Government by Network Deloitte

Government by Network
The New Public Management Imperative
A Joint Study by Deloitte Research and the Ash Institute for Democratic Governance
and Innovation at the John F. Kennedy School of Government at Harvard University
(sponsor of the Innovations in American Government Awards)
About the Authors
William D. Eggers Stephen Goldsmith
Tel: 202 772 8394 Tel: 617 495 0557
e-mail: weggers@deloitte.com e-mail: stephen_goldsmith@harvard.edu
William D. Eggers is the Global Director for Deloitte Research- Stephen Goldsmith is the Chairman of the Faculty Advisory
Public Sector. His research focuses on government reform, e- Committee of the Ash Institute for Democratic Governance
government, public-private partnerships, cost and Innovation which sponsors the Innovations in American
reduction, and information technology. He is also a Senior Government Awards. He is also the Chair of the Center for
Fellow at the New York-based Manhattan Institute for Policy Civic Innovation at the Manhattan Institute for Policy
Research and former appointee to the Office of Management Research. The author of numerous books, including The 21st
and Budget’s Performance Measurement Advisory Council Century City (Regnery, 1997), Mr. Goldsmith served as mayor
(PMAC). He is the co-author of Revolution at the Roots: of Indianapolis from 1992 until 1999.
Making our Government Smaller, Better, and Closer to Home
(The Free Press, 1995).
Table of Contents
Executive Summary .............................................................. 1
Introduction: The Rise of Networked Government ............... 3
Types of Public-Private Networks .......................................... 6
Network Management ......................................................... 8
Strategy: Answering the “What” Question .................. 10
Network Design: Answering the “How” Question ....... 11
Ties that Bind: Connecting the Network ...................... 14
Ensuring Accountability:
Getting Results from Networked Government .............. 17
Human Capital: Public Employees as

Network Managers ...................................................... 20
Conclusion ......................................................................... 23
Insets
Advantages of Networked Government ............................... 5
U.S. Coast Guard Deepwater ............................................. 11
Wisconsin W-2 ................................................................... 13
Bringing Power to the Edge of the Network ....................... 14
National Electronic Disease Surveillance System ................. 15
Six Ways CKNs Can Improve Networked Government ........ 16
Networking Requires an IT Network ................................... 17
Liverpool Partnership Group ............................................... 18
Managing the Tension between Flexibility

and Accountability ............................................................. 19
IRS e-File ............................................................................ 21

Executive Summary
The era of hierarchical government bureaucracy, the predominant organizational model used to
deliver public services and fulfill public policy goals for a century now, is coming to an end.
Emerging in its place is a fundamentally different model—one that we call governing by
network—in which government executives redefine their core responsibilities from managing
people and programs to coordinating resources for producing public value. Government agencies,
bureaus, divisions, units, and offices are becoming less important as direct service providers, and
more important as levers of public value. This new model is characterized by the web of multi-
organizational, multi-governmental, and multi-sectoral relationships that increasingly constitute
modern governance.
The rise of networked government represents the convergence ■ Movement towards joined-up government service
of two major trends that are altering the shape of the public delivery: The second trend is the movement to provide
sector. more integrated service delivery to citizens by dismantling
the stove-pipes that are so emblematic of traditional
■ The growth of outsourcing: Governments’ reliance on government and finding ways for agencies to better share
outsourcing to private sector and non-profit organizations information and coordinate their efforts.
as an alternative to using government employees to deliver
services and fulfill policy goals has been increasing in terms While these trends have been gaining momentum in the past
of size, scope, and frequency. The U.S. government spends decade, only recently has their convergence signaled a change
about US$100 billion more on contracts each year than it in the organizational and management model of many
does on salaries for government employees. In Great Britain, government agencies.
the percentage of social services provided by private firms or
Managing a government increasingly made up of provider
voluntary organizations has grown from almost nothing to
networks is an infinitely different endeavor than managing
40 percent in twenty years.
divisions of employees. Like any change of such magnitude, it
poses some major challenges for those in charge. Tackling
them requires a form of public management different from
what we’ve become accustomed to over the past 100 years –
an approach based on the following building blocks.
Deloitte Research/Ash Institute at Harvard – The New Public Management Imperative:Government by Network 1
Strategy Ensuring accountability
What is the public value the organization is really trying to The problem of accountability is one of the most difficult
create? Answering this question forces government officials to challenges of networked government. With authority and
figure out their policy goals and exactly what role their agency responsibility parceled out throughout the network, whom do
should play in fulfilling those goals. For example, a school you blame when something goes wrong? How do you
superintendent might ask whether it’s his or her core mission achieve results when you have limited control? Ensuring
to run schools, or to see that quality education is provided for accountability in a networked arrangement is a matter of
the maximum number of children. By taking a broader getting the following four things right: incentives,
approach, government officials can use a networked model as measurement, trust, and risk. With a good network partner
a lever to create a new solution and transform existing and government manager, the goals and outcomes will stay
operations. sharply in focus, but the inputs and processes will change as
required.
Network design
The success or failure of a networked approach can often be Human capital transformation
traced back to how it was originally designed. By defining Governing by network requires a whole different set of
how the network is governed, its design provides the structure competencies and capabilities. In addition to knowing about
that allows for the flow of information and resources within planning, budgeting, staffing, and other traditional
the network. Like a good roadmap, a sound design helps government duties, networked management requires
government reach its ultimate policy and operational becoming proficient in a host of other tasks, such as
destination. negotiation and mediation. Building such a capacity requires
not only far-reaching training and recruitment strategies, but a
Connecting the network full-blown cultural transformation. What is required is nothing
less than changing the definition of what it means to be a
Technology is the glue that can hold networked government
public employee.
together, allowing network partners to share knowledge,
business processes, decision making, client information, As the networked government trend continues, those
workflow, and other data. In Wisconsin, for example, state governments that are able to master these five components of
employees and the private contractors that deliver most managing in a networked setting will thrive; those that don’t
welfare-to-work services view the same information on their will increasingly experience service delivery and organizational
computer screens about each individual in the state’s W-2 problems.
welfare-to-work program. Employees working for the
contractors also have instantaneous access to all the
government information they need to do their jobs, including
educational assessment history, state wage records, and social
security records.
2 Deloitte Research/Ash Institute at Harvard – The New Public Management Imperative:Government by Network
Introduction
For a century now, the predominant organizational model used to deliver public services and
fulfill public policy goals has been hierarchical government bureaucracy. Today, a complex society
is forcing this model to change.
On many fronts, this century’s challenges and the means of Networks have already fundamentally changed how business
addressing them have become more numerous and complex is conducted and how businesses are structured. Companies
than ever before. The world is becoming more fast-paced; are re-examining, re-defining and re-creating their business
power is more dispersed; boundaries are more fluid – when models and increasingly relying on webs of alliance partners,
they exist at all. And diverse and mobile populations with contractors and suppliers, rather than in-house capabilities, as
complicated problems defy simplistic, one-size-fits-all their principal mechanism for manufacturing products and
solutions. delivering services. The ability to effectively develop and
manage a firm’s extended enterprise capabilities is increasingly
The traditional, hierarchical model of government does not
seen as a key source of competitive advantage in the 21st
meet the demands of this complex and fast-changing age.
Century marketplace.
Rigid bureaucratic systems – with their command and control
procedures, narrow work restrictions, and siloed cultures and Similarly, modern trends and problems require, and at the
operational models – are particularly ill-suited to responding same time enable, the movement to networked government.
to problems that increasingly know no organizational Consider homeland security. As we all know, identifying and
boundaries. apprehending terrorists can’t be accomplished by the FBI or
the CIA alone. It requires a law enforcement network that
Although the traditional model isn’t dead yet, it’s steadily
cuts across agencies and levels of government. It also involves
giving way to a very different approach in which government
communications systems that can capture, analyze, transform,
executives redefine their core responsibilities from managing
and act upon information across public and private sector
people and programs to coordinating resources for producing
organizations at a speed, cost, and level previously considered
public value. Government agencies, bureaus, divisions, units,
impossible. Similarly, responding to the outbreak of anthrax,
and offices are becoming less important as direct service
smallpox, or other acts of bioterrorism would involve more
providers, but more important as levers of public value inside
than the Centers for Disease Control and Prevention alone. It
the web of multi-organizational, multi-governmental, and
would require the activation of robust public health and
multi-sectoral relationships that increasingly constitute
emergency responder networks. And, in a world in which the
modern governance. This model of government, which we
biggest threats to Western democracies increasingly are
call governing by network, resembles less a traditional
elusive, decentralized non-state entities like al Qaeda,
organizational chart than it does a more dynamic web of
Hezbollah, or narco-trafficking cartels, a networked approach
computer networks that organize or reorganize, expand or
is also critical to national security. As RAND analysts John
contract, depending on the problem at hand.
Arquilla and Dave Ronfeldt explain in their article “Networks In the UK, joined-up government is the signature component
and Netwar”: “It takes a network to fight a network.”1 of the Blair Administration’s modernization program. In the
U.S., joined-up government efforts are underway across the
Networked government represents the convergence of two
country. For example, Oregon’s “No Wrong Door” initiative is
major trends that are altering the shape of the public sector
based on the notion that citizens receiving human services
worldwide.
should be able to get help from the first point of contact they
have with government – no matter which agency they’ve
Rise in Third-Party Government contacted. The Bush Administration currently has some 24
The first trend is the decades-long growth in using private cross-agency, cross-government projects under way. Australia
firms and nonprofit organizations, rather than government has also initiated a host of joined-up government efforts. The
employees, to deliver services and fulfill policy goals. In the largest is Centrelink, an ambitious initiative that assembles a
United States, service contracting at the federal level over the wide variety of social services from eight different federal
past 10 years has grown by 33 percent in civilian agencies and departments, as well as various state and territorial
14 percent in the defense area – even taking into account the governments, under one roof. And in Canada, the Ontario
huge defense cutbacks brought about by the end of the Cold government has developed a strategy that organizes service
War. All in all, the U.S. government spends about US$100 delivery around its customers, instead of its bureaucracy.
billion more on contracts each year than it does on salaries for
Governing by network, which often involves the weaving
its employees.2 The aging of public sector workforces is likely
together of various combinations of government units,
to accelerate the trend towards outsourcing in the U.S.
multiple levels of government, and private and nonprofit
In 1980, the overwhelming majority of social services in Great providers, represents the synthesis of those two trends. It
Britain were delivered by government agencies – only 14 combines the high level of public-private collaboration that is
percent were provided by private firms or voluntary characteristic of outsourced government with the robust
organizations. Less than two decades later, that number had network management capabilities of joined-up government
jumped to 40 percent.3 Meanwhile, in the developing world, (see Figure 1).
more than 15 percent of all overseas aid is now channeled
through non-governmental organizations (NGOs).4 Figure 1. Models of Government
Increases in third-party delivery models are occurring not only High

in long-established areas such as information technology,
trash collection, and street repair, but in many nontraditional Outsourced Networked
areas as well. In the UK, for example, dozens of school Government Government
authorities have contracted with the private sector to not only

build and modernize their schools, but also to operate them.
Private contractors have even become an integral component Level of
of fighting wars. In 1991, during the first Gulf War, there was Public/Private
Collaboration
one contractor for every 50 to 100 soldiers; during the 2003
Iraq War, the ratio was one for every 10 soldiers.5
Hierarchical Joined Up
But outsourcing alone cannot provide the cure to the Government Government
problems of modern government. When a stove-piped

government bureaucracy contracts out a service to a private
company, a citizen is still receiving the service through a
narrow, isolated silo – and having to deal with four
contractors, for example, isn’t much of an improvement over Low Network Management Capabilities High
interacting with four government agencies. Source: Deloitte Research
The Joined-Up Government Movement

Hence, the evolution of trend number two: the movement to
provide more integrated service delivery to citizens by better
linking up government agencies. This reform, often referred to
as “joined-up government,” entails dismantling the stove-
pipes that are so prevalent in modern government and finding
ways for agencies to better share information and coordinate
their efforts. Success in this area has become critical to
improving much of what government does today – from
fighting the war on terrorism to providing multi-channel
customer service.
Figure 2. The Networked Government Organizational Chart
Federal
Advantages of Networked
Government
Government
State
Flexibility
Local
Sub- Networks tend to be more flexible and nimble than
contractor hierarchies. A neighborhood center, for example, can
Contract
more easily direct a struggling young mother into a
Non-Profit personalized mix of shelter, counseling, or training
facilities through a public/private network than through
Sub- direct government service delivery because it can
contractor Client/
Citizen leverage the skills of a range of providers.
Source: Deloitte Research Innovation

Consider the way in which the city of Birmingham, England, Networks typically provide more innovative solutions to
delivers drug and alcohol treatment services. Birmingham local problems than traditional, rule-bound governments.
officials discovered that different city agencies were each Within months of securing contracts to administer
receiving treatment funding from several central government welfare and employment programs in six Wisconsin
agencies. This approach meant that each agency operated its counties, the Forward Service Corporation, a regional
own treatment programs and negotiated its own contracts nonprofit agency, obtained additional housing,
with community providers. “We had to break out of the silos transportation, and education grants from federal and
created by the dedicated funding streams,” says Jamie Morris private sources, enabling the organization to provide a
of the Birmingham Public Safety Partnership. The city far greater array of client services than had previously
accomplished this by pooling all treatment money from the been provided by the counties.
central government into one fund. It then created a joint
commissioning group, made up of representatives from each Specialization
of the agencies, to oversee the fund and negotiate contracts Network approaches allow a government to concentrate
with the providers that would actually deliver the services. The on its core mission by leveraging the expertise of “best
result: a government network that manages a network of of breed” providers. Many school districts, for example,
nonprofit and for-profit providers. partner with private sector organizations, which apply
Governing by network represents a fundamental their specialized technology and management skills to
transformation in how governments fulfill policy goals and deliver everything from remedial education to school
deliver services. While certain aspects of this phenomenon management services.
have been previously discussed, a roadmap for actually
governing the networked state has yet to be crafted. Perhaps Speed
least understood is how to manage a government that does The decentralized, fluid form of a network and the
less and less itself, instead relying on networks of partners to autonomy of each member allows for decision making
deliver services and accomplish policy objectives. Drawing at the local level. This, along with the ability to rapidly
from dozens of case studies, as well as established best access information at critical times, improves the speed
practices, this study aims to begin to fill that void. and efficiency of decision making.
Types of Public-Private Networks
Networked government comes in many forms. While there are major differences among them –
depending on their scope, breadth, complexity, and degree of government involvement – each
type of network represents an alternative to traditional direct government service delivery.
Increasingly, agencies – and even individual divisions – will find themselves managing a number
of these network models simultaneously.
Service Contract Channel Partnership

In service contract networks, governments use contractual Companies and nonprofits conduct transactions on behalf of
arrangements to organize a network. Contractor and government agencies in the same way that retail stores act as
subcontractor service agreements and relationships create an a distribution channel for manufacturers. When you purchase
array of vertical and horizontal connections as opposed to a new car, for example, the dealership handles your motor
simple one-to-one relationships. Such networks are prevalent vehicle registration for you. Other examples include
in many areas of the public sector, including health, mental purchasing a fishing license at a sporting goods store or
health, welfare, child welfare, motor vehicle, and defense. using the Intuit or H&R Block Web sites to file your taxes
online. As more and more services move online, the number
Supply Chain of channel partnerships will expand as companies bundle
public sector transactions into their online services offerings.
Supply chain networks are formed to deliver a complex
product to government, such as a fighter jet or multi-modal
Information Dissemination
transportation system. Far fewer are found in the public sector
than in the private sector because government mostly delivers A government entity partners with nonprofit or for-profit
services, as opposed to manufacturing goods. Supply chain organizations to disseminate public information to citizens.
networks can primarily be found in the defense and Earth 911, for example, provides a wealth of environmental
transportation segments. information and real-time data on its Web site, such as which
local businesses recycle used oil filters. It’s able to do this by
Ad-Hoc linking a federal agency, 50 state agencies, thousands of
local governments, and countless community groups and
Governments often activate a network in response to a non-profit organizations into one nationwide environmental
specific situation – usually an emergency. For example, an ad- network.
hoc network of hospitals, doctors, and public health and law
enforcement agencies might be set up to attempt to contain
an outbreak of an infectious disease. Ad-hoc networks are
also formed in response to natural disasters and cyber-threats.
Civic Switchboard
Although financial grants are sometimes involved,
government’s ability to organize a network derives not primarily
from the money at its disposal, but from its authority.
Government might, for example, serve as a catalyst in bringing
about the formation of a network of food pantries for the
homeless or a network of banks, churches, developers, and
community development organizations to provide more
affordable housing. Government’s chief contribution is the
influence and knowledge it brings to bear in getting the
network started, whereas the private sector produces the
component parts of the solution.
Figure 3. Types of Public-Private Networks
Civic Information Ad-Hoc Supply Chain

Switchboard Dissemination
Less More
Channel Service
Partnership Contract
Degree of Government Involvement
Source: Deloitte Research
Network Management
Managing a portfolio of private and nonprofit provider networks is an infinitely different
endeavor than managing divisions of employees. Like any change of such magnitude, it poses
major challenges for those in charge. How do governments know when to use networks? How
should the networks be activated and designed? How do governments tie together processes,
people, workflows, and technologies? How do they ensure accountability? What new skills are
needed for public employees?
Thanks to these and other challenges, attempts to fulfill public Communications meltdown. When a service is provided in-
policy goals through networks are not always successful. house, informal communications channels within the
When they fail, they often do so for one or more of the organization help information flow to those who need it.
following reasons: These internal communications channels are often one
casualty of moving to a networked approach where the very
Lack of goal congruence. Government networks tend to be strength of the network – diffusion and decentralization – can
formed around delivering a service where outcomes are often create communication difficulties. Moreover, a lack of
murky, difficult to measure, and may take years to realize. information system interoperability has plagued numerous
Making it even more complicated is that organizations networking efforts, causing uneven communications and poor
participating in networks often have differing but overlapping collaboration.
goals.
Coordination problems. Networked government typically
Contorted oversight. Many governments mistakenly see involves coordination between multiple levels of government,
contracting out as a way to offload the headaches of nonprofit organizations, and for-profit companies. Poor
managing a service. This is a recipe for failure that can result performance by any one organization within the network, or
in cost overruns, service failures, and scandal. Conversely, the breakdown of the relationships between any two
other officials may misuse their authority and insist that every organizations within the network, can imperil the
detail in the contract be performed whether it’s productive or performance of the whole. When complexity is high, and
not. responsibility unclear, coordination problems can undermine
the network.
Poor baseline data. Attempts to share service delivery with a Tackling these and other challenges of operating a networked
network partner may fail because of a lack of data about how model of government requires a new form of public
much it currently costs to run the program or deliver the management. A government that consists less and less of
service. How much does it cost to fill a pothole or process a public employees and more and more of networked
tax return? The absence of such baseline performance and arrangements can’t be managed by using traditional
cost data and preexisting benchmarks sets the network up for hierarchical controls. It requires a more nimble approach – one
continual attack by those hostile to its formation and success. based on five building blocks (see Figure 2).
Government as the 800-pound gorilla. Relationships in a
network may become strained because one of the members –
i.e., a government entity – has more authority than other
participants. Government often has the biggest checkbook
and other levers, such as regulatory authority, that can distort
communications and feedback, and even create tension
among the network parties in terms of “taking credit” and
“placing blame” for specific actions.
Figure 4. Building Blocks for Governing by Network
Design and Activation

• Who should activate the network?
• What is the optimal delivery model or
mix of public/private?
• Statutory requirements
• Funding streams
Human Capital Strategy Performance Integration

• Determining new skills needed in • Asking the right question • Ensuring goal congruence
government for managing networks • What public value do you want • Strategic, program and process
• Recruitment and retention Provide? performance measures Performance-
• Defining the problem based contracting
• Developing a training program
• Determining policy goals • Linking with performance budgeting
• Deregulating public service
• Cascading performance across the
• Developing centers of excellence extended enterprise
• Knowledge management • Individual performance measures
Information Technology Enablers

• Interoperability architecture
• Web based workflow
• Customer Data Management
• ERP
• Decision support tools
• Collaboration environment
• Enterprise Integration
• XML/Web Services
• Knowledge management tools
Framed this way, the answer was obvious. Close D.C. General
Strategy Formulation: and use the city resources that were subsidizing the hospital
Answering the “What” Question to instead knit together a network of private hospitals and
community-based health clinics. The city believed that this
Sometimes networked government fails not because of how a approach would not only save taxpayers money, but produce
particular venture is managed, but because of what was more health care for more people. “We decided that
delegated in the first place. All too often, precious little government should maybe not be in the business of running
thought is given to the question of mission and strategy: what hospitals, and instead we should be providing health care to
policy goals the agency hopes to accomplish and how that those who need it,” says Koskinen. “We now have a better
relates to what it wants the members of its network to do. health care safety net for the city’s indigent than we were able
Instead, agency officials pick up their organizational chart, to provide before at D.C. General.”
find something they’re not doing very well, and then ask the
private sector to do it for them. By forming the D.C. health care network, Mayor Williams was
also able to do something else: unlock the underutilized
The strategy should be the organizing theme around which all capacity of the myriad clinics and private hospitals located
other components of the network are built. The government throughout the city. By linking the health networks together
executive, hamstrung by precedent and reinforced by well- using public dollars, he was able to create greater overall
intentioned bureaucratic practices, will often find it very value than when they operated in isolation from one another.
difficult to step into the larger, more important, and more
exciting role of conceptualizing new models and solutions, but Step outside the box
it’s critical to the success of networked government.
A government agency shouldn’t let its historical processes,
current organizational charts, or existing capabilities—or for
Ask the right question that matter, the private sector’s current capabilities—dictate
Formulating the right strategy means, first of all, focusing on the answer to what it should transition to a networked
the core mission of the organization and asking the pivotal approach. Traditional outsourcing models – inside a narrow
question: What public value is the organization really trying to procurement box inside a functional silo and based mostly on
create? what’s not working well – just reduce the costs of mediocrity.
A better approach is to use a networked model as a lever to
Answering this question forces government officials to figure
create a new solution and transform existing operations.
out their policy goals and exactly what role their agency
Explains Stan Soloway, president of the Professional Services
should play in fulfilling those goals. For example, a housing
Council:
authority administrator might ask, “Is it my job to build
housing projects, or to maximize the number of people who In the private sector there’s the notion of ‘design space,’
can own and occupy their own homes?” If the answer is the which refers to the space needed to design to an
latter, then his or her central task may not be to construct outcome, rather than a preconceived notion of what it
public housing or even necessarily to contract with someone should look like. When I was at DoD, we spent a day at
else to do it. Instead, the task is to convene, seed, and direct Federal Express. The key point hammered into us was that
the necessary resources that will help the agency reach that the key to success is recognizing that before you
goal. outsource, you need to completely reassess everything
you’re doing today, do a process map, and then get rid of
This is the thought process Washington, D.C. Mayor Anthony
anything you’re now doing that doesn’t plug into your
Williams and his staff went through when they did a top-to-
new model.
bottom review of the city’s health system soon after Williams
took office in the late 1990s. For nearly two centuries, D.C. This is the approach adopted by the U.S. Coast Guard when it
General Hospital had been the backbone of the district’s sought to modernize its deepwater fleet (see box).
public health system. In recent years, however, the city-owned
hospital had been plagued by poor management and was
hemorrhaging cash. Instead of asking, “How can we fix the
hospital?” Williams asked a more fundamental question: “Is it
my job to run a public hospital or to provide the maximum
public health returns for the indigent?” Recalls former City
Administrator John Koskinen: “The District [of Columbia] had
some of the worst health statistics in the country. The
discussion was less about whether or not we should be
running a hospital, and more about how to improve these
statistics. We took a step back and asked: What is the action
that will improve health care in the city the most?”
U.S. Coast Guard Deepwater Network Design:
Supply Chain Network Answering the “How” Question
The Coast Guard completely rethought its strategy for
purchasing goods and services when it went out to bid When you put out a bid for a network, you’re
several years ago for the modernization of its deepwater usually building a network that doesn’t currently
fleet, which consists of 90 ships and 200 aircraft. The
exist, which means you need to think on a broader
fleet was old, falling apart, and unsuited to present-day
conditions. The standard way of replacing the US$10 basis than linearly. Doing this right requires a
billion fleet would have been to purchase each plane, conceptual feel for how it should turn out in the
boat, and piece of technology separately as they wore end.
out and only later figure out how to put them all — John Koskinen, former City Administrator, Washington, D.C.6
together.
A network doesn’t just happen. Someone must first figure out
For the deepwater fleet, the Coast Guard opted for a
how to fuse a collection of organizations into a seamless
much different model: contracting with one consortium
service delivery system. The job of this network designer and
to replace its entire inventory as an integrated package
activator is to see how all the pieces of the network should
over a multi-year time frame. The agency challenged
work together, identify possible partners, bring all the relevant
bidders to help increase mission effectiveness through
stakeholders to the table, and determine what resources will
the use of better and newer technologies and new ways
be used to keep the network together.7 The activator faces
of operation. The RFP spelled out what outcomes the
the challenge of being respectful enough of the knowledge of
agency hoped to achieve and what capabilities it needed
the partners to create a malleable model, but clear enough in
– search and rescue, identifying someone adrift in the
mission that everyone understands the common goal.
ocean, providing surge capacity to meet national
security, and disaster response requirements – and then The success or failure of a networked approach can often be
left it up to the vendors (with help from teams of Coast traced back to how it was originally designed. By defining
Guard specialists assigned to the three final bidders) to how the network is governed, the design provides the
design the system of boats, ships, aircraft, satellites, structure that allows for the flow of information and resources
information technology, and unmanned aerial vehicles within the network. Like a good roadmap, a sound design
that was needed. The ultimate goal: to revolutionize the helps government reach its ultimate policy and operational
way every man and woman in the Coast Guard does his destination. No matter how well the network is managed,
or her job. even slight flaws in the design can waste partners’ time and
energy and create considerable problems later on.
Choosing the most appropriate network model

The first thing to consider is what kind of network makes the
most sense under the particular circumstances: service
contract, supply chain, ad-hoc, channel distribution,
information, or civic infrastructure? The following factors
should be weighed in answering this question:
■ What do you want to do? Deliver a service? Provide
information? Build an aircraft carrier? Increase reach? What you
want to do is the most important determinant of the most
appropriate network. If the main goal is to increase reach, for
example, then a channel partnership, which leverages the private
sector’s greater reach in the marketplace, is likely to be the most
appropriate network model.
■ Is the need ongoing or one-time? Does the network only need

to be activated in response to a specific event – an emergency or a
disaster, for example – or is the need for the network ongoing?
■ How much money is available? The less money that’s available,

the less feasible it will be to create a contractual network, which is
typically held together almost exclusively by public dollars.
■ What is the relative importance of accountability versus As governments rely more and more on the private sector for
flexibility? The more important accountability is as a goal, the delivering services, they face the same fundamental question
more likely it is that a contractual network with clear goals and as manufacturers: What processes should be integrated and
performance incentives will be the best approach. If flexibility is who should do the integrating?
more important than accountability, then a looser framework may
be more appropriate. Two huge government IT outsourcing projects, the Navy
Marines Corps Intranet (NMCI) and NSA’s Groundbreaker,
Integrating the network reflect the recognition that sometimes the reason for going
“out to the market” in the first place is because government
Manufacturing a car requires managing a large network of
officials conclude that the private sector can integrate and
suppliers which provide the hundreds of individual
manage the various service delivery and infrastructure
components that go into assembly. Traditionally
components better than can be done in-house. In another
manufacturers have managed these suppliers themselves.
example, the state of Arizona contracts with a nonprofit
Increasingly, automobile companies are turning over
organization to coordinate a network of service providers for
responsibility for managing large components of the assembly
its behavioral health system. The long-established
process – such as building the car’s interior – to companies
relationships the contractor has developed with the providers
that specialize in this process. The same phenomenon is
have played an important role in the success of this network.8
taking place in many other industries – from computers to
apparel. Behind this trend is the belief that a contractor can As government entities move away from a narrow, stove-
sometimes better integrate and manage the various processes piped model of service delivery, integration becomes critical.
and organizations that make up the network than can the Rather than outsourcing individual services to various
company itself. contractors, public officials need to link up multiple players to
create a model of comprehensive service delivery.
Figure 5. Two Models for Integrating the Network
Proper integration may involve meshing together the activities
Third Party as Integrator
of a large number of entities – some of which may be other
Subcontractor
Subcontractor Subcontractor agencies and other levels of government. In these and other
Subcontractor
cases, breaking up the pieces into smaller contracts could
Subcontractor
Subcontractor
cause serious – if not disastrous – operational problems down
Subcontractor the road.
Subcontractor
Contractor Contractor
Contractor Contractor The State of Kansas discovered this in 1996 when it privatized
Contractor
its child welfare system. The Kansas Department of Social and
Third Party Rehabilitative Services (DSRS) divided the state into five
Private
Provider
regions and then bid family preservation and foster care
separately in each region (adoption was bid out in one
statewide contract). “We divided it the way we did by region
Government Government Government Government Government
and service because we wanted homegrown Kansas providers,
rather than the ‘big, bad managed care providers from the
Government as an Integrator
East’ to provide the services,” says Teresa Markowitz, the
Subcontractor
former DSRS commissioner who spearheaded the privatization
Figure 6. Kansas Child Welfare Contracting Design

Contractor
Subcontractor
State of Kansas
Subcontractor
Contractor
Contractor Government
Adoption
Subcontractor
Subcontractor
Contractor
Mental Social Groups

Health Services
Subcontractor Subcontractor
Client
Source: Deloitte Research Source: Deloitte Research
effort. While this goal was achieved, the flip side was that a certain instances, government can act as its own general
single child might be shuffled from one provider network to contractor. This role, however, requires the government
another several times, depending upon where the case was executive to think creatively across product lines and
classified at any one time. The end result was that the state’s agencies, build an intergovernmental network, and find
effort to “unbundle” the contracts inadvertently undermined internal management talent that can creatively configure the
one of its main policy goals: integrated service delivery. best possible solution. When the capacity to do this is
absent, the government executive must recognize that the
All of this is not to say that purchasing an integrated solution
ability of an outside provider to properly integrate the parties
from an outside provider is always the right way to go. In
may, in fact, be the most important asset to procure.
Wisconsin W-2
Service Contract Network
Enacted by a Republican U.S. Congress, signed into law by a Today, about 72 percent of Wisconsin’s W-2 workload is
Democratic president, and implemented by governors of handled by private providers. The most stunning example of
both parties, welfare reform was widely viewed as a great this can be found in Milwaukee, where all five of the W-2
public policy success. And no state was more successful in agencies are private organizations – four nonprofits and
moving from a cash-based welfare system to a work-based one for-profit firm. A welfare recipient can move through
support program than Wisconsin. Welfare caseloads the entire welfare system in Milwaukee without
plummeted 89 percent in the dairy state, while the poverty encountering a single public employee.
rate for single-parent families dropped from 30 percent to
Wisconsin W-2 illustrates both the tremendous promise, as
25 percent.
well as the enormous challenges, of networked
At the heart of Wisconsin Works (W-2), Wisconsin’s much government. The benefits of shifting to a networked
heralded welfare reform program, was a fundamental shift approach included paying greater attention to the different
in mission. Instead of simply dispensing cash benefits to needs of individual clients, a broader array of services, and,
welfare recipients, the role of the state would be to help most importantly, significantly better results in moving
families achieve economic self-sufficiency. Administrative clients into the workplace. There have also been some
entitlements were out; work requirements and time limits problems, including allegations of contractors misusing
were in. state funds. Meanwhile, some W-2 providers have accused
the state of reneging on its promises and overburdening
Not nearly as well known as these policy changes, but them with mounds of paperwork.
equally as important, were the far-reaching management
changes introduced as part of W-2. Responsibility for Wisconsin offers a host of lessons for managing public-
operating the program devolved to 72 W-2 agencies private networks, many of which are outlined throughout
operating across the state, each of which was paid a flat fee this report – from the need to build flexibility into the
for administering the program and given significant design of the network to the tension that often exists
operational freedom. In exchange for this flexibility, the W-2 between accountability and flexibility.
agencies were subject to a set of rigorous performance
Figure 7. Milwaukee W-2 Delivery Model
criteria.
Wisconsin also ended the monopoly the state’s counties had

on program administration, opening up the system to
bidding from private agencies. No state had ever tried
anything like this before. In fact, prior to the 1996 welfare Country: Milwaukee Regions Local Services
reform law, states weren’t even allowed to use private YW
Works Training
OIC
entities to provide case management services for welfare YW
Works
Payments
programs. UMOS
Maxi-
mus
UMOS
Client
Coping with Change: Creating a Flexible Design
Ties That Bind:
If done correctly, a networked model should result in a more
flexible approach than bureaucratic government. Such a Connecting the Network
benefit is easily lost if the ability to make frequent changes
In order for networked government to succeed, agencies must
isn’t built into the network design, including the ability to
be able to seamlessly, electronically connect at multiple levels
quickly:
– with each other and with private and non-profit partners.
■ Add or subtract partners. Unfortunately, with a few notable exceptions, most
■
government databases and information systems are so stove-
Broaden or shrink the scope of the network.
piped that public employees often can’t share information
■ Ramp the network up or down. with other agencies – much less with their partners in the
private sector and non-profit community.
■ Plug holes in the network.
■
Companies like Dell, Cisco, GM, Ford, and Herman Miller have
Allow and share unanticipated successes.
invested significant resources and executive-level attention in
■ Collaboratively manage unplanned failures. building electronic pipelines with their suppliers, alliance
partners, customers, and employees. Most governments, on
A dynamic network will continuously identify new sources of
the other hand, still interact with their partners through
value not explicitly authorized in the original contract.
manual processes. This creates a host of inefficiencies, from
Similarly, a well-designed, robust network can handle
slow responsiveness and poor reliability to uncoordinated
environmental shocks such as contractor bankruptcies,
service delivery.
contract problems, or an economic downturn that makes it
difficult to reach a hoped-for outcome. A flexible design This needs to change. Technology is the glue that can hold
structure can help a network cope with this kind of networked government together, enabling partners to share
uncertainty by allowing organizations to quickly respond to knowledge, business processes, decision making, client
unforeseen events – for example, by redesigning aspects of information, workflow, and data. While it’s still possible to
the network or adding another partner or two. manage a network with little more than a telephone and
meetings, in today’s world, optimal network management
requires deep, electronic links.
Bringing Power to the

Edge of the Network
Today’s Web-based technologies bring power to the edge
of the network, enabling:
■ A third-party provider to check the eligibility of a client for
job training services.
■ A social services agency to share real-time information with

its partners about an abandoned child.
■ A motor vehicles agency contractor to instantly verify the

identity of an individual applying for a driver’s license
renewal.
Coordination
Internet-based applications now give employees from
different organizations the ability to share the same
National Electronic Disease
workspace – even if they’re located on opposite edges of the
globe. The back office operations for American Express, for
Surveillance System (NEDSS)
example, are managed by a company located in India.9 Ad-Hoc Network
Such capabilities are critical for building effective public-
private networks in a post 9/11 world. Take a city facing a One byproduct of globalization is that diseases can
terrorist threat to its water system. The group of individuals spread at a speed that was previously unimaginable. The
who would be charged with responding to such a threat outbreak of SARS, for example, was astounding for the
might include Federal Emergency Management Administration speed with which the new disease spread across the
(FEMA) representatives, state environment officials, local globe. From mid-November 2002, when the first known
hospitals, environmental groups, public utility executives, local cases were identified, to May 2003, when the CDC
law enforcement officers, and building inspectors.10 A basic reported containment efforts had been taking effect,
requirement for such a network to function would be some 6,521 cases had been reported in 30 countries.11 This, as
kind of electronic coordination mechanism that allows them well as the threat of biological and chemical attacks,
to share information in real time and synchronize their demonstrates the importance of establishing electronic
response. systems to connect hospitals, labs, medical centers, and
public health agencies in tracking and reporting
diseases, outbreaks, and bio-terrorist attacks. One such
Visibility system is the CDC-backed National Electronic Disease
New Web-enabled technologies can also provide increased Surveillance System (NEDSS).
visibility into network partners’ processes, allowing
organizations to achieve virtual integration with their partners. Involving 46 states and three metropolitan health
The Ford Motor Company, for example, has access to the departments, the goal of the NEDSS is to allow
inventory data of all of its suppliers through the Internet, participants to quickly share information and identify,
allowing it to plan production so that it doesn’t run into any track, predict, and contain the spread of disease. Once
shortages or delays in the assembly line.14 fully implemented, the Web-based system is designed to
enable the ongoing, systematic collection of patient case
Achieving a similar level of visibility in the public sector would data over a secure system; the visual analysis of
have tremendous benefits. It would, for instance, allow a city outbreaks and spread trends by neighborhood and
health agency to instantly see the number of beds available in region; and the immediate communication of public
all local area hospitals that provide indigent health care health alerts, advisories, and updates.12
services. Or it would enable a regional workforce agency to
know the number of spots open at any given time in the job In February 2002, Pennsylvania became the first state to
training programs of area providers. The end result would be introduce a fully integrated NEDSS disease surveillance
not only a higher level of efficiency, but also much better and system. More than 130 hospitals, 120 labs, 450 public
more responsive customer service. health staff, and 475 physicians are connected to the
system which already been used to report more than
Lastly, better visibility would allow a government entity to 75,000 cases, representing over 55 diseases in 67
monitor services performed by contractors with the same counties.13
amount of clarity and immediacy it would have if those
activities were performed by the entity itself. How? By The enhanced coordination and information-sharing
eliminating the asymmetry of information that exists when a capabilities made possible by PA-NEDSS are having an
vendor or subcontractor has a piece of information but the impact. The system’s rapid detection abilities, for
contract monitor doesn’t. For example, when the city of example, helped the York City Bureau of Health to
Indianapolis rebid its abandoned vehicle outsource contract, it contain an outbreak of shigella. On a macro level, the
needed to be able to find out where any given vehicle was reporting cycle of each patient case in Pennsylvania has
located in real time. An electronic pipeline into the private been reduced from three weeks to less than 24 hours,
contractors’ tracking data gave city officials this visibility. enabling a more rapid and effective response.
The first step in building a CKN is to create an electronic
Figure 8. Achieving High Performance From Networks
gateway that allows important information to be
Understand Cititzen/
Customer/Client Value communicated to partners in a timely fashion. Soon after first
and Requirements opening its doors in 2002, the U.S. Transportation Security
Administration (TSA) built a collaboration model that allows
rapid and secure communications across federal, state, and
local governments, as well as its priority “partner”
constituents (air carriers, airport operators, external law
Measure Network Design enforcement, vendors, travel partners, and contractors). The
Performance Network information-sharing platform was used to supply 150 federal
security directors and private vendors with consistent, up-to-
date information during the rollout of the congressionally-
mandated federalization of 429 airports.16
A deeper level of knowledge sharing can be achieved by

Manage and Execute creating interactive communities called “communities of
Network Strategy
practice” (COPs). These are typically made up of groups of
Source: Deloitte Research people linked by technology and informally bound together
by a common mission and passion for a joint enterprise. By
Information and Knowledge Sharing changing how employees and employee groups interact with
Whether it’s deciding to remove an abused child from his or each other inside their organization and with partners and
her home or preventing a terrorist attack on an overseas suppliers on the outside, COPs can produce real, quantifiable
embassy, we still rely on human intelligence and human benefits for organizations. Royal Dutch/Shell Oil estimates its
interaction to make most important decisions; thus, it is 13 COPs, linking more than 10,000 users around the globe,
important to find better ways to connect minds. But how can produce at least US$200 million worth of benefits for the
distinct groups of people be linked in a way that enables company in knowledge transfer per year.
ongoing knowledge sharing and relationship building? How
COPs offer a powerful, low-cost way to build trust and
is the information now trapped within the various
understanding throughout a network – and by doing so
components of the network released? The answer, for an
improve the overall quality of services. At the World Bank,
increasing number of organizations, is to create
more than 100 active COPs link bank employees and their
“collaborative knowledge networks” (CKNs) – virtual
many constituencies around the globe, allowing, for example,
communities that utilize technologies such as extranets,
a staff member assisting the Nepalese Ministry of Education to
webinars, electronic rooms, and bulletin boards to allow
easily engage colleagues in Hungary and Turkey involved in
people throughout the network to share information and
similar projects.
knowledge across geographic and organizational boundaries.
Providing a Single View of the Customer

Six Ways Collaborative When a customer purchases a computer on Dell’s Web site or
makes a change in the order, all the information about the
Knowledge Networks Can customer is transmitted immediately throughout Dell’s supply
Improve Networked Government chain.17 The Dell model wouldn’t work if each of its
production partners took a different view of the customer.
By providing a technical and social infrastructure for
collaboration and knowledge sharing, collaborative Achieving a single view of the customer is just as critical for
knowledge networks can improve networked government achieving first-rate customer service in networked
in six ways: government. Through CARES, Wisconsin’s welfare eligibility IT
system, state employees and private contractors view the
■ Help transfer best practices throughout the network. same information on their computer screens about each
■
individual in the state’s W-2 welfare-to-work program.
Develop new knowledge and enhance learning.
Employees working for the contractors also have
■ Flesh out solutions to daily problems. instantaneous access to all the government information they
■
need to do their job, including educational assessment history,
Reduce misunderstanding and build trust between network
partners.
state wage records, and social security records. “It allows us
to work hand-in-glove with the state and county on individual
■ Help the network partners learn from each other’s successes – cases,” says Gerald Hanoski, the executive director of
and more importantly – from their mistakes.15 Workforce Connections, a welfare-to-work contractor. “It’s
■ Help government to better integrate and align the efforts of the backbone of the network. We couldn’t do our work
their partners with their strategic objectives. without it.”
In contrast, in Kansas’ privatized child welfare system, each
contractor maintains its own databases – none of which are
Ensuring Accountability:
tied into each other or to the state. Keeping the records of the
children up-to-date is a catch-as-catch-can process, involving
Getting Results From
fax, mail, and, where possible, e-mail. Not only is this Networked Government
enormously time-consuming and inefficient, but inevitably the
records become out of date. “The reports come in on paper It didn’t take long after the space shuttle Columbia exploded
and there’s no real-time reporting mechanism,” says Mark in mid-flight for people to start pointing fingers in all
Bloomingdale, the CEO of Lutheran Family Services, one of directions. With two of the world’s largest aviation and
the contractors. “The result is a lot of duplication of effort and defense contractors, as well as NASA itself, all playing
many data errors as the records cross over the systems.” important roles in the space shuttle program, no one seemed
to be able to sort out who was really responsible for the
disaster. Was it NASA’s fault because senior managers at the
Networking Requires agency failed to heed the prescient warnings of their
engineers? Was it Lockheed Martin’s fault because it built the
an IT Network shuttle? Was it Boeing’s fault because it determined the foam
should not cause serious problems? Or was it a combination
Technology now allows government organizations to be as
of the three?
integrated as they want to be with their partners. This
doesn’t mean, however, that they should be as integrated The problem of accountability is one of the most difficult
as technology allows. Resources, security, and time are challenges of networked government. With authority and
limited, forcing tradeoffs to be made and priorities to be responsibility parceled out throughout the network, who’s to
set. The critical question is how does one achieve the blame when something goes wrong? How can results be
maximum value for the least cost from technology achieved with limited control?
investments in networked government?
Private companies have struggled for years with this issue, but
Figure 9. Collaborative “Desired State” governments face a host of unique challenges that go well
High beyond those faced by their private-sector counterparts.
Outcomes in government are often murky, hard to define,
harder to measure, and may take many years to realize.
Moreover, when things go wrong in the public sector, it tends
to end up on the front page of the newspaper, instantly
transforming a management issue into a political problem.
Cost and Synchronization These challenges, while profound, aren’t insurmountable.
Complexity Collaboration All computers have
the same information
Automate cross-
organzational at the same time Governments can achieve high performance in a networked
processes and
Visibility
workflows arrangement but to do so they need to get four things right:
Web Access,
data visability for
optimal control
incentives, measurement, trust, and risk.
Transaction
Exchange
Data exchange
of transaction
Aligning Incentives
information
The first thing that needs to be done is to align the interests
Low Degree of Partnership High and goals of the network participants. This requires
Source: Deloitte Research performance targets that support the overall strategy of the
network. The targets should be clear, ambitious, and
The first thing to do is to look at initiatives that would outcome-based, laying out exactly what needs to be
address the biggest current problems. What issues are accomplished, while leaving the manner in which the work is
affecting service delivery, increasing risk, or raising costs? to be performed to the discretion of the network partners.
Are there frequent service disruptions? Is all the necessary
As the Liverpool example in the sidebar nearby illustrates, it’s
information received in a timely fashion from key
important to seek feedback from potential or present
partners? These “pain points” can also be thought of as
members of the network in the goal setting process.
opportunity points – the places where collaboration
Neglecting to do so can result in unrealistic goals and lack of
technology can make the biggest impact in the least
acceptance from the network partners.
amount of time. Other important factors to consider when
deciding where to focus networked government IT
investments are: the current level of technological
integration; the level of technological readiness of the
network partners; cost; and risk tolerance.
Once the goals are established, financial incentives tying back Measuring Performance
to them should be put in place to align the interests of the An effective performance measurement system is essential.
network partners. The financial incentives should be Without reliable performance information, it’s impossible to
structured in a way to encourage cost savings, creativity, know whether network participants are fulfilling their roles
innovation, and continuous improvement. Contractors or and obligations. New York City learned this in the 1980s
grantees can be rewarded for meeting milestones, penalized when it tried to move to a performance-based contract with
for failing to do so, and/or paid a percentage of savings at the its streetlight maintenance contractor. The city drew up
end of the job. exacting performance standards – all broken lights had to be
One caveat: performance-based contracts and grants are fixed within ten days of being reported or a daily financial
harder to do in practice than on paper. Basic requirements of penalty would be levied.19 The scheme didn’t work. Why
doing them, such as having a firm handle on baseline costs not? City Hall had no idea whether the standards were
and being able to measure the performance of the partners, actually being met because no one tracked how long it took
are sometimes missing in a public sector environment. And no to repair the lights.
performance standard will ever be perfect, so an iterative Advances in technology make collecting performance data
process is necessary. easier and less time-consuming than before, giving
governments a clearer picture of how well the overall network
Liverpool Partnership Group: – and the individual entities within it – is performing at any
one time. Wisconsin’s Department of Workforce
Aligning Incentives from Development, for example, has put in place a data warehouse
to collect performance information about each of its
the Bottom Up contractors. The data warehouse provides the state with
extensive information about the progress of every welfare-to-
In 2000, the UK passed the Local Government Act,
work client. This data is then used to analyze whether the
requiring local authorities to produce a community
contractors are exceeding or falling behind their performance
strategy for the improvement of the economic, social,
targets.
and environmental well-being of their areas. One of the
most advanced responses to this directive was the city of Another important tool for measuring performance is
Liverpool’s Partnership Group. Consisting of 23 member customer satisfaction data. In Ohio, where the state
organizations and more than 100 participating department of motor vehicles delivers nearly all motor vehicle
organizations representing the entire spectrum of services through a network of more than 200 private
community, business, and social service groups, as well as contractors, the agency’s information system allows it to view
the city council and government agencies, the Liverpool monthly customer satisfaction ratings for each provider. Using
Partnership has become a model for community these ratings, as well as other performance data, the
networks in the UK. department is able to closely monitor providers. The
performance emphasis results in about half-a-dozen contracts
Liverpool’s Partnership model has demonstrated the value
terminated annually due to poor performance.
of involving as wide a group as possible in setting
performance targets and standards. Feedback on goals,
priorities, and performance targets comes from the
Building Trust
bottom up through local forums, focus groups, and Accountability can’t just consist of a series of contract clauses.
neighborhood action plans. It’s then captured in the Successful networks are partnerships that rely, at least partly,
overall community strategy, called Liverpool First. This on trust. Without trust, participants will be unwilling to share
cycle of direction-setting and feedback ensures that goals knowledge, and coordination will be more difficult.
and performance are always aligned.
Trust can help reduce transaction costs. This refers to the costs
The Liverpool example also illustrates the importance of associated with conducting exchanges between organizations
flexibility. Processes are periodically tweaked and refined and includes all the costs related to procurement, search, and
based on feedback. After criticism that the partnership third-party monitoring. Transaction costs can represent
groups tended to be “talking shops” and that anywhere from 35 percent to 40 percent of economic activity
performance targets were too vague, the Partnership costs.20 Without trust, transaction costs in networked settings
implemented measures to be more action- and outcome- are high, as government officials are forced to spend
based. The result: of the 171 initiatives outlined in inordinate amounts of time negotiating, monitoring, and
Liverpool First, 61 percent were on target, 34 percent enforcing inflexible contract provisions.21 Trust reduces these
experienced delays, and 5 percent were abandoned.18 costs by both encouraging a more open exchange of
information and reducing the need to rely on costly legalistic
approaches for solving relationship issues.
The easiest way to create trust is to choose network
partners who share your goal. The more the network Managing the tension between
partners intrinsically understand what you’re trying to
accomplish, the easier it is to align goals and the less flexibility and accountability
likelihood there will be major misunderstandings. Maintaining the dynamic nature of a network implies constant
change not only in the relationship between the members of
Sharing Risk the network but also with respect to the work to be done.
One of the chief advantages of networked arrangements is Doing this while protecting the taxpayers — and keeping out
that they allow some financial and performance risk to be of the crosshairs of inspector generals, auditors, and
transferred to the private and nonprofit sector. legislatures — may be the ultimate challenge of networked
Unfortunately, some governments mistakenly take this to government. On the one hand, executives want to prevent a
mean that they should try to shift as much risk as they can contractor from bidding low only to seek to modify the
out the door. In the Kansas child welfare privatization cited contract terms later to increase its profit. At the same time,
earlier, nearly all financial and performance risk was initially the most valuable relationships are dynamic, learning
transferred to the contractors (all of whom were nonprofit relationships built to change. Strict adherence to the contract
organizations). On paper, the risk transfer made eminent terms is a sure way to leave value on the table.
sense. In practice, it was a much different story. Several of With a good network partner and government manager, the
the nonprofits awarded contracts proved unable to bear goals and outcomes will stay sharply in focus but the inputs
the hefty financial risks imposed by the contract and ended and processes will change as required. Restrictive long-term
up declaring bankruptcy. contracts that lock governments and contractors into goals
that could be irrelevant in two years – thanks to statutory
The lesson is that governments should think about risk in
changes or shifts in economic conditions – will come back to
terms of optimal – not maximum – risk transfer. The public
haunt the public sector. The dilemma is to retain as much
sector can’t walk away from a disaster. No matter how
flexibility as possible, but to do so in a way that doesn’t
much risk it has theoretically transferred to the private
require constant changes to performance targets and
sector, the public is likely to hold the government entity at
standards.22 Balancing these two seemingly contradictory
least partially responsible for any service problems.
impulses requires a delicate balancing act.
Figuring out the right amount of risk to transfer to the
Achieving a shared understanding of the goals before any
private sector requires a deep understanding of the roles
contracts are written – testing every assumption and
and capabilities of all parties in the network: understanding – will help immensely in this regard. “Both
■ How much subsidy is involved? The more public money parties [need] to understand at the conceptual level the goal
that’s involved, the more risk the public sector will have to that has to be reached,” says Rear Adm. Charles Munns, the
assume. director of the US$8 billion NMCI program, the largest
government outsourcing project in the world. “Once you have
■ How capable are the network partners of managing risk?
that shared understanding, you can recognize some of the
Many nonprofit providers, for example, may have limited
weaknesses and ambiguities in the contract, put each one on
experience actually managing financial and performance risk.
In these cases, risk should be contracted out gradually in bite-
the table, and talk through it.”
sized chunks, rather than all at once. Munns and his team at the Navy have come up with a novel
■ Who is bringing the brunt of innovation to the table? If way to balance the tension between flexibility and
the providers are responsible for innovation, then they’re accountability. Clauses in the contract with NMCI’s prime
necessarily going to be assuming some risk. contractor, EDS, provide the company with a generous
performance bonus for achieving a high level of customer
■ How much control does the public sector have over the satisfaction. This gives the Navy and the Marine Corps the
network? The less control and leverage the public sector has,
leverage they need to suggest changes they believe will help
the less risk it should assume.
boost the customer satisfaction numbers. EDS, in turn, has a
■ Are the contract costs of the risk shifting worth it? For strong financial incentive to fix the problems.
example, huge performance bonds often drive up the cost of
the contract by more than the benefit. Mechanisms like this, which aim to resolve service-level issues
without going through the arduous task of renegotiating
The main point is that for networked government to contracts, are crucial to maintaining the dynamic nature of
succeed, the public and private sectors will have to learn networks. In the UK, local governments have created
how to better share risk. partnership boards as a way of maintaining direct contact
between the service providers and the government in public-
private partnership arrangements. The boards provide a forum
where contractors, government officials, and stakeholders can
problem solve, resolve issues, and discuss expansions of the
scope of the contract.
Human Capital: Public Employees Capabilities and Competencies
as Network Managers Needed for Network Management
■ Coaching
“The human capital crisis is also a human capital ■ Mediation
opportunity. It gives us the opportunity to bring ■ Negotiation
into government people with new skills who think
■ Risk analysis
more like business people and to think in a whole
new way about what it means to be a government ■ Contract management
employee.” ■ Ability to tackle unconventional problems
—Deidre Lee, U.S. Department of Defense’s Acquisition Chief
■ Strategic thinking
In the world of hierarchical government, being a government
■ Interpersonal communications
manager could be trying and difficult – finessing politics,
negotiating with unions, dealing with angry citizens – but ■ Project and business management
generally it was a relatively straightforward job: to manage a
program or service. The workforce was largely stable. The ■ Team building
larger your staff and budget, the more prestige you had. The
way to get ahead was to be an advisor on policy issues or to Engaging Senior Management
demonstrate a solid ability to manage government employees.
Reshaping the government workforce to fit the imperatives of
Managing in a networked government environment is more networked government needs to start at the top. In the
complex, requiring a whole different set of competencies and private sector, responsibility for managing and nurturing
capabilities. In addition to knowing about planning, alliance partnerships, joint ventures, and outsourcing
budgeting, staffing, and other traditional government duties, relationships often rests at the most senior levels of a
networked management requires becoming proficient in a company. This is rarely the case in government. Executive
host of other tasks, such as negotiation and mediation (see attention is typically more focused on political issues, public
box). Instead of a drill sergeant, today’s public managers need affairs, and putting out fires, leaving precious little time to
to be more like a symphony conductor. spend on supervising and fostering partnership arrangements.
“In government, the people doing the work managing the
Today, such skills aren’t exactly plentiful in the public sector.
contractors are not the people that really have the skin in the
Many government organizations don’t have effective contract
game,” says GAO’s Brock. “It’s been pushed down the
management capabilities, never mind the far more
organization and doesn’t get the attention it deserves.” This is
sophisticated requirements of network management.23
troubling because more and more the job of government
“When you look at sourcing issues, government’s need for
executives today is managing relationships across sectors.
access to services has grown faster than its management
capacity to control that they’re getting what they want,” For years, the Internal Revenue Service was no different. One
explains Jack Brock, managing director of sourcing and failed multimillion dollar contract engagement after another
acquisition issues at the General Accounting Office. demonstrated the lack of senior attention the agency devoted
to relationship management. In 1997, the IRS got its wake-up
Building such a capacity requires not only far-reaching training
call in the form of highly publicized congressional hearings,
and recruitment strategies, but a full-blown cultural
which took the agency to task for a host of problems, among
transformation. What is required is nothing less than changing
them dreadful customer service and archaic information
the definition of what it means to be a public employee.
systems. Meeting many of the new goals set by Congress was
People with network management skills – skills currently not
dependent on the success of its multibillion dollar
highly valued in government – need to be recruited,
modernization project, a program managed by a consortium
rewarded, promoted, and empowered to solve problems with
led by Computer Services Corp. (CSC). “Driving a multi-year,
increased discretion and fewer layers of supervision.
business transformation outsourcing relationship across a
complex organization requires senior-level commitment,” says
IRS Deputy Commissioner Dave Mader. The agency set up a
management structure in which IRS executives are lined up
with CSC executives in joint integrated process teams for all
the agency’s dozen-odd modernization projects. Fred Forman,
the deputy commissioner who leads the modernization effort,
has a full-time counterpart at CSC whose office is adjacent to
his own.
Internal Revenue Service E-File
Channel Partnership Network
The Internal Revenue Service (IRS) has formed particularly explains Lutes. “Over half of all tax returns came in from
innovative partnerships with private tax preparers and tax professionals; millions more were completed by
software manufacturers. Looking to save money, speed up taxpayers with the help of tax software. We needed to
the issuance of refund checks, and reduce Americans’ anger work with the private sector to accomplish our goals.”
with the much-despised IRS, in 1998 Congress told the IRS
Lutes hired a handful of national account managers – an
that by 2007 it wanted 80 percent of all tax returns – over
unheard of job title in government – and gave them a
120 million annually – to be filed electronically.
single goal: enlist software companies like Intuit, tax
As far as Congressional appropriators were concerned, preparation firms like H&R Block and Jackson Hewitt,
convincing the majority of Americans to file their tax returns portals like AOL and MSN, individual practitioners, and
electronically was the only way to prevent huge future banks and other financial institutions in the effort to shift
budget outlays, as the volume of returns continued to rise tax filing to the Net.
each year. “Over the next decade, we’ll need to process 40
The strategy was simple. Rather than try to drive traffic
million additional returns with no additional resources,” said
through the IRS or other government sites, why not link up
Terry Lutes, the career IRS employee who runs e-file, the
with commercial partners who already have high traffic? By
IRS’s electronic filing initiative. “The only way to do that is
creating multiple channel partners, the IRS gains the
by getting at least 40 million more taxpayers to file
advantage of free marketing and a better chance of
electronically.”
meeting its aggressive targets. As a result, the IRS
While the case for online filing was never in doubt, the established e-file trading partners, including those who
Congressionally-driven goals were incredibly ambitious, to prepare electronic tax returns, assist in processing returns,
say the least. At the time, the agency was receiving only 20 and transmit electronic returns directly to the IRS.
percent of all returns electronically – or about 24 million Individual taxpayers must file electronically using the online
each year. Fully 70 percent of Americans weren’t even aware forms of one of these trading partners rather than submit
that they could file their federal income taxes online. their returns directly to the IRS.
It didn’t take long for the IRS to realize that the agency Within three years, the percentage of Americans aware of
would need a lot of help meeting the Congressional targets. e-file had shot up to 80 percent, and 46 million returns
It turned to the private sector, deciding to embark on a plan were being filed electronically – about 35 percent of all
to leverage the technological and marketing prowess of tax returns. Much of the rise was attributed to massive
software companies and national tax preparation firms as advertising campaigns from the agency’s private-sector
well as the millions of individual relationships built by tax partners. “They’re a powerful ally in marketing the
accountants with their clients. “It was a no-brainer,” message of filing online,” says Lutes.
Attracting More “Connectors” come from a variety of different backgrounds, including

In the best-selling book The Tipping Point, Malcolm Gladwell investment bankers, lawyers, management consultants, and
introduces the concept of the “connector:” These are engineers. They all have commercial experience in delivering
individuals who are able to effortlessly span several very projects, thereby filling a major capacity void in the central
different worlds and bring together people from these government. “The civil service career strategy doesn’t lend
disparate environments. In a networked world, governments itself to developing commercial deal capabilities,” says Helen
need more connectors – people whose background and Dell of Partnerships UK. “Civil servants aren’t recruited in for
temperament enable them to build up a trove of relationships those skills.”
across the public, private, and nonprofit sectors and leverage
these relationships to build networks of mutual benefit. Updating Skills
The acquisition community itself also needs to update its
An interesting model for attracting these skill sets comes from
skills. Traditionally, the most important thing was to know all
Great Britain. Several years ago, the central government
the rules and follow them without deviation. No longer.
created an organization called “Partnerships UK” as part of a
Acquisition officers must be more than mere purchasers or
broader effort to improve government’s capacity to conduct
process managers. They need a much greater understanding
public-private partnerships. Partnerships UK tries to help
of market conditions and industry trends. “The old days of
agencies become smarter purchasers of services by
the stereotypical government acquisition worker are at an
standardizing contracts and specifications, providing help desk
end,” says Joseph Johnson, director for administration and
support, highlighting best practices, and rotating employees in
services at the Defense Acquisition University, DoD’s
and out of agencies for up to six months at a time. Employees
acquisition training institute. “The worker of the future
cannot be just rule bound. Acquisition is no longer about
managing supplies; it’s about managing suppliers.”
To prepare the military’s 132,000 acquisition workers for this

new environment, the Defense Acquisition University has
thoroughly revamped its training curriculum. One important
change is its effort to get Defense employees to understand
that the traditional adversarial, arms-length relationship that
procurement officers have had with their contractors simply
won’t work anymore. It produces too much confusion and
misunderstanding and makes it very difficult to build in the
trust needed for partnerships to work over time. One way the
acquisition university is trying to fix these problems is by
“embedding” contractor representatives into many of the
training courses. Contractors regularly participate in classroom
discussions, and Defense procurement officers are asked to
act the role of contractors in role-playing exercises. The goal:
to help the procurement officers to better understand the
other side.
Ultimately, there’s no better way to understand the capabilities

and pressures of contractors than through on-the-job training.
Understanding this, NASA and the Department of Energy
offer rotational assignments in which agency employees
spend months at a time with private contractors.24
But as has been emphasized earlier, contracting and

relationship skills can no longer be just the province of the
acquisition community. In Great Britain, the increase in public-
private partnerships has led to changes in the top civil service
training programs. They’ve been revamped to include a much
greater emphasis on networked government skills – managing
contracts, being smart buyers, working in partnerships, and
developing business management skills. In a similar vein, the
Defense Acquisition University now offers week-long
acquisition strategy executive training sessions for generals,
admirals, and other military brass whose primary
responsibilities don’t necessarily include direct oversight over
procurement.
Conclusion
The government landscape has changed. Governments are Achieving results for citizens in this new environment requires
steadily moving from a model of hierarchical direct service a whole new management approach: new ways of using IT to
delivery to one of networked government – in which they connect to partners, new ways of ensuring accountability,
use a web of private sector contractors, nonprofits, and new ways of measuring and monitoring performance, and
other government agencies to deliver services and fulfill new ways of thinking about human capital needs. In this
policy goals. At the same time, how governments use third study, we’ve tried to provide a framework for moving
parties to deliver public services is becoming more complex. governments in this direction. As the networked government
It’s no longer just about outsourcing versus bureaucracy. It’s trend continues, those governments that are able to master
about managing diverse webs of relationships to create the skills of managing in a networked setting will thrive;
value. As the problems governments must confront become those that don’t will increasingly experience service delivery
more complex and as technology allows for more and organizational problems.
sophisticated responses, simple bi-lateral contracting
arrangements are giving way to multi-organizational, cross-
boundary, and cross-sector networks.
15
C. O’Dell and C. Jackson Grayson, Jr., If Only We Knew
End Notes What We Know: The Transfer of Internal Knowledge and
1
John Arquilla and David Ronfedlt, “Fighting the Network Best Practice, (New York: The Free Press, 1998).
War,” WIRED, December 2001, p.151. 16
“TSA: We will never assume we’ve got the job done,”
2
White House Office of Management and Budget, FY 2004 Deloitte Consulting, 2002, p.23. Because many of TSA’s 400
Budget-Object Class Analysis, Budget Concepts Branch. internal and external constituents may have a need to share
3
“sensitive” information, the information sharing system is
Commission on Public Private Partnerships, Building Better
set up for role-based access.
Partnerships: The Final Report of the Commission on Public
17
Private Partnerships, The Institute for Public Policy Research, Joan Magretta, “The Power of Virtual Integration: Interview
London, United Kingdom, 2001, p.70. with Michael Dell,” Harvard Business Review, 1998.
4 18
European Commission, “The Commission and Non- Liverpool Partnership Group, LSP Accreditation – LPG’s Self
Governmental Organizations: Building a Better Partnership,” Assessment, January 2002.
Discussion Paper presented by President Romano Prodi, 19
available at http://europa.eu.int/comm/secretariat_general/ E.S. Savas, Privatization: The Key to Better Government,
sgc/ong/docs/communication_en.pdf. (Chatham, NJ: Chatham House Publishers Inc, 1987), p.
270.
5
Fortune, “The Pentagon’s Private Army,” Nelson D. 20
Schwartz, March 17, 2003. The article cites these figures Jeffrey H. Dyer, Collaborative Advantage: Winning Through
from Peter W. Singer’s book, Corporate Warriors: The Rise of Extended Enterprise Supplier Networks, (New York: Oxford
the Privatized Military Industry. University Press, 2000).
21
6
John Koskinen, interview with the author, January 2003. Ibid., p.38. Dyer shows empirically the correlation between
higher supplier trust and lower transaction costs in a study
7
Robert Agranoff and Michael McGuire, “Big Questions in of U.S. and Japanese automakers. Transaction costs are
Network Management Research,” paper prepared for the defined as the costs associated with staff time spent on
Fifth National Public Management Research Conference, activities such as negotiating and assigning blame.
Texas A&M University, College Station, Texas, December 3-4, 22
1999, pp. 2-3. In public-private networks, the network is Providers need some certainty in order to plan their
designed by either government or a third party, while the budgets, hire staff, and ensure continuity of care.
Meanwhile, governments can’t measure performance over
role of activator is usually performed by a senior government
time if the measures keep changing each year.
official or politician.
23
8 At the federal level in the U.S., the acquisition workforce
H. Brinton Milward and Keith G. Provan, “Governing the
has fallen by 22 percent over the past decade. See: U.S.
Hollow State,” University of Arizona School of Public
General Accounting Office, “Acquisition Workforce: Status
Administration and Policy, February 6, 2000.
of Agency Efforts to Address Future Needs,” Report to
9
Ravi Aron and Jitendra Singh, “IT Enabled Strategic Senate Committee on Governmental Affairs, GAO-03-55,
Outsourcing: Knowledge Intensive Firms, Information Work December 2002, p.1.
and the Extended Organizational Form,” The Wharton 24
Ibid.
School, University of Pennsylvania.
10
M. Mitchell Waldrop, “Can Sense-Making Keep Us Safe?”
Technology Review, March 2003, p.45.
11
“CDC Reports SARS Containment Methods Working,” U.S.
Centers for Disease Control and Prevention, CDC
Telebriefing Transcript, CDC Update on Severe Acute
Respiratory Syndrome (SARS), May 6, 2003.
12
Center for Digital Government report commissioned by
Deloitte & Touche, November 2002.
13
Deloitte Consulting Information Release, “Electronic Disease
Surveillance Systems.”
14
Robert D. Austin, “Ford Motor Company: Supply Chain
Strategy,” Harvard Business School, December 2001.
Acknowledgments About Deloitte Research
Research Associate Jeannie Rhee (Washington, DC) Deloitte Research identifies, analyzes, and explains the major
contributed significantly to this study, particularly in helping issues driving today’s business dynamics and shaping
to develop the case studies and applying insights from tomorrow’s global marketplace. From provocative points of
business networks to the public sector. Jon Williamson from view about strategy and organizational change to straight talk
the London office of Deloitte conducted some of the about economics, regulation, and technology, Deloitte
research into networked government in the UK. Harvard PhD Research delivers innovative, practical insights companies can
candidate Andy Feldman also contributed research assistance use to improve their bottom line performance. Operating
for the study, particularly on the role of nonprofits in through a network of dedicated research professionals, senior
networks. From Deloitte, Dwight Allen (Washington, DC), consulting practitioners, and academic and technology
Peter Koudal (New York, NY) and Michael Raynor (Toronto, partners, Deloitte Research exhibits deep industry knowledge,
Canada) provided helpful comments and insights on various functional expertise, and a commitment to thought
drafts of the paper. Other helpful comments from Deloitte leadership. In boardrooms and business journals, Deloitte
came from Greg Pellegrino (Boston, MA), Bob Campbell Research is known for bringing new perspective to real-world
(Austin, TX), Ajit Kambil (Boston, MA) and Ann Baxter (SF, concerns.
CA). From the Kennedy School of Government, Steve
For more information about Deloitte Research, please contact
Kelman, Howard Husock, Robert Behn, John Donahue and
the Global Director, Ajit Kambil, at +1 617 437 3636 or via
Mark Moore all provided helpful insights. We would also like
e-mail: akambil@deloitte.com.
to thank the dozens of people we interviewed from
government agencies, nonprofit organizations and the
private sector over a nine month period who helped us to
better understand this phenomenon, particularly Jack Brock About the Ash Institute for
and Chris Mihm from the General Accounting Office, Stan
Soloway of the Professional Services Association, Lynn Governance and Innovation at
Scarlett, Assistant Secretary of the Department of the
Interior, Deidre Lee of the Department of Defense and John
Harvard University
Koskinen, the former City Administrator for Washington, DC. The Roy and Lila Ash Institute for Democratic Governance and
Innovation fosters excellence in government around the world
in order to generate and strengthen democracy. Through its
Innovations Awards, its research, publications, and curriculum
support, and its global network, the Ash Institute champions
critical milestones in creative and effective governance and
democratic practice.
The Ash Institute builds upon the success of its Innovations in

American Government Awards Program. Since 1986,
Innovations has received more than 24,000 applications from
federal, state, local, tribal, and territorial government
initiatives. The Program has recognized 310 innovative
programs, which have received a total of $18.6 million in
awards. Most Innovations winners have been replicated;
many have served as harbingers of comprehensive reform
strategies or as forerunners to federal and state legislation.
Recent Deloitte Research Putting IT on the Short List: Key Findings from the Harvard
University, John F. Kennedy School of Government's
Thought Leadership “Leadership Workshop for the New Governors,” February
2003.
Transportation Policy
Put information technology on the short list of critical
Combating Gridlock: How Pricing Road Use Can Ease initiatives that the country’s 24 new governors should be
Congestion focusing on in their first term? The very notion sounds
counter-intuitive, but as this Deloitte Research Brief illustrates,
People the world over are choking on traffic gridlock. In
deep budget deficits, new homeland security demands, and
Western Europe, for instance, it is forecast that gridlock will
public expectations can’t be reconciled without dramatic, yet
rise 188 percent on urban roads by 2010. The cost of
feasible, reforms in how government operates and delivers
congestion in OECD countries alone amounts to nearly 3
services. As a result, information technology should be a key
percent of GDP, or about US$810 billion.
component of each governor’s management agenda.
A new study from Deloitte suggests a possible remedy—
pricing road use in the same way as utilities, food and other State Fiscal Crises
goods. The study details the success road user pricing has Show Me the Money: Budget-Cutting Strategies for Cash-
achieved in reducing congestion in London, Singapore, Oslo Strapped States
and other cities around the world. It is the first study to offer
detailed lessons for successfully implementing road user As hard as it is to fathom, state budget problems in fiscal year
pricing from London and other leading cities. Some of the 2003 will be even worse than they were in 2002. This study
recommended tips include achieving buy-in from local seeks to provide budget-cutting strategies that will address
businesses, citizens and consumer groups, and creating current budget shortfalls as well as much-needed medium-
convenient alternative transportation options so commuters and long-term reforms in state finances.
who choose not to drive and pay the charges still have a way
to get to work. Homeland Security profile
The Homeland Security Market: The World’s Most
IT Value in the Public Sector Challenging Emerging Business Environment
Citizen Advantage: Enhancing Economic Competitiveness
Government and business leaders believe that securing the
Through e-Government
homeland against potential terrorist threats could cost
E-government isn’t usually the first thing that comes to between $93 billion and $138 billion in 2003. Based on
politician’s minds when they’re debating what government original survey data and interviews, this study profiles
can do to enhance constituent value, make compliance with homeland security spending in the public and private sectors
government rules and regulations easier, or create a favorable and describes approaches for both to make critical
business climate. However, by minimizing the amount of time investments pay off.
and effort it takes to comply with government red tape and
complete government transactions, e-government can have a Strategic Partnering in the Public Sector
positive impact on both business productivity and people’s
Relationship Portfolio for the Public Sector: A Strategic
quality of life.
Approach to Partnering in Turbulent Times
This study introduces a new model of Return on Investment
Today, governments around the world are looking more to the
(ROI), which we call Citizen Advantage. By measuring the
private sector for help with major technology and operations
benefits to businesses and citizens—as well as those to
projects. And while limited contracting, outsourcing, and
government —it provides decision makers with a fuller picture
public/private partnerships are the tactics to get the jobs
of the costs and benefits associated with IT investments.
done, governments need to think strategically about the
Cutting Fat, Adding Muscle: The Power of Information partners they choose with special attention on current and
Technology in Addressing Budget Shortfalls potential value to the organization. Using the Relationship
Portfolio enterprise approach to partnering, governments can
What are the best opportunities for using technology to position themselves strongly for project successes today and
reduce operational costs? How do you squeeze savings from hedge against severe risks in the future.
current IT budgets? Where are the greatest savings likely to
come from? These are just a few of the important questions
that are addressed in this study, which is the first of a two-
part series on IT value in the Public Sector.
Getting Results in Government
For Further Information,
The Keys to Smart Enterprise Transformation for the
Public Sector: 2002-2003 Please Contact
When money is tight and the future uncertain, ambitious Global
enterprise transformation projects in the public sector need to Greg Pellegrino
yield positive results. Here are the top eight transformation Tel: +617 850 2770
issues government executives need to confront, and the keys e-mail: gpellegrino@dc.com
to tackling them for maximum success.
Frank Wilson
Tel: +44 161 832 3555
Business Model Innovation in e-Government
e-mail: fwilson@dc.com
The Transformation is Now: Michigan’s Innovative Formula
for e-Government Success Paul Doop
Tel: +31 182 575200
This case study reveals how the State of Michigan followed a e-mail: PDoop@deloitte.nl
new model of e-Government evolution to produce accelerated
benefits for customers and itself. The secret is an entirely new
Europe
approach to enterprise transformation that turns it from a
destination into a driver. Peter Allred
Tel: +44 20 7779 5511
e-mail: pallred@dc.com
Benefits of Customer Service
e-Government’s Next Generation: Transforming the Hans Bossert
Government Enterprise Through Customer Service Tel: +31 33 4537200
e-mail: jbossert@deloitte.nl
Through analysis of the current state of e-Government
initiatives throughout the world, this report develops a Michael Kerr
strategic roadmap that will help governments make sure their Tel: +44 20 7303 6645
investments continually pay off for their constituents and e-mail: mkerr@deloitte.co.uk
themselves.
Americas
Please visit www.deloitte.com/research for the latest Deloitte
Research thought leadership or contact us at: Bob Campbell
delresearch@deloitte.com. Tel: +512 226 4210
e-mail: bcampbell@dc.com
© 2004 Deloitte Development LLC. All rights reserved.
ISBN 0-9747183-4-3 David Jones
Tel: +973 683 7125
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Glen Orsak
Tel: +1 613 786 7537
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Asia
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www.deloitte.com/research

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Government by Network

The New Public Management Imperative

Introduction: The Rise of Networked Government ............... 3

Types of Public-Private Networks .......................................... 6

Network Management ......................................................... 8

Strategy: Answering the “What” Question .................. 10

Network Design: Answering the “How” Question ....... 11

Ties that Bind: Connecting the Network ...................... 14

Human Capital: Public Employees as

Advantages of Networked Government ............................... 5

U.S. Coast Guard Deepwater ............................................. 11

Wisconsin W-2 ................................................................... 13

Bringing Power to the Edge of the Network ....................... 14

National Electronic Disease Surveillance System ................. 15

Six Ways CKNs Can Improve Networked Government ........ 16

Networking Requires an IT Network ................................... 17

Liverpool Partnership Group ............................................... 18

Managing the Tension between Flexibility

IRS e-File ............................................................................ 21

Increases in third-party delivery models are occurring not only High

authorities have contracted with the private sector to not only

problems of modern government. When a stove-piped

The Joined-Up Government Movement

Source: Deloitte Research Innovation

Service Contract Channel Partnership

Figure 3. Types of Public-Private Networks

Civic Information Ad-Hoc Supply Chain

Degree of Government Involvement

Source: Deloitte Research

Figure 4. Building Blocks for Governing by Network

Design and Activation

Human Capital Strategy Performance Integration

Information Technology Enablers

Source: Deloitte Research

Choosing the most appropriate network model

■ Is the need ongoing or one-time? Does the network only need

■ How much money is available? The less money that’s available,

Figure 6. Kansas Child Welfare Contracting Design

Mental Social Groups

Source: Deloitte Research Source: Deloitte Research

Wisconsin also ended the monopoly the state’s counties had

Source: Deloitte Research

Bringing Power to the

■ A social services agency to share real-time information with

■ A motor vehicles agency contractor to instantly verify the

A deeper level of knowledge sharing can be achieved by

Providing a Single View of the Customer

Attracting More “Connectors” come from a variety of different backgrounds, including

To prepare the military’s 132,000 acquisition workers for this

Ultimately, there’s no better way to understand the capabilities

But as has been emphasized earlier, contracting and

The Ash Institute builds upon the success of its Innovations in

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