Public Private Partnership for E-governance

8/13/2019 Public Private Partnership for E-governance

1/11

Public Private Partnership for e-Government

J Satyanarayana IASCEO, National Institute for Smart Government,

Hyderabad,India

[ ABSTRACT : e-Government is a complex, multi-functional process that has the promise oftransforming government. However, governments do not have the required financial,managerial and technological resources to implement e-government in a sustainablemanner. There are complementarities between the public and private sectors in the skillsetsand resources required for success in e-government. PPP is a model that exploits this fit.This paper discusses the different PPP models, the conditions necessary for its success and afew case studies.]

(KEY WORDS

e-Government; PPP; Accountability; BOO; BOOT; JV; Political will;Monopoly)

e-Government is the process of transformation of the relationships of thegovernment with its constituents citizens, businesses and employees using the tools ofICT (Information & Communications Technology) to bring about enhanced access,transparency, accountability and efficiency in delivery of government information andservices. Implementation of e-government raises several organizational, process-relatedand technological issues. It is a complex issue that needs multi-dimensional approach.

New technologies demand new types of implementation models. Adoptingconventional procurement methods would not take us far on the path of e-government. Inthe conventional approach, the project ownership lies with the public sector itself along withthe responsibility for funding it and bearing the entire risk. Can we not think of newermodels that enable sharing of funding responsibility and risk ? In this paper, we discuss thePublic Private Partnership or PPP model for e-government, which is being increasingly triedout in different parts of the world.

The concept of PPP has been brought into operation over a decade ago, primarily inrelation to the construction and operation of public infrastructure projects like bridges,airports, highways, hospitals etc. PPP is a reform that is a generation next to privatization.Privatization is the process of involving the private sector in the ownership and managementof ongoing and existing projects and businesses of the public sector. In PPP, the privatesector partner is inducted into a project right from the stage of initiation to completion andmanagem ent. The word PPP is used interchangeably with PFI or Public Finance Initiative

a concept in use in the UK. Though PPP has been in vogue for over a decade, not muchresearch has taken place in this area- and very little in its relation to e-government. Theexperience has also not been extraordinary. In UK, as of end of 2002, 512 PFI deals havebeen signed, of which 208 are in local governments. PFI scheme in education and healthhave caused considerable controversy, while PFI IT projects have proved practically difficultto get right.

2. Why PPP for e-Government ?


2/11

What could be the provocation for governments to start looking at PPP moreseriously now in relation to their e-government plans? The reasons could be many anddifferent for different governments.

(a) Combining accountability with efficiency : The most common belief is that PPP fore-government would combine the accountability and domain expertise of the public sector

with the efficiency, cost-effectiveness and customer-centric approach of the private sector.Conceptually this is sound. Despite the shortcomings like legacy mindset, bureaucracy, redtape and lack of responsiveness to citizen needs, the public sector is still the largestrepository of domain expertise in addition to possessing the monopoly of exercisingstatutory powers. The public sector, however is not adept at absorption of newtechnologies. The private sector on the other hand, is reputed to be efficient and cost-effective and more importantly, agile enough to absorb and apply new technologies ininnovative ways. Therefore it is possible to create a win-win situation combining the corestrengths of the public and private sectors to fulfill the objectives of e-government i.e.delivery of efficient online services.

(b) Complexity and size of e-government : All said and done, e-government is adifficult game. It involves application of complex ICT technologies and managementpractices to equally complex business processes of the government over a sustained period.This is complexity compounded ! The situation appears more intractable if we visualize thegovernment to be a complicated amalgamation of heterogeneous agencies withdynamically changing business processes, cross-communications and dependencies. It isa tall order to expect the government organization to accomplish the task of e-government in any meaningful timeframe. An assessment of the magnitude of effortinvolved in e-government in India, puts it at over 1,25,000 man years! Theoretically, theprivate sector is supposed to be able to raise unlimited resources provided there iseconomic sense in the e-government exercise. There is thus a reasonably good matchbetween the need of the government and the resource of the private sector.

(c) Pace of implementation : ICTs change fast. This applies to all its segments

hardware, software and networks. Newer versions and releases of software operatingsystems, database servers, application servers, and security software are released atregular intervals by the vendors to maintain and capture market share. Networks anddevices are no exception. As is often said the only thing that is constant is change! Thetypical life cycle of a large e-government initiative is 18 to 24 months from initiation tocompletion. Lot of water would have flown under the bridge during this period, in terms oftechnological advances. In this fast-changing technology scenario, it is impractical to planfor implementing projects one after the other. By the time a second batch of projects isfinished, they would be incompatible or out of sync with the fist. We need to adopt a

carpet - bombing approach after we have designed appropriate architectures and readiedthe people. It is not possible to attain and maintain such a high pace in implementing e-government, if the government attempts the task by itself. This is a compelling reason to

join hands with the private sector.

(d) Resources : The combined effect of the huge size of e-government effort and thegreat speed of implementation is that investments required in e-government sector arevery large over a continuous period of 5 years. It is estimated that India needs $ 8 billionof investment in e-government sector over a 3-5 years period - excluding the cost ofcommunication and access infrastructure. This is sixteen times higher than the currentannual IT spend of about half- a-billion in the government sector. Add to this thestupendous requirements in the managerial and human resource fronts. No governmentcan be equal to this task. Tapping the unlimited financial, managerial and manpower


3/11


4/11

government and create hope. Private sector cannot be expected to be the opening batsman in this filed! Mere political leadership, not backed up by administrative grit anddetermination would not create enthusiasm among the private sector. We needchampions of e-government among the top echelons of the civil service. Thesechampions have to carry the sermon of e-government and evangelize it across

various government agencies.Transparency and fair play in award of the contracts form the next set ofprerequisites that the private sector entrepreneurs look for, before venturing theirresources into e-government. The tender procedures of the government arecumbersome and those for e-government could be more elaborate andcumbersome. It is an extremely difficult - but possible - task to demonstrate thetransparency in e-government decision-making. However, when accomplished overa few projects, this task of demonstrating the transparency creates trust, especiallyamong the major technology players. It would create the abiding confidence thatthe resources sunk into bidding for e-government projects would not be lost. Andif lost, it would be in favor of a competitor who has made a better value proposition.Transparency promotes healthy competition. And coupled with consistency, itpromotes the spirit of partnership.Entrepreneurship is about risk-taking risk in anticipation of reward. Apartnership in e-government, therefore, presupposes that the risk is also to beshared by the partners the government and the private entrepreneur. Civilservants and political executives even - are known to be averse to risk. Theenvironment is conducive to the argument heads I win - tails you lose against theprivate sector partner. One of the pre-requisite characteristics that an entrepreneurwould, therefore, like to see is the propensity to take risk among political andadministrative echelons. A few innovative and potentially risky projectsimplemented successfully against all odds, create a fertile ground for generating aconviction among intending entrepreneurs and IT companies to gravitate towardspartnering e-government. The grooming of a batch of Chief Information Officerswho chant the mantra of e-government is a good augury in this context.

While a set of sporadic and isolated e-government projects sprinkled across severalsectors would be adequate to enthuse the private sector, attempts to draw upcomprehensive architectures and the big picture of e -government wouldundoubtedly make them commit to the cause. e-government architectures providea stable platform for the PPP exercise to go on for sustained periods. The exerciseof developing more mature and complete architecture is in itself a good ground forlong-term public-private partnerships in areas of technology, business processreform and human resources development.At the end of the day, business and industry tend to move to areas that havecurrent or future market potential . It is far-fetched to imagine that ICTindustry would choose the PPP route to e-government unless it makes economicsense. Volume and value of transactions and sustainability of the businessoperations are key things here. Creation of excellent e-government solutions isonly a part of the job done. More important is to create and maintain markets forthem. The value that customers see in an e-service is the foundation for a long-term business opportunity. This requires a real hard-selling effort in the initial,post-launch period of every e-government project. Such an effort is to be led bythe government to be carried forward by the private partner.

5.4. PPP for What ?


5/11

PPP model of implementation is more suitable to particular areas of e-governmentand not to all. The criteria for PPP include long-term nature of demand for a service,profitability and amenability to structuring a commercial framework and business model forPPP. The following areas are recommended for PPP. The list is illustrative, not exhaustive.

Information Infrastructure Projects.

e-government architectureData centersCommunication backboneCall Centere-government gatewaye-payment gateway

Government-to-Citizen Projects

Citizen service portalsIntegrated service centersAgency service centers.Networks of Kiosks.

Government-to-Business Projects

e-procurementG2B portal.

While contemplating e-government initiatives in the above areas, it is a good practiceto evaluate whether it is a fit case for PPP and if so, what form of PPP is best suited (asdiscussed below).

5. Forms of PPP

PPP can be of different forms, depending on the shares of government and theprivate sector in the investment, control as also on the strategic nature and commercialviability of the project/initiative. Let us see these different models of PPP.

5.1. JV Model : In this model, an SPV (Special Purpose Vehicle) is formed to undertakethe e-government project and /or to provide e-services. The joint venture can be led by thegovernment or by the private partner depending upon the strategic nature and sensitivity ofthe domain.

JV model is the preferred option for typically projects involving

(a) delivery of services, which are basic and permanent in nature(b) setting up of infrastructure with steady returns envisaged in long term(c) handling of sensitive data and information relating to citizens, businesses andgovernment.(d) close coordination with and cooperation from a host of government agencies.

The extent of government share varies from 51% to 11% . For instance, it could be:51% in category (a) with government retaining management control;49% in category (b) with private partner in control;


6/11

26% in category (c) with government representative being present on the Boardto ensure that the priorities of the government/citizen are taken care of ;11% in category (d) to provide the stamp of the government to lend credibility tothe JV in its interactions with government agencies.

The following guidelines are useful while structuring a JV for e-government.

i. The share of the government in the equity of the JV need not always be in cash.It can be in the form of tangible assets like land, building and equipment or in theform of intangible assets like the right to access government information anddatabases for providing e-services.

ii. The selection of a partner is usually done through an open competitive process.The pre-qualification criteria are required to be quite stiff considering the long-term or near-permanent nature of the partnership. Companies with a longstanding (at least 10 years), high turnover during the preceding 3 years (inrelation to the expected annual turnover of the JV) handsome profitability(exceeding 15%) and good track record in the particular area of e-government tobe handled by the JV.

In the short-term term the most viable (and perhaps desired) e-government partners may be multinational companies that have proven experience andcapacities to deliver. However, long-term development of local ICT companiescan, and often should be part of e-government planning. One effective strategymight be to pair an experienced multinational company with a suitable localcompany in the development and delivery of e-government applications. Thiscan promote the transfer of technology and skills to local industry which at thesame time ensuring that outsourcing producing results .[1]

iii. It is strongly recommended that, despite the stringent criteria adopted forselection of the partner, a JV should not be formed straightway. The bid

documents should hold out formation of JV as an option to be exercised after theselected partner has established its credentials by executing a pilot and runningit successfully for a period of 6 months. This would serve three purposes.Firstly, it would establish the viability or otherwise of the e-government project.Secondly, it would enable the government to make an accurate assessment ofthe technical, organizational and managerial capabilities of the partner. Thirdly,it would enable the partners to estimate the business model more accurately(than at the RFP stage) through an analysis of the transaction data and trendsrecorded during the pilot phase.

iv. It is necessary to draw up the RFP and the bid evaluation criteria as clearly aspossible to enhance the transparency of the selection process. Looking aroundfor successful implementations elsewhere could be one good way.

v. The agreements, both at the pilot stage and the JV stage, should be draftedwith considerable care engaging the best legal experts, as these documentsregulate the partnership over a long period.

5.2. BOO Model : Build-own-operate Model

In this model, the selected partner designs, develops and implements the project,most often, entirely at its cost and operates the system for a pre-specified period. The


7/11

options of the partners are kept open till the end of the period also known as theconcession period. The revenue model of the project is either based on transactioncharges (paid by the citizen or the government) or on EQI/EMI (Equated QuarterlyInstallment/Equated Monthly Installment) paid by the government to theoperator/service provider. The revenue model could also be a combination of a fixedEQI/EMI plus transaction charges.

The BOO model is suitable for projects that involve setting up physical infrastructurelike service center(s) for delivering services to the citizens. Good examples are e-government projects relating to issue of driving licenses, registration of vehicles, andprovision of integrated services to citizens across the counter. The important aspects indrafting the RFP (Request for Proposal) for a BOO Project are

(a) to determine the period of concession during which the partner (Concessionaire)is authorized to deliver the services and(b) the bid parameters dealing with the transaction charges and / or EQI/EMI to bequoted by the competitive bidders.

BOO model is usually applied to e-government projects that adopt time-testedtechnologies and have a fairly reliable revenue model.

5.3. BOOT -Build-own-operate-and-Transfer-model

This is almost identical to the BOO model except that the government exercises theoption to get the ownership of the assets created by the partner at the end of the project.The transfer cost is usually a small percentage 5 to 10 % - of the initial capital cost of theproject. The BOOT model is adopted where the technology is time-tested and the ICT assetsare expected to outlast the concession period.


8/11

4. ASP Model Application Service Provider model

The ASP model is an example of PPP where the partnership is quite tenuous. In thismodel, the government contracts to avail the services of the partner for delivery of services

as per mutually agreed service levels and commercial terms. The revenue model is typicallytransaction-based. The ASP model is suitable to e-government initiatives that involve

a) A requirement to launch the services in a short time frame.b) The technology is not complex and widely accepted and practiced in the private

sectorc) The nature of information is not so critical to governance.

Examples of ASP model are - design and hosting of websites that provide fairly staticinformation to the citizens, provision of simple services like downloading/filing of forms andprovision of MIS services in the G2G arena to the government agencies. The serviceprovider is usually not precluded from using its ICT infrastructure to serve othergovernment agencies or private agencies. Most often the ASP model is useful to leveragethe existing ICT infrastructure and management skills already established by serviceproviders. This creates a win-win situation by enabling the optimum utilization of ICT byleveraging the infrastructure already set up in the private sector and thereby reducing thetransaction cost to the government/citizen. The ASP model also saves the governmentagencies of the hassles of designing complex technology models.

5.5. Facilities Management: FM

FM is an arrangement whereby the responsibility of maintaining and/or managing theongoing e-government projects/assets is outsourced to a private company on a fixed costper period. Legally, there is no partnership between the government and private sector inan FM model. However the involvement of the private sector could be substantial in this

arrangement. Hence FM has been grouped under PPP. As mentioned, FM is ideal forongoing, operational e-government projects especially those involving maintenance of sitesin geographically distributed locations. The scope of the FM arrangement may include notonly the typical annual maintenance of assets but also supply of consumables and sparesand also front-ending the government agency to provide services to the citizens. Thefollowing are the benefits of FM:

a) FM frees the key personnel of the organization from the hassles of day-to-daytechnical problems and enables them to focus on their core businessstrengths.

b) FM results in cost savings to the tune of 15 to 20% in maintenance by virtueof specialization of the partner in that area.

c) FM helps maintain/deliver high quality services to the citizens due toenforcement of the SLA (Service Level Agreement) between the partners.


9/11

6. Issues in PPP for e-government.

All is not well in PPP for e-government. The partnerships tend to get into problems everynow and then. Let us examine the issues that come up and ways to ensure that they do notthreaten PPP relationships.

6.1. Lack of congruence in objectives : PPP is about the partnership in realizingshared objectives. The various models in sharing the investment and controls areonly organizational mechanisms. The success of PPP depends on the degree towhich the public and private sector partners align themselves along these objectives.Failure to realize this certainly leads to failure of the venture. The development ofa shared vision for the partnership between the two parties takes time and bothmust commit to developing an understanding of each others objective and besympathetic where these do not necessarily match their own says an officialspokesman of UK government, which pioneered the PFI concept. The objective ofproviding convenient, high quality e-service may often conflict with the objective ofmaking the initiative a commercially sound and viable proposition. Clarity onobjectives has to be achieved by both the parties at the outset.

6.2. Risk and Control: Sharing of risk and control is another slippery area.Most often, governments attempt to transfer the risk to the partner without passingon the related controls to the partner quoting public interest as the reason. Thisresults in one partner calling the shots and expecting the other partner to play thegame! An example is setting up a portal with substantial private investment with thegovernment trying to prescribe and control what services are to be offered and atwhat transaction cost. Operational controls should be passed on to the privatepartner in proportion to the risk transferred. This promotes adoption of innovativeapproaches rather than inhibiting them.

6.3. Clash of cultures : The organizational cultures of the private and publicsector differ widely in all parts of the world. This is bound to result in conflicting

situations, in as much as e-government involves substantial process reform needinginteraction between the partner company and the government agency or agencies incharge of the domain. The agencies look at the surveys, interviews and studiesconducted by the consultants of partner company as interference and disturbancefrom their normal duties. The private partners tend to look at the governmen temployees as bureaucrats with antiquated ideas that have outlived their time. Boththe views are substantially wrong. It is necessary to create a joint control andreview mechanism that creates mutual trust and confidence, especially during theinitial period of the project.

6.4. Monopoly: Several of the e-initiatives depend, for their viability, on theprinciples of aggregation of demand and economy of scale. Very often there isspace for only one partner in areas like e-procurement, country or state portal, datacenter, gateway and the like. This is likely to result in a situation of monopoly.- themonopoly of the state being replaced with the monopoly of the private partner andmore importantly, monopoly of a particular technology. While a monopoly appearsto be inevitable, at least in the initial periods of e-government growth, the followingmethodology is recommended to mitigate its impact.

The operational monopoly can be handled by defining the commercialfeatures of the contact unambiguously while notifying the project to an open bid.The service levels and the formula for determination of the transaction/ service


10/11

charges have to be spelt out in the RFP. The service/transaction charges could be acombination of a fixed base plus viable cost. The following factors are to beconsidered in arriving at the formula :

- Projected customer base and transaction volume- Length of the concession period

- Fee structure of the existing services- Price elasticity of the new services- Capacity for growth.

The model should provide for (a) revision of the charges, especially downwardrevision, as it often happens with advance in the ICT sector (b) a slab system wherethe transaction charge gets smaller with the increase in volume.

The technology monopoly can be mitigated by prescribing open standardsin conformity with the technology architecture approved by the government andensuring that there is scope for developing interfaces with other systems that maybe developed concurrently or in future.

Once the agency attains clarity and definiteness on the above issues and factors theminto the business model of the RFP and a transparent process adopted, one need notworry about a monopoly situation in e-government.

7. Case studies in PPP

PPP for e-government is relatively a new concept. There are not many majorsuccess stories as yet. The following cases, are a few examples of PPP

7.1 RCB Singapore : The Registry of Companies and Businesses, Singapore partnered withfour private companies, Crimson Logic, Dunn & Bradstreet, Singtel yellow pages and DP

Information Network ,with a view to provide value-added online information services oncompanies registered in Singapore. The following are the salient features:

a) RCB owns all the data. The partners have been permitted to replicate the RCBdatabase and sell the information with value-addition through transforming the data intoinformation in the forms required by different clients.

b) The revenue model rests on a revenue-sharing mechanism out of the service chargescollected from the end users.

c) The pricing of services is jointly decided by RCB and the partner, based on the followinggeneral principles:

online services should be cheaper than conventional over-the-counter services.The charges for new services are calculated on a nominative basis and notified.

d) RCB entered into partnership with 4 companies to avoid a monopoly situation (pointedout in earlier section ).

7.2 Singapore Land Authority (SLA) :

SLA offers online services that provide information on property ownership, landtenure, land area, last transacted price, survey plans etc. SLA attempted at PPP with thefollowing salient features:

a. The selection of the partner was through an open tender.


11/11

b. There would be a sole private partner, so as to exploit the economies of scalein providing land information.

c. SLA owns the application, having paid for its development.d. The partnership works on a revenue-sharing model.

7.3 Road Transport Authority, Andhra Pradesh, India :-

The RTA is responsible to issue learning licenses & drivers licenses, registration ofvehicles and collection of road taxes and other transport related services. The services areprovided at 37 service centers of RTA where the processes were entirely manual. Theagency decided to provide computerized services using PPP model, in 2000. Thepartnership went through a turbulent period but finally got stabilized by 2002 and isrunning smoothly at present. A classic BOOT model was adopted in this case.

8. Summary

PPP can be a powerful instrument in the implementation of the e-government if (a)there is a PPP policy laid down by the state (b) there is a shared vision between thegovernment and the partner(s) (c) the right functional areas are chosen at first toexperiment PPP and (d) appropriate financial models are crafted for governing thepartnerships.

Reference

1. Roadmap for e -Government in the Developing World 10 Questions e-Governmentleaders should ask themselves; Working Group on e -Government in the Developing World,Pacific Council on International Policy, April 2002

Public Private Partnership for E-governance

Documents

Transcript of Public Private Partnership for E-governance