Though you couldn’t exactly call it a flowering, there is at least some promising budding going on in the area of public-private sector IT partnerships.
Here are some cases in point. The New Brunswick government invites a major information technology consulting firm to invest in the agency building electronic government services for its citizens. The government of Alberta forms a partnership with a consortium of private companies to build an advanced, province-wide communications network. The federal government invites private companies to form a consortium to help Ottawa address the security of online information.
Though most governments are approaching them with caution, public-
private partnerships are becoming a more and more popular approach to major information technology projects. Governments see an opportunity to reduce costs by turning over more responsibility to the private sector, while using outside talent to fill the gaps in their supply of IT skills. Private vendors see new business opportunities.
“It’s certainly an approach that we’re looking at more often than we would have in the past,” says Neil Sentance, director of procurement policy and information technology procurement in the office of the corporate Chief Information Officer for the province of Ontario. “I would qualify that by saying we’re looking at a continuum of relationships.”
“The public sector can’t do everything,” says Lori MacMullen, New Brunswick’s Chief Information Officer and co-chair of the Public Sector CIO Council, “and we shouldn’t do everything. We don’t have the resources and in some cases we don’t have the skills.”
Adds David Primmer, Chief Information Officer for the province of Manitoba: “I think we will see an increase in this, particularly as pressure from citizens grows for citizen self-service.”
On the other hand, partnerships with private sector vendors bring with them some obvious perils for government. They may be seen as handing over taxpayers’ money and control of public services to profit-hungry corporations. Often such a partnership means letting a private company provide a service and charge user fees, and “even though the cost-benefit analysis may say there’s a lower cost over all, the perception is that you’re introducing a new fee,” says Primmer. And like all so-called partnerships, they can end badly if the participants fail to work together toward common goals.
Defining The Partnership
What is a public-private partnership? Admittedly it’s a vague term, and open to abuse. Some so-called public-private partnerships look more like sweetheart deals between politicians and property developers, for instance. In IT projects, though, the word partnership means almost the same thing when one of the partners is in the public sector as it does when both (or all, if there are more than two) are private companies.
That definition is somewhat fluid, though. For some, it means that instead of a technology vendor providing a predefined product or service, the vendor and client agree to work together toward a more broadly defined goal and to share the risks and the rewards. Often the technology vendor invests money in the project in return for the chance to profit if it goes well. Generally the vendor is also on the hook to some degree if the project turns out badly.
“I like to think they lose sleep at night just as much as I do,” says Jill Velenosi, deputy Chief Information Officer for the Canadian federal government.
For others, partnership simply means that a vendor or service provider takes responsibility for making something work, rather than simply delivering a system that meets a set of specifications, and commits to a set fee in advance. Thus the vendor takes on a share of the risk that the project will run into snags, take longer or cost more than expected.
“The intent is that they get to know our business very well, and as an organization then we can shift a significant portion of the risk for that development to them; we can have them lead the project; we can have them work on a fixed-fee basis,” explains David Booth, director of information management at the Workers’ Compensation Board of Alberta in Edmonton.
Sentance sees it as a range of options from the traditional pure fee-for-service arrangement to a true partnership. “In a pure fee-for-service arrangement you’re really buying inputs for a solution,” he says. “At the other end, you’re buying a solution.”
Who’s Teaming Up?
You don’t have to look far to find public-private partnerships. The following are but a few examples.
Service New Brunswick is a provincial government agency charged with offering electronic government services to New Brunswickers and uniting government services to provide one-stop services in many communities. It has gone in for public-private partnership in a big way by inviting CGI Group Inc., a Montreal-based consulting and IT services firm, to invest in the agency.
CGI is putting $3.5 million into Service New Brunswick over five years, in exchange for the right to commercialize some technology developed for the project and for bragging rights as a key player in one of Canada’s most extensive electronic government initiatives. The extra money is helping SNB move faster to bring new electronic services to citizens, says Mary Ogilvie, vice-president of development.
“They both have value to bring to the table and they’ve figured out how to exploit that value for the benefit of the province,” says provincial CIO MacMullen.
One of the federal government’s current IT partnership projects is the Secure Channel initiative, aimed at protecting the security of information that the federal government collects or provides online. Ottawa outlined to private-sector contractors what it wanted to achieve and asked them to organize into a consortium and come back with strategy proposals, explains Velenosi. “It’s coming to the close of the bid part of the contract now and I think it’s been extremely successful,” she says.
The government of Alberta formed a partnership with BCE Inc. subsidiary Bell Intrigna and Calgary-based networking company Axia NetMedia Corp., to extend broadband communications throughout the province. According to Robb Stoddard, the province’s Chief Information Officer, the project spurs telecommunications competition in Alberta, brings economic development to small communities, and links Alberta companies with technology leaders.
What Drives Partnerships
“A partnership would be attractive in those circumstances where we would not be able to define in fairly clear terms what it is we want to do,” Sentance says. “We may want a situation where the vendor brings financing to the table. We may want to get a situation where vendors and government share the rewards in order to get it done more quickly.”
An example is the Ontario government’s Integrated Justice Project, in which three provincial ministries and a consortium of three major vendors are working together to build a common infrastructure for the province’s court system.
“I’ve always struggled with the term partnership,” MacMullen says, “only because I feel partnerships have common objectives. There are fundamental differences between what the public sector does and what the private sector does.” Because the parties have different objectives – the public sector presumably to provide a service to taxpayers and the private company to make money – partnership may be a less accurate word than, say, strategic relationship.
“I think you have to realize that the private-sector companies are in business to make money and that’s a legitimate aim,” Ogilvie says.
“You also have to recognize that the province is interested in getting the best value for its money – but I don’t think a relationship based on pinching pennies benefits anyone.”
Achieving Success
Yet those different goals don’t have to mean the relationship can’t work for both parties. The first requirement, MacMullen says, is that both partners must understand the other’s goals and needs. In particular, she says, private companies that form this kind of relationship with government ministries or agencies often have a lot to learn about the accountability of public-sector organizations. This accountabaility sometimes “makes us look like we do crazy things,” says MacMullen, “but you’ve got to understand the rationale behind it.”
Grasping the notion of public accountability means, among other things, realizing that private partners should be careful about handing over competitively sensitive information to public-sector organizations, because freedom of information laws could force their partners to make that information public, says MacMullen.
The accountability issue is probably the main thing that separates public-private partnerships from similar relationships that are wholly within the private sector. Beyond that, most of what it takes to make a public-private partnership work is similar to what goes into a successful partnership in the corporate world.
In fact, much of it is the same mixture of clear communication, project management and co-operation that makes any IT project go well.
“You have to go into it with a very specific service [in mind] and the model very well defined,” says Manitoba’s David Primmer. “I think the benefits for everyone have to be defined right up front.” This helps guard against scope creep, in which the goals of the project – and consequently its costs – keep growing until the whole thing is out of control and unmanageable.
“It needs to be very structured,” agrees David Booth at the Workers’ Compensation Board of Alberta. “You can’t just go into these things crossing your fingers and hoping for the best.”
“It’s not enough to say we want a partnership,” says Neil Sentance at the government of Ontario. “What kind of partnership do we want? What sort of decision-making authority is on each side of the table, and what is the level of authority for making decisions?”
“I would suggest it’s an absolute must that the senior management have to be fully engaged and fully understand what this is all about,” adds MacMullen. And it’s not just about technology. “If you don’t have that understanding right from the front end that this is about exploiting technology to change the way we work, then don’t even do it.”
Sharing The Risk
When a public-sector organization asks a private-sector supplier to take on a share of the risk in an IT project, it must give that supplier something in return. Part of that something is probably the chance of a bigger reward if things go well. But at least as important is a reasonable amount of control. Otherwise the vendor is being handed responsibility without authority – always a recipe for disaster.
“In order to reduce the risk to my organization, what I have to do is give up a bit of control,” says Booth. “So rather than my managing all the resources, telling everyone exactly what they have to do, I tell the systems integrator: these are the required outcomes.”
At Service New Brunwick, Ogilvie says CGI Group wants to be very sure that its own project managers are in charge of those pieces of the project in which the consulting firm has invested. Perhaps because CGI has a stake in SNB’s success, she notes, “they have always provided us with quality resources, so there’s never any fighting about whether a person is right or wrong for the job.”
A Meeting Of The Minds
Government CIOs say they look for partners that are compatible with their own organizations. That does not necessarily mean having the same culture – probably difficult when one partner is a government ministry and the other a private company – but there must be some meeting of minds.
“I’m not saying it has to be a match,” Velenosi says. “When you’re establishing the relationship, you talk that through and you come to common ground.”
Nor is it absolutely necessary that the private-sector partner have experience in partnerships with government. If the company doesn’t have the experience, though, an education process will be necessary.
Keeping the relationship working well also requires continuity, meaning that at least some of the same people continue to be involved on both sides of the table. That can be difficult, notes Sentance, since senior executives in the public sector often change jobs regularly. One answer is to start with a pool of senior people involved in the project, so there is still some continuity even when one or two leave.
Finding The Right Partner
Finding the right partner isn’t always easy. Unlike ordering specific hardware and software, you can’t rely on cut-and-dried specifications.
The Workers’ Compensation Board of Alberta approaches this problem with a two-phase evaluation. It asks prospective partners to answer written questions, then invites them to a face-to-face presentation where they are asked to discuss possible scenarios, such as problems arising in a project.
“There are no right answers,” Booth says. “What we’re judging is behaviours – for instance, in their responses, are they thinking about the impact on our business, or are they just thinking about technology?”
The WCB also looks at vendor responses for signs of what Booth calls gamesmanship and political posturing – neither of which is a sign of a promising relationship.
“What you need to have is a very, very tight, trust-based relationship between the two parties,” Booth says. “The service provider needs to understand our business; they need to have empathy; they really do need to demonstrate an understanding of our technology direction. And a very important part of the process is a procedure for handling disputes.”
Booth also believes a clear understanding of each party’s role has to be balanced against flexibility. That means establishing a contract that defines responsibilities and allows for both partners to benefit from the relationship, yet is flexible enough to allow for changes.
“If you have a very rigid contract it becomes a straitjacket,” Booth says. “You can’t manage within it.”
Alberta CIO Robb Stoddard says success depends on allowing innovation to happen, on having effective change-management and dispute-resolution procedures in place, and on maintaining an effective dialogue between the partners.
When It’s Time To Say Goodbye
While there is lots of sage advice about making public-private partnerships work, there is also a sober reality: sometimes they don’t work. When that happens, it’s important to recognize that the partnership should be terminated.
“One of our historical problems was we wouldn’t walk away and we didn’t seem to have a way to exit gracefully,” says Velenosi, of the Government of Canada. “You have to have review points and off ramps.”
Ontario’s Sentance agrees. “I’m not suggesting that one would want to structure these things so that it’s easy to leave,” he says, “but they need to be structured so that it’s possible to leave.”
David Booth, for instance, likes to review partnerships every two years, with an option to end the relationship at that time. “But if it’s going well,” he says, “we won’t necessarily go back to the marketplace.”
And Velenosi adds, it’s also important to know when not to get into a partnership at all. Some situations just don’t lend themselves to the model.
Government CIOs say partnerships are a good approach when the public sector needs one or more vendors’ expertise to help figure out how to meet a broadly defined goal, or when outside investment can help make a project viable.
But as our commentators have indicated, successful partnerships need a great deal of care and nurturing. Without the proper attention, their most likely fate will be to wither on the vine.
Grant Buckler is a freelance writer specializing in information technology and IT management. He is based in Kingston, Ontario.
