Buying into e-gov
Who, what and how
by Nicole Tedesco
In the scramble to meet e-government agendas, a number of Canadian
public sector organizations are streamlining their procurement processes
in order to better manage the purchase of required software and hardware
and the services of solution providers.
IT procurement can be frustrating for both governments and suppliers,
says Joan McCalla, Ontario's corporate chief strategist, Office of the
Corporate CIO, Management Board Secretariat. "Obviously government
needs an open, fair and transparent procurement process and the best value
for taxpayers. But at the same time … sometimes our processes are slow
and unwieldy," she says.
It isn't just about buying a particular piece of hardware or software.
It's more about taking a vision and strategy that solution providers have
to offer and then working together to come up with a solution, one that
involves shared risks, shared rewards, shared responsibility and shared
accountability in the design, operation and ongoing development of
e-government initiatives - the domain of public-private partnerships.
"That is a very non-traditional field for the government to
procure, because it somewhat changes the basis of the relationship - it
moves from vendor-supplier to that of solution provider," says Martin
McGrath, president of KPMG Consulting's Public Services Practice in
Canada.
In government procurement, the purchase of IT products and services has
always been a bit of an oddity. The difficulty is how IT contracts are
awarded and managed. Traditional procurement processes leave little room
for the flexibility that is the very heart of any IT system. And with
little or no innovation, often the result is that government builds
systems with yesterday's technology to meet tomorrow's needs.
Many government IT executives find it challenging to balance the need
to get to market faster and take advantage of marketplace innovations with
preserving fairness and transparency in the procurement process.
Shared-risk partnerships, risk management frameworks and fast-track supply
arrangements are just some of the tools they turn to.
"We need to look at the process by which we procure IT services -
no question - because services are very different from goods. Buying a
chair is quite different from buying consulting advice," says Lori
MacMullen, New Brunswick's chief information officer.
Last year, New Brunswick spent $100 million on a wide range of IT
products and services. The province gained international recognition as
one of the first jurisdictions to successfully initiate and deploy
"single window" citizen access to government services. Service
New Brunswick (SNB), a Crown corporation, integrates traditional and
electronic service delivery, offering services from most government
departments over-the-counter at one-stop service centres, over the phone
at SNB Teleservices and through SNB On-Line. In April, New Brunswick
established an eNB Coordination Office that oversees the province's
electronic strategy including e-government, e-learning and e-business. The
next stage in the eNB strategy is one electronic window.
MacMullen says governments can protect the principle of public
accountability and at the same achieve efficiencies. "We will always
be driven to protect the public good - an open, fair, transparent
procurement process - the fundamental principles wouldn't change. But how
we achieve those results may change."
She notes that flexibility - everything from an outright tender for
goods, to Request for Information (RFI) and Request for Proposals (RFP)
and also the Common Purpose Procurement process - currently exists in the
procurement structure as far as the "how" is concerned, it just
requires governments to be "creative."
"By creative, I don't mean breaking the rules," she says.
"For the most part, the procurement structure allows us to do what we
need to do. We look at creative relationships with our vendor community
and, with private sector help, do what we need to do. But there isn't a
pot of money at the end of the rainbow so we have to find innovative ways
to fund these initiatives."
SNB recently partnered with CGI Group Inc. to accelerate the pace of
electronic service delivery and provide infrastructure investment and
research and development. In return, CGI will be able to market SNB's
integrated service delivery model to e-government markets around the
world.
Neil Sentance, director of the Procurement Policy & IT Procurement
Branch with Ontario's Management Board Secretariat, says the difficulty
with IT procurement is finding a mechanism that allows government to take
advantage of good ideas yet ensure that everyone is treated the same.
"In order to ensure fairness you need a process that really allows
any qualified bidder to submit a proposal. We have to give everyone the
opportunity, in terms of the length of time the RFP is on the street, to
respond. We need to ensure that we've answered all questions fully and
that once we close the procurement we do not vary the evaluation process
from what we say in the RFP. The challenge is to not inadvertently affect
the process if a vendor comes forward with a creative idea - that's a real
challenge because the creative idea was not part of what we asked
for," he explains.
Theoretically, Sentance says, the solution lies in designing
procurement on the front-end to make it clear to vendors that government
is looking for solutions. "But, to normalize bids across alternative
solutions - to ensure fairness - is tough and something we haven't much
experience with. Our entire professional practice is around comparing
apples to apples, not apples to oranges.
His department is developing a Risk Management Framework - policies and
guidelines that will help ministries and IT clusters structure their
procurement strategy from the point of view of risk. Part of the new
framework is a review aimed at improving contractual terms and, in some
circumstances, potentially standardizing contract terms "to ensure
that when we go to the street there is a reasonable allocation of risks
between the two parties." And, says Sentance, his department has had
"fruitful and intensive consultation" with ITAC Ontario around
some key industry concerns, such as limitation of liability and
intellectually property provisions.
"We're getting people to ask fundamental questions about the risks
of the project and then ask how the procurement strategy should be
structured in terms of mandatory requirements, rated requirements, price
and contractual terms and conditions," he says.
With these new guidelines, Sentance hopes to construct procurement
documents that reflect individual IT projects. "We won't require from
vendors things we don't need. It is a move away from a one-size-fits-all
approach to say that in some circumstances, the following mandatory
requirements are reasonable, but in other circumstances different
requirements are reasonable given the higher risks to the Crown."
He says the process for low-risk procurement can be faster, less
onerous and designed to encourage small business who may be daunted by
government requirements. For purchases that are mission-critical and have
significant impact on the public, and those that involve the delivery of
services by third parties, government wants to ensure some "fairly
comprehensive and heavy-duty protections in the procurement strategy and
in the contractual terms and conditions."
Additionally, Sentence's department has also sought a consistent
consultation process with the IT vendor community prior to the release of
an RFP. He says better and strategic communication is important since it
affords industry the opportunity, early in the procurement process, to let
government know if it is heading off in the wrong direction and it gives
the vendor community a chance to identify partners to team with for a
joint bid response.
In its efforts to meet its commitment to become a world leader in
electronic government by 2003, Ontario's Ministry of Consumer and Business
Services signed a five-year contract with a consortium of companies led by
Bell Canada. The contract follows the guidelines of governance and
accountability while allowing for a shared-risk management approach.
The Bell consortium, including BCE Emergis, CGI Group Inc. and KPMG
Consulting, is tol deliver 24 high demand electronic services to the
public by late next year. They will build an IT interface that enables
government information systems to use Bell's electronic channel
infrastructure securely and deliver high-volume, routine products and
services over telephone interactive voice response (IVR) systems, Internet
and multimedia access terminals. CGI will build and manage the delivery
network, BCE Emergis will supply the secure payment technology and KPMG
Consulting will implement the technology designed to protect individuals'
personal information.
The value of the contract, estimated at between $60 million to $90
million, is driven largely by customer up-take, says Barbara Hewett,
director of service management at the ministry. Based on the number of
transactions that occur, the consortium will be paid with money saved
through efficiencies.
"So the more people who use the channel, the more money Bell
makes. This provides the consortium incentive to deliver good quality
service - so that customers come back - and also to market the
channel," she says.
In fact, customer acceptance and satisfaction will be a major factor in
evaluating Bell's contract performance, says Hewett. "As an
individual in Ontario, doing the work that you need to do with the
government should look quite different in the future as a result of this
contract." She calls the contract a "complex business
offering" - combining an IT project and a service delivery project
into one contract.
When evaluating the bids, the government looked at both the quality of
the proposal and price. Hewett says the weight was 50-50 with the proviso
that proponents had to successfully pass on quality before their price
envelope was opened.
"On the IT front, we looked for depth of expertise and a design
that would be scalable as business needs changed. For service delivery, we
looked for a customer service approach that fit with the government's
objectives - a channel management approach and design that would be
client-friendly and responsive to changing customer needs - and creativity
in how to deliver services efficiently and effectively."
The competition followed a traditional public procurement process: the
RFP was posted on MERX for the usual time frame. The competition closed in
early February 2001. An evaluation period of a couple of months involved
seven Ontario Ministries. In June 2001, the Bell consortium was selected.
Contract discussions occurred over the summer and a contract was signed in
early September. Hewett credits a detailed pro forma section in the
RFP as the main reason contract negotiations moved along expeditiously.
"For a contract of this value it is pretty unusual to get it
negotiated and signed in that time frame - in fact, it is extremely
unusual. I'd be surprised if has ever been done."
At the federal level, Public Works and Government Services Canada (PWGSC)
announced a Supply Arrangement in June 2001 that essentially fast-tracks
the IT procurement process for federal departments and agencies struggling
to meet Canada's commitment to make the federal government the most
connected to its citizens by 2004.
"Without undertaking a major policy reform, we've been able to
streamline the existing framework for procurement, making it more
effective," says Canada's CIO, Michelle d'Auray, referring to the
Government On-Line (GOL) Supply Arrangement.
Sylvain Cardinal, manager at PWGSC's GOL Procurement Office, explains
that the Supply Arrangement differs from a contract in that a contract
identifies a definite need and represents an obligation on the part of
government to contract with suppliers. With the Supply Arrangement,
companies agree to provide GOL services on an "as-and-when-requested
basis, and under set terms and conditions." Following a competitive
tendering process, 175 companies from across Canada were pre-qualified to
provide GOL services to the federal government until December 2004. The
list of companies will be refreshed annually. Suppliers qualifying next
year will be added; suppliers already on the list will remain and will not
have to re-qualify.
GOL services are divided into four streams:
- business process and content services (assessing the current state,
re-engineering business processes, and developing content for the new
delivery channels);
- IT professional services (developing, integrating and implementing
all technical aspects of Government On-Line);
- human resource management services (mobilizing, preparing and
training federal employees to undertake the work, and developing
approaches and preparing them to deliver services through the new
delivery channels); and
- composite solutions (providing a turnkey solution).
Prior to the Request for Supply Arrangement, there were extensive
consultations with all stakeholders, including suppliers, central agencies
and government departments. In December 2000, PWGSC also issued a draft
RFP to get further comments from the industry and clients.
According to Graeme Gordon, a partner with Accenture's E-government
practice based in Ottawa, "only two or three contracts have come out
and they are relatively small. So whether it works and is available is
actually a question in my mind."
In an Accenture study released earlier this year, Canada led 22
countries in e-government. Gordon says Canada was first because of the
federal government's launch of its portal and the adoption of a
cross-agency approach to e-government making it easier to interact with
government. But, says Gordon, a major challenge for Canada, and
governments worldwide, in achieving e-government is funding. "Right
now, I'm not sure that the funds and the appetite are there," he
says. "I find we've set the goals, [but] in a lot of cases goals are
being set without associated funding."
"Funding is always an issue," says d'Auray. "I think our
business case is sound but these initiatives are only as good as the
deliverables that are produced." To date, $280 million over two years
has been allocated to jump start GOL through Pathfinder Projects and
cross-departmental infrastructure projects such as the Secure Channel.
Electronic service delivery represents an opportunity to look at
"involving the private sector - on the one hand in providing and
helping shape the transformation but also in providing the service in
helping us achieve some of the efficiently and to do so in a partnership
mode," says d'Auray. But, "can we define a number of areas or
initiatives where a shared risk environment is both sufficiently
manageable and intriguing enough - where the potential benefits for both
the private sector and the government would outweigh the traditional
model?"
She notes that other governments, such as Ontario, have been more
aggressive on that front. Governments tend to be fast followers, she says.
"And in this instance, given that federal procurement has always been
an interesting environment, I think learning from others is a good
thing."
Nicole Tedesco is a Toronto-based freelance writer.
Alberta sets priorities
Governments are eager to move to electronic
procurement in order to reduce purchase costs and internal
administrative fees, but to enjoy the efficiencies that an electronic
supply chain offers they must first streamline current procurement
processes.
"You can set up a great e-marketplace and
e-procurement system but if you are still trying to adapt to old
processes, and that is what costs you money to begin with, then you
won't achieve the savings and ultimately the project will fail,"
warns Robb Stoddard from Alberta's chief information office.
Regardless of the electronic solution,
procurement savings for Alberta will be found in process change and
renewal, not an electronic supply chain, he says.
Alberta went to the market to set up an
e-marketplace, but when the government looked at the cost of
establishing the marketplace with a large partner, it found it too
costly. Stoddard says the original business case for the e-marketplace
showed that 83 percent of the potential savings came from process
renewal or strategic sourcing.
"We made the decision to focus on that 83
percent," he says. "Take a look at where your true saving is -
if it is in processes as opposed to the technical solution, that is
where you need to focus your efforts."
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