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Public Private Partnership for e-Government

J Satyanarayana IAS CEO, National Institute for Smart Government, Hyderabad, India

[ABSTRACT : e-Government is a complex, multi-functional process that has the promise of transforming government. However, governments do not have the required financial, managerial and technological resources to implement e-government in a sustainable manner. There are complementarities between the public and private sectors in the skillsets and resources required for success in e-government. PPP is a model that exploits this fit. This paper discusses the different PPP models, the conditions necessary for its success and a few case studies.] (KEY WORDS e-Government; PPP; Accountability; BOO; BOOT; JV; Political will; Monopoly) e-Government is the process of transformation of the relationships of the government with its constituents citizens, businesses and employees using the tools of ICT (Information & Communications Technology) to bring about enhanced access, transparency, accountability and efficiency in delivery of government information and services. Implementation of e-government raises several organizational, process-related and technological issues. It is a complex issue that needs multi-dimensional approach. New technologies demand new types of implementation models. Adopting conventional procurement methods would not take us far on the path of e-government. In the conventional approach, the project ownership lies with the public sector itself along with the responsibility for funding it and bearing the entire risk. Can we not think of newer models that enable sharing of funding responsibility and risk ? In this paper, we discuss the Public Private Partnership or PPP model for e-government, which is being increasingly tried out in different parts of the world. The concept of PPP has been brought into operation over a decade ago, primarily in relation to the construction and operation of public infrastructure projects like bridges, airports, highways, hospitals etc. PPP is a reform that is a generation next to privatization. Privatization is the process of involving the private sector in the ownership and management of ongoing and existing projects and businesses of the public sector. In PPP, the private sector partner is inducted into a project right from the stage of initiation to completion and management. The word PPP is used interchangeably with PFI or Public Finance Initiative a concept in use in the UK. Though PPP has been in vogue for over a decade, not much research has taken place in this area- and very little in its relation to e-government. The experience has also not been extraordinary. In UK, as of end of 2002, 512 PFI deals have been signed, of which 208 are in local governments. PFI scheme in education and health have caused considerable controversy, while PFI IT projects have proved practically difficult to get right. 2. Why PPP for e-Government ?

What could be the provocation for governments to start looking at PPP more seriously now in relation to their e-government plans? The reasons could be many and different for different governments. (a) Combining accountability with efficiency: The most common belief is that PPP for e-government would combine the accountability and domain expertise of the public sector with the efficiency, cost-effectiveness and customer-centric approach of the private sector. Conceptually this is sound. Despite the shortcomings like legacy mindset, bureaucracy, red tape and lack of responsiveness to citizen needs, the public sector is still the largest repository of domain expertise in addition to possessing the monopoly of exercising statutory powers. The public sector, however is not adept at absorption of new technologies. The private sector on the other hand, is reputed to be efficient and costeffective and more importantly, agile enough to absorb and apply new technologies in innovative ways. Therefore it is possible to create a win-win situation combining the core strengths of the public and private sectors to fulfill the objectives of e-government i.e. delivery of efficient online services. (b) Complexity and size of e-government: All said and done, e-government is a difficult game. It involves application of complex ICT technologies and management practices to equally complex business processes of the government over a sustained period. This is complexity compounded ! The situation appears more intractable if we visualize the government to be a complicated amalgamation of heterogeneous agencies with dynamically changing business processes, cross-communications and dependencies. It is a tall order to expect the government organization to accomplish the task of egovernment in any meaningful timeframe. An assessment of the magnitude of effort involved in e-government in India, puts it at over 1,25,000 man years! Theoretically, the private sector is supposed to be able to raise unlimited resources provided there is economic sense in the e-government exercise. There is thus a reasonably good match between the need of the government and the resource of the private sector. (c) Pace of implementation: ICTs change fast. This applies to all its segments hardware, software and networks. Newer versions and releases of software operating systems, database servers, application servers, and security software are released at regular intervals by the vendors to maintain and capture market share. Networks and devices are no exception. As is often said the only thing that is constant is change! The typical life cycle of a large e-government initiative is 18 to 24 months from initiation to completion. Lot of water would have flown under the bridge during this period, in terms of technological advances. In this fast-changing technology scenario, it is impractical to plan for implementing projects one after the other. By the time a second batch of projects is finished, they would be incompatible or out of sync with the fist. We need to adopt a carpet-bombing approach after we have designed appropriate architectures and readied the people. It is not possible to attain and maintain such a high pace in implementing egovernment, if the government attempts the task by itself. This is a compelling reason to join hands with the private sector. (d) Resources: The combined effect of the huge size of e-government effort and the great speed of implementation is that investments required in e-government sector are very large over a continuous period of 5 years. It is estimated that India needs $ 8 billion of investment in e-government sector over a 3-5 years period - excluding the cost of communication and access infrastructure. This is sixteen times higher than the current annual IT spend of about half- a-billion in the government sector. Add to this the stupendous requirements in the managerial and human resource fronts. No government can be equal to this task. Tapping the unlimited financial, managerial and manpower

resources of the private sector is a viable alternative in this regard. Structuring appropriate public-private partnerships that complement and supplement each other in functional, technological and resource areas is the key. (e) Weathering the storm: e-government is an evolutionary process that spreads over at least 2 decades before its impact is felt in a widespread manner. Example is Singapore. This process typically involves the following phases: 1. 2. 3. 4. 5. 6. Implementation of an innovative e-government project in one or two agencies. Taking up of a few pilot projects in different sectors on stand-alone basis. Creation of core information infrastructure. Design of overall business and Technology architectures. Creation of institutions that focus on e-government . Multiple large-scale e-government projects.

Out of the above, the stage 3 through 6 require political will, vision and leadership, coupled with technology leadership and managerial excellence on a continuous basis. Major programs and initiatives can receive a setback in the event of a disruption or discontinuity in any of the above stages. Political risk is the most critical. One way of hedging the risk is to create stakes outside the system of governance that exert pressures at appropriate times, to continue the ongoing e-government initiatives. PPP is an effective way of creating such stakes that provide continuity during political and administrative transitions. The contractual rights and obligations created through PPP agreements, most often, survive the political upheavals. 3. Necessary but not sufficient ! We have argued out the case for private sector involvement in e-government on the grounds of efficiency, competence, resource and continuity that it can bring to bear. Why is it then, that we have not so far seen the private sector making a beeline for partnering governments significantly anywhere in the world not even in the hey days of the dotcom era? The answer is simple. All the above circumstances a to e are necessary but not sufficient to enthuse the private sector. The entrepreneurs are not sitting out there with tons of money and resources to venture into the risk-prone area called egovernment unless they also see a set of other conditions that are conducive to success, prevailing in the country or state. Let us look at those conditions, which, together with the necessary circumstances mentioned at (a) to (e) above, make a set of conditions sufficient to attract investments from and, more so, involvement of the private sector in the saga of e-government. First and the foremost circumstance that the entrepreneurs look for is the existence of a strong political will to implement e-government. This will should be manifest in the form of an explicitly stated vision for e-government and a leadership that keeps asserting we can do IT. The leadership h as got to exhibit a spirit or commitment that is undaunted by criticism, opposition and resistance at every stage and an unflinching faith that e-government is the right answer - even in the face of initial failures. The role of political leadership in this context is more crucial in developing countries where e-government has to compete with more pressing demands from development and welfare sectors. The emergence of a few successful e-government projects implemented purely in the public sector is another factor favored by entrepreneurs. These are required to mould the political and public perception on the potential of e-

government and create hope. Private sector cannot be expected to be the opening batsman in this filed! Mere political leadership, not backed up by administrative grit and determination would not create enthusiasm among the private sector. We need champions of e-government among the top echelons of the civil service. These champions have to carry the sermon of e-government and evangelize it across various government agencies. Transparency and fair play in award of the contracts form the next set of prerequisites that the private sector entrepreneurs look for, before venturing their resources into e-government. The tender procedures of the government are cumbersome and those for e-government could be more elaborate and cumbersome. It is an extremely difficult - but possible - task to demonstrate the transparency in e-government decision-making. However, when accomplished over a few projects, this task of demonstrating the transparency creates trust, especially among the major technology players. It would create the abiding confidence that the resources sunk into bidding for e-government projects would not be lost. And if lost, it would be in favor of a competitor who has made a better value proposition. Transparency promotes healthy competition. And coupled with consistency, it promotes the spirit of partnership. Entrepreneurship is about risk-taking risk in anticipation of reward. A partnership in e-government, therefore, presupposes that the risk is also to be shared by the partners the government and the private entrepreneur. Civil servants and political executives even - are known to be averse to risk. The environment is conducive to the argument heads I win -tails you lose against the private sector partner. One of the pre-requisite characteristics that an entrepreneur would, therefore, like to see is the propensity to take risk among political and administrative echelons. A few innovative and potentially risky projects implemented successfully against all odds, create a fertile ground for generating a conviction among intending entrepreneurs and IT companies to gravitate towards partnering e-government. The grooming of a batch of Chief Information Officers who chant the mantra of e-government is a good augury in this context. While a set of sporadic and isolated e-government projects sprinkled across several sectors would be adequate to enthuse the private sector, attempts to draw up comprehensive architectures and the big picture of e-government would undoubtedly make them commit to the cause. e-government architectures provide a stable platform for the PPP exercise to go on for sustained periods. The exercise of developing more mature and complete architecture is in itself a good ground for long-term public-private partnerships in areas of technology, business process reform and human resources development. At the end of the day, business and industry tend to move to areas that have current or future market potential. It is far-fetched to imagine that ICT industry would choose the PPP route to e-government unless it makes economic sense. Volume and value of transactions and sustainability of the business operations are key things here. Creation of excellent e-government solutions is only a part of the job done. More important is to create and maintain markets for them. The value that customers see in an e-service is the foundation for a longterm business opportunity. This requires a real hard-selling effort in the initial, post-launch period of every e-government project. Such an effort is to be led by the government to be carried forward by the private partner. 5.4. PPP for What ?

PPP model of implementation is more suitable to particular areas of e-government and not to all. The criteria for PPP include long-term nature of demand for a service, profitability and amenability to structuring a commercial framework and business model for PPP. The following areas are recommended for PPP. The list is illustrative, not exhaustive. Information Infrastructure Projects. e-government architecture Data centers Communication backbone Call Center e-government gateway e-payment gateway Government-to-Citizen Projects Citizen service portals Integrated service centers Agency service centers. Networks of Kiosks. Government-to-Business Projects e-procurement G2B portal. While contemplating e-government initiatives in the above areas, it is a good practice to evaluate whether it is a fit case for PPP and if so, what form of PPP is best suited (as discussed below). 5. Forms of PPP PPP can be of different forms, depending on the shares of government and the private sector in the investment, control as also on the strategic nature and commercial viability of the project/initiative. Let us see these different models of PPP. 5.1. JV Model: In this model, an SPV (Special Purpose Vehicle) is formed to undertake the e-government project and /or to provide e-services. The joint venture can be led by the government or by the private partner depending upon the strategic nature and sensitivity of the domain. JV model is the preferred option for typically projects involving (a) delivery of services, which are basic and permanent in nature (b) setting up of infrastructure with steady returns envisaged in long term (c) handling of sensitive data and information relating to citizens, businesses and government. (d) close coordination with and cooperation from a host of government agencies. The extent of government share varies from 51% to 11% . For instance, it could be: 51% in category (a) with government retaining management control; 49% in category (b) with private partner in control;

26% in category (c) with government representative being present on the Board to ensure that the priorities of the government/citizen are taken care of ; 11% in category (d) to provide the stamp of the government to lend credibility to the JV in its interactions with government agencies. The following guidelines are useful while structuring a JV for e-government. i. The share of the government in the equity of the JV need not always be in cash. It can be in the form of tangible assets like land, building and equipment or in the form of intangible assets like the right to access government information and databases for providing e-services. The selection of a partner is usually done through an open competitive process. The pre-qualification criteria are required to be quite stiff considering the longterm or near-permanent nature of the partnership. Companies with a long standing (at least 10 years), high turnover during the preceding 3 years (in relation to the expected annual turnover of the JV) handsome profitability (exceeding 15%) and good track record in the particular area of e-government to be handled by the JV. In the short-term term the most viable (and perhaps desired) e-government partners may be multinational companies that have proven experience and capacities to deliver. However, long-term development of local ICT companies can, and often should be part of e-government planning. One effective strategy might be to pair an experienced multinational company with a suitable local company in the development and delivery of e-government applications. This can promote the transfer of technology and skills to local industry which at the same time ensuring that outsourcing producing results.[1] iii. It is strongly recommended that, despite the stringent criteria adopted for selection of the partner, a JV should not be formed straightway. The bid documents should hold out formation of JV as an option to be exercised after the selected partner has established its credentials by executing a pilot and running it successfully for a period of 6 months. This would serve three purposes. Firstly, it would establish the viability or otherwise of the e-government project. Secondly, it would enable the government to make an accurate assessment of the technical, organizational and managerial capabilities of the partner. Thirdly, it would enable the partners to estimate the business model more accurately (than at the RFP stage) through an analysis of the transaction data and trends recorded during the pilot phase. It is necessary to draw up the RFP and the bid evaluation criteria as clearly as possible to enhance the transparency of the selection process. Looking around for successful implementations elsewhere could be one good way. The agreements, both at the pilot stage and the JV stage, should be drafted with considerable care engaging the best legal experts, as these documents regulate the partnership over a long period.




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

options of the partners are kept open till the end of the concession period. The revenue model of the project is charges (paid by the citizen or the government) or on Installment/Equated Monthly Installment) paid by operator/service provider. The revenue model could also EQI/EMI plus transaction charges.

period also known as the either based on transaction EQI/EMI (Equated Quarterly the government to the be a combination of a fixed

The BOO model is suitable for projects that involve setting up physical infrastructure like service center(s) for delivering services to the citizens. Good examples are egovernment projects relating to issue of driving licenses, registration of vehicles, and provision of integrated services to citizens across the counter. The important aspects in drafting the RFP (Request for Proposal) for a BOO Project are (a) to determine the period of concession during which the partner (Concessionaire) is authorized to deliver the services and (b) the bid parameters dealing with the transaction charges and / or EQI/EMI to be quoted by the competitive bidders. BOO model is usually applied to e-government projects that adopt time-tested technologies and have a fairly reliable revenue model. 5.3. BOOT -Build-own-operate-and-Transfer-model This is almost identical to the BOO model except that the government exercises the option to get the ownership of the assets created by the partner at the end of the project. The transfer cost is usually a small percentage 5 to 10 % - of the initial capital cost of the project. The BOOT model is adopted where the technology is time-tested and the ICT assets are expected to outlast the concession period.

4. ASP Model Application Service Provider model The ASP model is an example of PPP where the partnership is quite tenuous. In this model, the government contracts to avail the services of the partner for delivery of services as per mutually agreed service levels and commercial terms. The revenue model is typically transaction-based. The ASP model is suitable to e-government initiatives that involve a) A requirement to launch the services in a short time frame. b) The technology is not complex and widely accepted and practiced in the private sector c) The nature of information is not so critical to governance. Examples of ASP model are - design and hosting of websites that provide fairly static information to the citizens, provision of simple services like downloading/filing of forms and provision of MIS services in the G2G arena to the government agencies. The service provider is usually not precluded from using its ICT infrastructure to serve other government agencies or private agencies. Most often the ASP model is useful to leverage the existing ICT infrastructure and management skills already established by service providers. This creates a win-win situation by enabling the optimum utilization of ICT by leveraging the infrastructure already set up in the private sector and thereby reducing the transaction cost to the government/citizen. The ASP model also saves the government agencies of the hassles of designing complex technology models. 5.5. Facilities Management: FM FM is an arrangement whereby the responsibility of maintaining and/or managing the ongoing e-government projects/assets is outsourced to a private company on a fixed cost per period. Legally, there is no partnership between the government and private sector in an FM model. However the involvement of the private sector could be substantial in this arrangement. Hence FM has been grouped under PPP. As mentioned, FM is ideal for ongoing, operational e-government projects especially those involving maintenance of sites in geographically distributed locations. The scope of the FM arrangement may include not only the typical annual maintenance of assets but also supply of consumables and spares and also front-ending the government agency to provide services to the citizens. The following are the benefits of FM: a) FM frees the key personnel of the organization from the hassles of day-to-day technical problems and enables them to focus on their core business strengths. b) FM results in cost savings to the tune of 15 to 20% in maintenance by virtue of specialization of the partner in that area. c) FM helps maintain/deliver high quality services to the citizens due to enforcement of the SLA (Service Level Agreement) between the partners.

6. Issues in PPP for e-government. All is not well in PPP for e-government. The partnerships tend to get into problems every now and then. Let us examine the issues that come up and ways to ensure that they do not threaten PPP relationships. 6.1. Lack of congruence in objectives: PPP is about the partnership in realizing shared objectives. The various models in sharing the investment and controls are only organizational mechanisms. The success of PPP depends on the degree to which the public and private sector partners align themselves along these objectives. Failure to realize this certainly leads to failure of the venture. The development of a shared vision for the partnership between the two parties takes time and both must commit to developing an understanding of each others objective and be sympathetic where these do not necessarily match their own says an official spokesman of UK government, which pioneered the PFI concept. The objective of providing convenient, high quality e-service may often conflict with the objective of making the initiative a commercially sound and viable proposition. Clarity on objectives has to be achieved by both the parties at the outset. 6.2. Risk and Control: Sharing of risk and control is another slippery area. Most often, governments attempt to transfer the risk to the partner without passing on the related controls to the partner quoting public interest as the reason. This results in one partner calling the shots and expecting the other partner to play the game! An example is setting up a portal with substantial private investment with the government trying to prescribe and control what services are to be offered and at what transaction cost. Operational controls should be passed on to the private partner in proportion to the risk transferred. This promotes adoption of innovative approaches rather than inhibiting them. 6.3. Clash of cultures: The organizational cultures of the private and public sector differ widely in all parts of the world. This is bound to result in conflicting situations, in as much as e-government involves substantial process reform needing interaction between the partner company and the government agency or agencies in charge of the domain. The agencies look at the surveys, interviews and studies conducted by the consultants of partner company as interference and disturbance from their normal duties. The private partners tend to look at the governmen t employees as bureaucrats with antiquated ideas that have outlived their time. Both the views are substantially wrong. It is necessary to create a joint control and review mechanism that creates mutual trust and confidence, especially during the initial period of the project. 6.4. Monopoly: Several of the e-initiatives depend, for their viability, on the principles of aggregation of demand and economy of scale. Very often there is space for only one partner in areas like e-procurement, country or state portal, data center, gateway and the like. This is likely to result in a situation of monopoly.- the monopoly of the state being replaced with the monopoly of the private partner and more importantly, monopoly of a particular technology. While a monopoly appears to be inevitable, at least in the initial periods of e-government growth, the following methodology is recommended to mitigate its impact. The operational monopoly can be handled by defining the commercial features of the contact unambiguously while notifying the project to an open bid. The service levels and the formula for determination of the transaction/ service

charges have to be spelt out in the RFP. The service/transaction charges could be a combination of a fixed base plus viable cost. The following factors are to be considered in arriving at the formula : Projected customer base and transaction volume Length of the concession period Fee structure of the existing services Price elasticity of the new services Capacity for growth.

The model should provide for (a) revision of the charges, especially downward revision, as it often happens with advance in the ICT sector (b) a slab system where the transaction charge gets smaller with the increase in volume. The technology monopoly can be mitigated by prescribing open standards in conformity with the technology architecture approved by the government and ensuring that there is scope for developing interfaces with other systems that may be developed concurrently or in future. Once the agency attains clarity and definiteness on the above issues and factors them into the business model of the RFP and a transparent process adopted, one need not worry about a monopoly situation in e-government. 7. Case studies in PPP PPP for e-government is relatively a new concept. There are not many major success stories as yet. The following cases, are a few examples of PPP 7.1 RCB Singapore: The Registry of Companies and Businesses, Singapore partnered with four private companies, Crimson Logic, Dunn & Bradstreet, Singtel yellow pages and DP Information Network ,with a view to provide value-added online information services on companies registered in Singapore. The following are the salient features: a) RCB owns all the data. The partners have been permitted to replicate the RCB database and sell the information with value-addition through transforming the data into information in the forms required by different clients. b) The revenue model rests on a revenue-sharing mechanism out of the service charges collected from the end users. c) The pricing of services is jointly decided by RCB and the partner, based on the following general principles: online services should be cheaper than conventional over-the-counter services. The charges for new services are calculated on a nominative basis and notified. d) RCB entered into partnership with 4 companies to avoid a monopoly situation (pointed out in earlier section ). 7.2 Singapore Land Authority (SLA): SLA offers online services that provide information on property ownership, land tenure, land area, last transacted price, survey plans etc. SLA attempted at PPP with the following salient features: a. The selection of the partner was through an open tender.

b. There would be a sole private partner, so as to exploit the economies of scale in providing land information. c. SLA owns the application, having paid for its development. d. The partnership works on a revenue-sharing model. 7.3 Road Transport Authority, Andhra Pradesh, India:The RTA is responsible to issue learning licenses & drivers licenses, registration of vehicles and collection of road taxes and other transport related services. The services are provided at 37 service centers of RTA where the processes were entirely manual. The agency decided to provide computerized services using PPP model, in 2000. The partnership went through a turbulent period but finally got stabilized by 2002 and is running smoothly at present. A classic BOOT model was adopted in this case. 8. Summary PPP can be a powerful instrument in the implementation of the there is a PPP policy laid down by the state (b) there is a shared government and the partner(s) (c) the right functional areas are experiment PPP and (d) appropriate financial models are crafted partnerships. Reference 1. Roadmap for e-Government in the Developing World 10 Questions e-Government leaders should ask themselves; Working Group on e-Government in the Developing World, Pacific Council on International Policy, April 2002 e-government if (a) vision between the chosen at first to for governing the