alternative funding for it initiatives covits2008 september 9, 2008
Post on 19-Dec-2015
214 views
TRANSCRIPT
Alternative Funding for IT InitiativesCOVITS2008
September 9, 2008September 9, 2008
3
Session Description
• The Commonwealth's PPEA (Public-Private Education & Infrastructure) statute now allows for innovative partnerships on a broader set of productivity-generating investments.
• The Governor's Productivity Investment Fund rewards high-expectation ideas to transform government operations.
• This session is a discussion on how to successfully capitalize the game-changing investments that might not otherwise survive a budget process
4
Session Members
Executive:
Judy Napier• Deputy Secretary of Technology• Commonwealth of Virginia
Moderator:
Dean Merrill• Vice President Consulting• CGI
Panelists:Manju Ganeriwala
• Deputy Secretary of Finance• Commonwealth of Virginia
Jorman Granger• Vice President, Client
Accounts• Northrop Grumman
Ajay Rohatgi• Special Projects Lead:
Virginia Enterprise Applications Program (VEAP)
• Commonwealth of Virginia
5
Discussion Outline
• Alternative Funding Background Information• Large Transformation Programs • Innovative Projects Funded out of Operations and Private Sector Funding for IT Initiatives
• Virginia R&D Innovation Fund and Other Programs• Discussion
6
Major Forces on Government
Old and New Pressures Add Complexity
Organization
Information Technology
Processes
The world is changing
Public Accountability
Budget Pressures
Aging Society
GoogleYouTube
People
YOUin the middle
7
• Create governance structures
• Improve data standards & exchange
• Produce high quality information
• Upgrade networks and computing
• Develop workforce management strategies
• Shed non-core functions
• Outsource the ‘back office’
• Promote workforce mobility
• Develop better information management
• Integrate information sources
• Provide for real-time access to public information
• Update technology
• Leaders embrace technology
• Reduce bureaucracy to enhance agility
• Create new delivery models that rely on partners and networks
• Update regulatory regime to reflect the new information flows
• Innovate
• Create alternative funding approaches
• Adopt best practices
• Provide training and responsibility as job rewards YOU
??
?
?
?
Pressures on Government – Many Responses
What are Your Priorities?
8
Pervasive Budget Pressures
Governments Face Difficult Choices Ahead
As the Economy Falters, So Do State Budgets By Jennifer SteunhauerMarch 17, 2008
Programs for the elderly are being slashed in Maine. Government jobs are being eliminated in New Jersey. Prison construction has been put off in Virginia. Some schools in California will end their music programs.
About half of the state legislatures nationwide are scrambling to plug gaps in their budgets, shot through by rapid declines in corporate and sales tax revenue, distressed housing markets and a national economy on the verge of a recession.
Many states are reporting their largest budget shortfalls since the recessions of 2001 and 1991-2. In some states where tax increases are generally anathema, including Maryland and Kentucky, governors are looking to raise some levies.
“It is not just the standard downturn where unemployment rises for a while, income tax and sales tax revenues are weak, and ultimately the economy recovers,” said Iris Lav, the deputy director of the Center on Budget and Policy Priorities, a liberal research group in Washington that tracks state budgets. ..
Programs for the elderly are being slashed in Maine. Government jobs are being eliminated in New Jersey. Prison construction has been put off in Virginia. Some schools in California will end their music programs.
National ChallengesNational Challenges• Housing market and credit crisis• Soaring energy, health care costs• 35 - 40 states could face budget
cuts in FY 2009 (NGA estimates)
• Housing market and credit crisis• Soaring energy, health care costs• 35 - 40 states could face budget
cuts in FY 2009 (NGA estimates)
Difficult Choices for GovernmentDifficult Choices for Government
9
Virginia Budget Shortfalls
Brutal Budget Season For Northern Virginia
• Fairfax Faces Gap Of $430 MillionWashington Post Staff Writer, Wednesday, August 27, 2008
Commonwealth Budget Crisis
• Kaine prepares Virginia for difficult budget cuts – Richmond Times-Dispatch• Kaine warns: Taxes not bringing in enough, major cuts ahead - Associated Press• Nothing off-limits for cuts, Kaine says - Washington Times• Kaine says task is ‘Not an easy one’ - Roanoke Times
September 2008: Kaine looks to trim more from state budget
• Facing more grim economic news, Gov. Timothy M. Kaine has ordered the heads of state agencies to prepare three sets of budgets for 2009-10 reflecting spending cuts of 5 percent, 10 percent and 15 percent.Richmond Times-Dispatch
10
What is a Public Private Partnership?
What is it?
• An alternative procurement tool that allows public entities to more efficiently develop infrastructure and achieve better value for the taxpayer
• Vehicle to use design-build contracting practices• Leverage private sector expertise to meet public goals• Opportunity to foster innovative financing
What it is NOT?
• A panacea that resolves all procurement issues• A way to get something for nothing• Privatization
Source: Statutory Frameworks for Public Private Partnerships, McGuire Woods Consulting
11
What is a Public-Private Partnership?
• VATAX Partnership Program was the first large scale IT Benefits Funded Program prior to PPEA following California’s innovative approach
• Virginia has pioneered statutory framework to govern process
• Does require a willingness to innovate by the public sector
• Transparency and accountability are vital
12
Virginia’s PPEA/PPTA
• Exist as procurement tools outside the Virginia Public Procurement Act
• Allow for solicited and unsolicited proposals to develop or operate a qualifying project
• A qualifying project is:• transportation facility• education facility (public school and higher ed)• equipment to enhance public safety and security at public buildings• utility and telecommunications and other communications infrastructure • recreational facilities • technology infrastructure, services, and applications• any building or facility that meets a public purpose and is developed or operated
by or for any public entity• any improvements necessary or desirable to any unimproved locally- or state-
owned real estate
13
PPEA/PPTA Success Stories
• Route 288, Route 28, HOT Lanes• New education facilities• State and regional correctional facilities• Water and wastewater• Public safety centers• Information technology infrastructure• IT services• Recent unsolicited Proposal
The Commonwealth of Virginia Department of Human Resource Management (DHRM) has received and accepted for public notice and conceptual-phase consideration, an unsolicited proposal under the Public-Private Education Facilities and Infrastructure Act (PPEA) of 2002, to provide patient care coordination and provider coordination services In accordance with the PPEA published procedures.
14
Benefits Funded Projects in the U.S. CGI Examples in Tax and Revenue
CGI Footprint in Revenue Agencies
Internal Revenue Service
Kansas$182 Million
Kansas$182 Million
Virginia$231 Million
Virginia$231 Million
Grand Total$1.55 BillionGrand Total$1.55 Billion
Missouri$55 MillionMissouri
$55 Million
California$570 Million$176 Million$41 Million$37 Million
California$570 Million$176 Million$41 Million$37 Million
Hawaii$252 Million
Hawaii$252 Million
Canada Revenue Agency
Benefits Funded projects
Australian Tax Office Other Tax and Revenue projects
15
Case Study: Moving toward Full Offering Strategy for Procurement
++
• Decentralized enterprise
• Suppliers not efficiently connected to buyers
• Need to ensure the “right goods are on the shelves”
• Need savings while maintaining quality
Hosted, comprehensive, integrated web-based procurement system powered by Ariba Buyer and AMS Advantage Procurement
• Largest single online marketplace (5M line items)• Largest # of voluntary local agencies on single statewide system (500+)
• Up to 50% reduction in processing costs
Strategic Sourcing implementation• Performed spend analysis, strategic sourcing, process review, compliance and savings monitoring, and training
• Leveraged spend across 200+ entities• Achieved $150 Million in Sourcing Savings
Client Situation
ResultsCommonwealth of VACommonwealth of VA
16
Case Study: Client-centric Practices Reinforced with Next Generation Technology
• Unable to support client-centric vision for revenue and collections management
– Aging infrastructure– Lack of efficiency– Inflexible, obsolete tax
administration tools• Poor public image – critical state auditor report
• Severe budget constraints
End State Vision and Strategy• Integrated end-to-end program strategy• Internet and channel management• Budget, financial, revenue mgmt systems• Org. design, change management, & training • Benefits funded through improved collections• Risk/behavior modeling and decision analytics• CACS-G for collections case management
Results to Date• Over $231 million in recovered revenues to date • More than 50% of all new businesses register on-line• $4.5 billion in payments received on-line• 96% of refunds issued in 12 days or less (99%of electronic returns)
• 11 national and state awards, incl. FTA, NASCIO, and Governor’s Technology Award
• Relationship grown to include Collections BPO
Client Situation
Results to DateVirginia Dept. of TaxationVirginia Dept. of Taxation
17
Case Study: Alternative Funding Generates Additional Revenue
• Aging technical infrastructure
• Need to re-engineer DOTAX to achieve the following goals
• Be more taxpayer-centric • Allow taxpayers to more
easily comply with tax laws • Improve return and payment
processing time• Treat taxpayers fairly and
consistently• Budget constraints - system must fully pay for itself
Client Situation
Hawaii Dept. of TaxationHawaii Dept. of Taxation Outcomes
• ITIMS exceeded all of its expectations and has enabled tax administration in Hawaii to dramatically improve
• Benefits achieved within 4 months of project start• New systems successfully implemented:
• Tax processing system• Collections case management system• Audit selection system• Electronic filing for tax returns• Imaging of tax returns
• Reorganized department to better serve the public• Measured project benefits: $252 Million. Benefits
no longer being tracked, but continue to accrue daily
ITIMS was the most successful large IT project in Hawaii State Government
18
Examples of Alternative Funding Approaches
• Benefits-funding• Contractor paid as technology solution and process investments
lead to revenue benefits beyond an established baseline.
• Share-in-Savings• Contractor paid as technology and process efficiencies drive down
costs relative to an established baseline.
• Transaction-based• Contractor paid for performing a unit of work. Fixed-fee per
transaction or percentage based on the transaction amount. Up front, one-time costs recouped over life of contract from transaction fees.
• Capital investment• Contractor makes capital investment. Recovers through operating
fees as in outsourcing or external user payments.
19
Virginia Alternative Funding Ideas
• Large Transformation Projects for IT: Planning Funding for Capital Outlay and Federally Funded Projects, etc.
• Private Sector Funding for IT Initiatives• Virginia R&D Innovation Fund and other programs
20
Characteristics of Transformation IT Projects
• Large
• Complex
• Multiple Entities
• Multiple Phases
• Costly – Millions of $s
21
Commonwealth’s Past Performance With Implementing Large IT Projects Has Been Lackluster
• Huge Cost Overruns
• Prolonged Implementation
• Multiple “Bumps” Along the Way
• Some Failures
22
Establish a Revolving Planning Fund for IT Projects
• Non-reverting Appropriation
• Builds on ITIB Priority for IT Projects
• Pay for Detailed Planning of IT Projects
• The Fund is Reimbursed for Planning Costs When the Project is Funded by the General Assembly
23
Capitalize Large IT Projects
• Reflects Nonrecurring Spending Need
• Provides Long-term Appropriation (multi-year life of project)
• Reflects Multi-year Life of Potential Benefits
• Enables Bond Financing
• Brings Transparency by Consolidating Accounting Under One Capital Project
24
Private Sector Funding for IT Initiatives
• “Shrinking S&L budgets = Growing Private Sector Partnerships”
• Northrop Grumman investment in the construction of the CESC and SWESC data centers to support transformation of IT infrastructure
• Jump start application development through creative models
• Hosted Service model for infrastructure and applications• Software as a Service model providing subscription/fee flexibility in
pricing and service• Shared service model – one proven solution leveraged by many
organizations (i.e., common CRM system for usage by multiple organizations)
25
Private Sector Funding for IT Initiatives
• “Outside the box thoughts”• Develop unique public/private funding pool for critical IT
Initiatives that share in the risk/reward• The “financing” of IT Initiatives - Lease versus Purchase
model for select IT Initiatives
• Basic principles still must be followed!• Benefit analysis of the project• Life cycle of the solution• Risk/Reward for all stakeholders• ROI• Accountability
26
Discussion Areas - Alternative Funding Sources for small and medium projects
Non availability of funds should not be a deterrent for planning new projects. There are various non- traditional ways that are outside the budget process and can help agencies to meet their needs. Some of those avenues are:
• Virginia Productivity Investment Fund (PIF)
• Shared Services VEAP can help
• Collaboration opportunities (pooled resources) – VEAP can help
• Self Funded Models
• SaaS – Software as a Service
27
Discussion Areas: VEAP Overview
Objective: Lead the Commonwealth’s efforts to modernize central administrative
systems and common data repositories.
Directed by: Ms. Peggy Feldmann, Chief Applications Officer (CAO).
Focus on operations:• Enterprise Applications• Shared Services• Centers of Excellence• Partner with agencies on enterprise
28
Discussion Areas: Virginia Productivity Investment Fund (PIF)
Mission:
Partner with state agencies to identify, catalyze and implement innovative Solutions which enable a simpler and more effective government for the benefit of the citizens of the Commonwealth.
Overview:• Governor Kaine established $3M fund in January 2007• To date ~ $2.7 M. Additional 950K this FY, another 900 K next FY.• The awards can be made as a loan or a grant. • For details on application process please go to http://www.pif.virginia.gov• Managed by Secretaries of Administration, Finance, and Technology
• Supported by Chief Applications Officer, Chief Information Officer, Director of the DHRM, Director of the DPB.
Goals:
In addition to operating cost savings, PIF encourages agencies to lower constituent transaction time and advance the Governor’s key performance measures
29
Discussion Areas: Virginia Productivity Investment Fund (PIF)
Some Examples: • A Partnership to Improve High-Risk Prenatal care in Rural
Virginia• Google Applications Classroom for K12 Education Mecklenburg• PlugGED® In (VCU)• QRIS Pre-K Review • Region 2000 and Virginia Tech eCorridors Program• Release Card Pilot - Cash/Instant Issue Card • Electronic Medical Records Pilot• Training/Travel and Data-Sharing Network• Business One Stop (BOS)• Upgrade iReg , Convert to Key-From-Image, Bulk Upload of Tax
Returns
30
Discussion Areas: Shared Services
Shared Services save money – VEAP (Virginia
Enterprise Applications Program) can help.
Examples:
• BI (Business Intelligence)• ECM (Electronic Content Management)• E-forms• Looking for others• -
31
Discussion Areas: Collaboration
Collaboration opportunities (pooled
resources) save money – VEAP can help
Examples:• Portals
Business One Stop (DBA, TAX, DGS, DMBE): Goal - Reduction
of portals and building of common services (example –
registration for FEIN #) • Web services
• Data Sharing (DBA,DMBE, DGS, TAX): Goal – Improves productivity and saves money.
32
Discussion Areas – Other Sources
Self Funded Models• VI (Virginia Interactive)
• DGIF • DMV
SaaS (Software as a Service)• Software delivered as a service on a subscription based cost model.
Allows use of a prebuilt solutions without upfront investment in development or hosting. The provider typically charges a monthly / yearly usage fees. Like: Renting vs. buying a home.
• Advantages: • Low upfront investment• Multi-Tenant – same application instance shared across multiple organizations• Rapid deployment, high productivity• Automatic upgrades• Highly configurable, limited to no customization
33
Contact Information for Session Members
Dean Merrill
Vice President Consulting
U.S. Central South
Jorman Granger
Vice President
Client Accounts
Manju Ganeriwala
Deputy Secretary of Finance
Commonwealth of VA
Ajay Rahatgi
Special Projects Lead
VEAP
Judy Napier
Deputy Secretary of Technology
Commonwealth of Virginia