May 2005

Public-Private Partnerships

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The private sector has played a significant role in revolutionising the way we work and communicate today. Investment in telecommunications infrastructure projects alone with private participation is estimated to have topped USD 210 billion in the developing world over the 1992-2002 period1.

By definition, a Public-Private Partnership (PPP) is a contractual agreement between a government entity (public sector) and a for-profit corporation (private sector). Together, these entities agree to provide services to the public by combining their assets and skills and share the risks and rewards. Traditionally, PPP has been applied to core infrastructure oriented projects or public works such as water, highways, and bridges to name a few. The maturing of ICT and its dominance since the dawn of the century has posed one question to governments worldwide: how to partner with the private sector in e-Governance. Other challenges range from financing e-Gov-ernment projects to technological independence. The increasing demands for information and higher service level expectations constrained with limited budgets have added to the complexity of such initiatives.

The landscape today

The impact of the Internet and telecommunications as a medium to access and disseminate information has changed the world politically and geographically. For instance, worldwide mobile phone subscriptions increased from 32 million in 1998 to 1.4 billion in 2003. About 23 percent of the world’s population is ‘connected’, according to the International Telecommunication Union2. The quantum jump in the availability of affordable communications is a catalyst for information dissemination and the counter demand. A world without boundaries operating in a 24/7 environment is a reality for every country. Countries big and small have realised the importance of operating across time zones to stay afloat in global markets.

Observing and learning from peers is the model of the day as opposed to building from first principles or in isolation. Bringing transparency in government processes is not a new agenda anymore; today, it is an expectation. The transparency now goes beyond political boundaries where peers and/or global powers are constantly watching each other.

Across governments and countries, there are a common set of core processes that may, in principle, be identical.

The ‘Yesterday’ syndrome

The pace of government modernisation is only likely to increase. This has put significant pressure on governments to review, reengineer and deploy citizen-centric services at a faster pace than a traditional public sector core sector projects cycle. It is no stretch of imagination if one were to state that ‘all projects were to be completed yesterday’. In addition, organisational transformation and retooling the workforce to conform to this new paradigm is a challenge governments will continue to face.

The inside-out approach

During the dotcom era governments had to rush to the Internet world to display their involvement and commitment to this new medium and adopt it as the new channel for interaction with constituents. Governments worldwide already have several e-Government initiatives in place today. These range from simple information dissemination to complex transaction oriented systems for critical functions such as budgeting, tax and revenue, or social services. This may have resulted in the imposition of a new layer of interface on existing infrastructure and complex business processes residing in islands of technology or processes. The support costs of this approach continue to increase and will be of serious concern. Inability to adopt or implement new business processes, and scale up to future demands is one of the major risks in this approach.

Another major challenge for governments worldwide is ‘collaboration’ across different government entities. This constraint deprives the administrators of leveraging the economies of scale such as procurement across ministries or departments, sharing information across agencies for public safety, or even effective collection of taxes. Governments will be expected to integrate at a local, state or central level, and the need to adopt a uniform infrastructure strategy and subscribe to a common platform that becomes the foundation for future building blocks is real. This view of a ‘common platform: a layer above the infrastructure providing core services, open to integration and build upon’ is a reality today and gaining momentum in the industry. Subscription to this concept and strategy is likely to make current and future initiatives of governments a reality – within budget and on time. This strategy termed as the “insideout” approach with emphasis on building the core foundations inside and expanding outwards is the most viable approach in today’s changing landscape and will provide the best returns on investment.

The fundamental concept here is to separate the business processes layer from the network, hardware, databases and operating systems that can be grouped as the ‘infrastructure’. The infrastructure continues to get efficient and affordable and is available practically in the form of a commodity. Replacing or swapping some of these components in real-time is possible today and will only get smarter as we progress.

The layer that controls the business processes is of concern and importance today. Across governments and countries, there are a common set of core processes that may, in principle, be identical. These include planning and execution of budgets, managing the human capital, ensuring a fair and transparent procurement, efficient collection of taxes, and providing basic services to constituents such as registration and payment of fees. The implementation aspects of these processes may differ from country to country and are addressed through localisation – yet the fundamentals are common and could be based on best practices. These core processes are key targets for a ‘Buy’ approach for prime reasons such as proven and tested processes with options to adapt to the local requirements. There could be additional processes that are specific in nature and may be required to be built and integrated with the core processes. The advantages in this approach are obvious when a common platform strategy is adopted:

• A platform proven and available to all
• A platform that offers a standard set of services that could be readily used
• A platform open by design and technology to facilitate integration
• A platform that supports integration and development of custom processes.

Managing the portfolio of business applications and adapting them to changes in a cost effective manner is the key to successful initiatives by governments in future. Let us examine additional issues faced by governments today and how partnerships on an inside-out approach could be of importance.

The right budget

Budgeting for e-Government initiatives is a relatively new territory for administrations. “How much does it cost for the right solution?” is the basic question on the administrators’ mind. However, the key question ought to be “What is the right solution?” The traditional budgeting cycle coupled with changes in the technology and pricing of solutions and services adds a level of uncertainty to the outcome and the adequacy of requested budgets. Defining scope of implementation in e-Government oriented services is a bigger challenge to administrators as compared to the core sectors.

Investing in the most effective technology

It is imperative that governments adopt the best value technologies and solutions for their constituents. However, technologies have changed rapidly in the past and may continue to change. Hardware has transformed from specialised goods to a commodity. Is the public sector model adaptable to dynamic pricing models and landscapes? Subscribing to a platform that is based on open technologies and enables reuse is a significant step towards the best value for money acquisition.

Bringing transparency in government processes is not a new agenda anymore; today, it is an expectation.

Build or Buy dilemma

When it comes to the business solutions layer, organisations small and large are faced with the same question – Build or Buy? The immediate reaction would be “Why build if you could buy?” This is true in a majority of the cases except for specialised processes that may require custom development of solutions. Implementers need to ensure that adequate expertise and talent is available locally to adopt and implement the ‘Buy’ solutions.

Managing the risks

Risk management is the core element in government-led technology initiatives. Anticipating risks and planning accordingly continues to be a major challenge. Risks could be in the form of gaining acceptance, staying within the budget envelope, retooling the workforce, changing the work culture and finally planning and scaling for an unprecedented success if all goes well.

Measuring Return on Investment (ROI)

Governments today are moving towards results and performance-oriented measurement.

The key challenge is how to measure ROI in public sector and make it meaningful enough to adopt and replicate the successes or ensure that failures are rectified in future initiatives. Unlike private sector, ROI has different flavours in public sector such as Political, Operational and Social ROI that makes it more challenging to measure.

Selecting the right partner

Given the above challenges, the crucial question is how does one select the right partner. The conventional methods of “lowest cost” or “best value” may not be applicable in all cases. Intangibles yet important are factors such as the vision, long-term strategy, and staying power in turbulent markets that may influence this decision.

Partnership is all about sharing the risks and the rewards.

Enrolling Private Partnership

Today, the dividing lines between public and private sector are blurred due to the nature of integration of processes in the value chain. As an example, a constituent conducting business with the government using a portal is unaware of the series of events that occur behind the scenes and the entities that are involved in the process. These entities could be financial institutions, suppliers, NGOs collaborating with the government based on a variety of private public partnership models. Traditional project oriented approach for private partnership in e-Government has had limited success so far. Changing technology, evolving business processes, ownership, sustaining the economic model of the partnerships and measuring the ROI for both parties have been some of the issues in this approach. The argument here is to propose a partnership between the industry and governments on a scale that has a long lasting and positive impact on the future of constituents and economies of countries. A common operating platform that is committed, funded, continually innovated, supported by the private sector and subscribed by the governments could be the most successful form of partnership that can be envisioned.

Economic exclusion and digital divide has been of concern in developing countries. Building a robust eco system around such a platform may have a long lasting socio-economic impact on the government and the industry. The eco system provides opportunities for small local firms to integrate with the leading industry players, adopt new skills, enhance the human capital and provide affordable technical expertise to governments. The larger the eco system the more positive will be the impact and the ability to steer collectively the refinement of the platform in the right direction. Concerns that are expressed in this approach include being locked into a technology or paying a premium to subscribe to such a platform when compared to open source freeware. A partnership of this scale has distinct advantages. The subscribers, the platform providers and service providers are all stakeholders and should be able to leverage their roles and ensure a balance.

To many governments, partnering with the private sector in e-Government is like navigating in uncharted waters. Yet, this could be the most effective way for governments by adopting an inside-out approach where the government can lay the foundation using an open platform through private partnerships and build upon it. After all, partnership is all about sharing the risks and the rewards.

References:

1 Financing ICT needs in the Developing World: Public & Private Roles, February 2005 Report published by the World Bank.
2. ICT Statistics, 2003, International Telecommunication Union

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