Shubella said: "You don't want to tie staff reductions to savings." He recommended IT modernization be used to shift workers from mundane tasks to customer service. "It's hard to launch a project based on staff reductions."

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