Buying into E-GOV: Who, what and how

In the scramble to meet e-government agendas, a number of Canadian public sector organizations are streamlining their procurement processes in order to better manage the purchase of required software and hardware and the services of solution providers.

IT procurement can be frustrating for both governments and suppliers, says Joan McCalla, Ontario's corporate chief strategist, Office of the Corporate CIO, Management Board Secretariat. "Obviously government needs an open, fair and transparent procurement process and the best value for taxpayers. But at the same time ... sometimes our processes are slow and unwieldy," she says.

It isnt just about buying a particular piece of hardware or software. It's more about taking a vision and strategy that solution providers have to offer and then working together to come up with a solution, one that involves shared risks, shared rewards, shared responsibility and shared accountability in the design, operation and ongoing development of e-government initiatives - the domain of public-private partnerships.

"That is a very non-traditional field for the government to procure, because it somewhat changes the basis of the relationship - it moves from vendor-supplier to that of solution provider," says Martin McGrath, president of KPMG Consulting's Public Services Practice in Canada.

In government procurement, the purchase of IT products and services has always been a bit of an oddity. The difficulty is how IT contracts are awarded and managed. Traditional procurement processes leave little room for the flexibility that is the very heart of any IT system. And with little or no innovation, often the result is that government builds systems with yesterday's technology to meet tomorrow's needs.

Many government IT executives find it challenging to balance the need to get to market faster and take advantage of marketplace innovations with preserving fairness and transparency in the procurement process. Shared-risk partnerships, risk management frameworks and fast-track supply arrangements are just some of the tools they turn to.

"We need to look at the process by which we procure IT services - no question - because services are very different from goods. Buying a chair is quite different from buying consulting advice," says Lori MacMullen, New Brunswick's chief information officer.

Last year, New Brunswick spent $100 million on a wide range of IT products and services. The province gained international recognition as one of the first jurisdictions to successfully initiate and deploy "single window" citizen access to government services. Service New Brunswick (SNB), a Crown corporation, integrates traditional and electronic service delivery, offering services from most government departments over-the-counter at one-stop service centres, over the phone at SNB Teleservices and through SNB On-Line. In April, New Brunswick established an eNB Coordination Office that oversees the province's electronic strategy including e-government, e-learning and e-business. The next stage in the eNB strategy is one electronic window.

MacMullen says governments can protect the principle of public accountability and at the same achieve efficiencies. "We will always be driven to protect the public good - an open, fair, transparent procurement process - the fundamental principles wouldn't change. But how we achieve those results may change."

She notes that flexibility - everything from an outright tender for goods, to Request for Information (RFI) and Request for Proposals (RFP) and also the Common Purpose Procurement process - currently exists in the procurement structure as far as the "how" is concerned, it just requires governments to be "creative."

"By creative, I don't mean breaking the rules," she says. "For the most part, the procurement structure allows us to do what we need to do. We look at creative relationships with our vendor community and, with private sector help, do what we need to do. But there isn't a pot of money at the end of the rainbow so we have to find innovative ways to fund these initiatives."

SNB recently partnered with CGI Group Inc. to accelerate the pace of electronic service delivery and provide infrastructure investment and research and development. In return, CGI will be able to market SNB's integrated service delivery model to e-government markets around the world.

Neil Sentance, director of the Procurement Policy & IT Procurement Branch with Ontario's Management Board Secretariat, says the difficulty with IT procurement is finding a mechanism that allows government to take advantage of good ideas yet ensure that everyone is treated the same.

"In order to ensure fairness you need a process that really allows any qualified bidder to submit a proposal. We have to give everyone the opportunity, in terms of the length of time the RFP is on the street, to respond. We need to ensure that we've answered all questions fully and that once we close the procurement we do not vary the evaluation process from what we say in the RFP The challenge is to not inadvertently affect the process if a vendor comes forward with a creative idea - that's a real challenge because the creative idea was not part of what we asked for," he explains.

Theoretically, Sentance says, the solution lies in designing procurement on the front-end to make it clear to vendors that government is looking for solutions. "But, to normalize bids across alternative solutions - to ensure fairness - is tough and something we haven't much experience with. Our entire professional practice is around comparing apples to apples, not apples to oranges.

His department is developing a Risk Management Framework - policies and guidelines that will help ministries and IT clusters structure their procurement strategy from the point of view of risk. Part of the new framework is a review aimed at improving contractual terms and, in some circumstances, potentially standardizing contract terms "to ensure that when we go to the street there is a reasonable allocation of risks between the two parties.' And, says Sentance, his department has had "fruitful and intensive consultation" with ITAC Ontario around some key industry concerns, such as limitation of liability and intellectually property provisions.

"We're getting people to ask fundamental questions about the risks of the project and then ask how the procurement strategy should be structured in terms of mandatory requirements, rated requirements, price and contractual terms and conditions," he says.

With these new guidelines, Sentance hopes to construct procurement documents that reflect individual IT projects. "We won't require from vendors things we don't need. It is a move away from a one-size-fits-all approach to say that in some circumstances, the following mandatory requirements are reasonable, but in other circumstances different requirements are reasonable given the higher risks to the Crown."

He says the process for low-risk procurement can be faster, less onerous and designed to encourage small business who may be daunted by government requirements. For purchases that are mission-critical and have significant impact on the public, and those that involve the delivery of services by third parties, government wants to ensure some "fairly comprehensive and heavyduty protections in the procurement strategy and in the contractual terms and conditions."

Additionally, Sentences department has also sought a consistent consultation process with the IT vendor community prior to the release of an RFP. He says better and strategic communication is important since it affords industry the opportunity, early in the procurement process, to let government know if it is heading off in the wrong direction and it gives the vendor community a chance to identify partners to team with for a joint bid response.

In its efforts to meet its commitment to become a world leader in electronic government by 2003, Ontario's Ministry of Consumer and Business Services signed a five-year contract with a consortium of companies led by Bell Canada. The contract follows the guidelines of governance and accountability while allowing for a shared-risk management approach.

The Bell consortium, including BCE Emergis, CGI Group Inc. and KPMG Consulting, is to deliver 24 high demand electronic services to the public by late next year. They will build an IT interface that enables government information systems to use Bell's electronic channel infrastructure securely and deliver high-volume, routine products and services over telephone interactive voice response (IVR) systems, Internet and multimedia access terminals. CGI will build and manage the delivery network, BCE Emergis will supply the secure payment technology and KPMG Consulting will implement the technology designed to protect individuals' personal information.

The value of the contract, estimated at between $60 million to $90 million, is driven largely by customer up-take, says Barbara Hewett, director of service management at the ministry. Based on the number of transactions that occur, the consortium will be paid with money saved through efficiencies.

"So the more people who use the channel, the more money Bell makes. This provides the consortium incentive to deliver good quality service - so that customers come back - and also to market the channel," she says.

In fact, customer acceptance and satisfaction will be a major factor in evaluating Bell's contract performance, says Hewett. "As an individual in Ontario, doing the work that you need to do with the government should look quite different in the future as a result of this contract.' She calls the contract a "complex business offering" combining an IT project and a service delivery project into one contract.

When evaluating the bids, the government looked at both the quality of the proposal and price. Hewett says the weight was 50-50 with the proviso that proponents had to successfully pass on quality before their price envelope was opened.

"On the IT front, we looked for depth of expertise and a design that would be scalable as business needs changed. For service delivery, we looked for a customer service approach that fit with the government's objectives - a channel management approach and design that would be client-friendly and responsive to changing customer needs - and creativity in how to deliver services efficiently and effectively."

The competition followed a traditional public procurement process: the RFP was posted on MERX for the usual time frame. The competition closed in early February 2001. An evaluation period of a couple of months involved seven Ontario Ministries. In June 2001, the Bell consortium was selected. Contract discussions occurred over the summer and a contract was signed in early September. Hewett credits a detailed pro forma section in the RFP as the main reason contract negotiations moved along expeditiously. "For a contract of this value it is pretty unusual to get it negotiated and signed in that time frame - in fact, it is extremely unusual. I'd be surprised if has ever been done."

At the federal level, Public Works and Government Services Canada (PWGSC) announced a Supply Arrangement in June 2001 that essentially fast-tracks the IT procurement process for federal departments and agencies struggling to meet Canadas commitment to make the federal government the most connected to its citizens by 2004.

"Without undertaking a major policy reform, we've been able to streamline the existing framework for procurement, making it more effective," says Canada's CIO, Michelle d'Auray, referring to the Government On-Line (GOL) Supply Arrangement.

Sylvain Cardinal, manager at PWGSC's GOL Procurement Office, explains that the Supply Arrangement differs from a contract in that a contract identifies a definite need and represents an obligation on the part of government to contract with suppliers. With the Supply Arrangement, companies agree to provide GOL services on an "as-and-when-requested basis, and under set terms and conditions" Following a competitive tendering process, 175 companies from across Canada were pre-qualified to provide GOL services to the federal government until December 2004. The list of companies will be refreshed annually. Suppliers qualifying next year will be added; suppliers already on the list will remain and will not have to re-qualify.

GOL services are divided into four streams:

business process and content services (assessing the current state, re-engineering business processes, and developing content for the new delivery channels);

IT professional services (developing, integrating and implementing all technical aspects of Government On-Line);

human resource management services (mobilizing, preparing and training federal employees to undertake the work, and developing approaches and preparing them to deliver services through the new delivery channels); and

composite solutions (providing a turnkey solution).

Alberta sets priorities

Goverments are eager to move to electronic procurement in order to reduce purchase costs and internal administrative fees, but to enjoy the efficiencies that an electronic supply chain offers they must first streamline current procurement processes.

"You can set up a great e-marketplace and e-procurement system but if you are still trying to adapt to old processes, and that is what costs you money to begin with, then you won't achieve the savings and ultimately the project will fail," warns Robb Stoddard from Alberta's chief information office.

Regardless of the electronic solution, procurement savings for Alberta will be found in process change and renewal, not an electronic supply chain, he says.

Alberta went to the market to set up an e-marketplace, but when the government looked at the cost of establishing the marketplace with a large partner, it found it too costly. Stoddard says the original business case for the e-marketplace showed that 83 percent of the potential savings came from process renewal or strategic sourcing.

"We made the decision to focus on that 83 percent," he says. "Take a look at where your true saving is - if it is in processes as opposed to the technical solution, that is where you need to focus your efforts."

Prior to the Request for Supply Arrangement, there were extensive consultations with all stakeholders. including suppliers, central agencies and government departments. In December 2000, PWGSC also issued a draft RFP to get further comments from the industry and clients.

According to Graeme Gordon, a partner with Accenture's E-government practice based in Ottawa, "only two or three contracts have come out and they are relatively small. So whether it works and is available is actually a question in my mind."

In an Accenture study released earlier this year, Canada led 22 countries in e-government. Gordon says Canada was first because of the federal government's launch of its portal and the adoption of a cross-agency approach to e-government making it easier to interact with government. But, says Gordon, a major challenge for Canada, and governments worldwide, in achieving e-government is finding. "Right now, I'm not sure that the funds and the appetite are there," he says. "I find we've set the goals, [but] in a lot of cases goals are being set without associated funding."

"Funding is always an issue," says d'Auray. "I think our business case is sound but these initiatives are only as good as the deliverables that are produced" To date, $280 million over two years has been allocated to jump start GOL through Pathfinder Projects and cross-departmental infrastructure projects such as the Secure Channel.

Electronic service delivery represents an opportunity to look at "involving the private sector - on the one hand in providing and helping shape the transformation but also in providing the service in helping us achieve some of the efficiently and to do so in a partnership mode," says d'Auray. But, "can we define a number of areas or initiatives where a shared risk environment is both sufficiently manageable and intriguing enough - where the potential benefits for both the private sector and the government would outweigh the traditional model?"

She notes that other governments, such as Ontario, have been more aggressive on that front. Governments tend to be fast followers, she says. "And in this instance, given that federal procurement has always been an interesting environment, I think learning from others is a good thing."

Nicole Tedesco is a Toronto-based freelance writer.

Copyright Summit Group Dec 2001
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