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Self-Funding IT

Self-Funding IT

When the Texas Legislature directed the State of Texas Department of Information Resources (DIR) to test the feasibility of making state agency and local government services available online it presented DIR with a major challenge.

By law, the service was to be self-supporting, with no provision of funding by the state.

DIR’s answer, according to BearingPoint’s senior Vice President for Public Services Global Operations Jim Geiger, was to adopt a business model which is likely to point the way for public sector organisations around the world, as governments seek creative ways to fund IT projects. Under the model the TexasOnline services generate user fees, subscription fees and hosting fees, so that agencies can take part without having to allocate funds for the program. Those fees go to BearingPoint, to enable it to recoup the cost of delivering the service.

In many instances BearingPoint charges no upfront fees for development and maintenance of interfaces and front-end Web applications.

“As a result there were no costs to the State of Texas,” Geiger says. “. . . And we try and keep it cost neutral to the state, and expand the services for the citizens of Texas.”

He says as of about a month ago the system had completed almost 15 million transactions, and generated roughly half a billion dollars in revenue to the general fund of the State of Texas.

“Necessity is proving once again to be the mother of innovation,” notes BearingPoint’s national director for state and local e-government services Gary Miglicco. “As a result of the ongoing budget crisis, state and local governments are utilizing creative strategies to pay for new IT projects that otherwise would go without funds. For example, some are launching self-funded projects that require no up-front costs on behalf of the government. Rather, IT vendors are paid with moneys generated from fees paid by users of the new system. Numerous government organizations have already proven that taking an innovative funding approach results in success. The time is right for strong leadership in other government organizations to champion this approach.”

That’s one message Geiger was bringing to Australia last week, as part of BearingPoint’s mission to grow its public sector business outside the United States, to export solutions developed in the US to public sectors elsewhere around the globe, and to learn from public departments and agencies outside the US.

But if Geiger had a mission to export innovative funding solutions to Australia, he also found he had something to learn. He says he was particularly impressed during his visit with the innovative application of a data warehousing solution developed in the United States for the US Air Force which has been applied “with a twist” to the Department of Human Services.

“I want to bring that back and discuss with my counterparts some of the technology involved,” he says.

But he is also keen to take back contracting models being applied within the Department of Defence and some other Australian departments and agencies, which have not yet been tried in the US.

“One of the things being done here that I learned about is performance based contracts for longer periods of time, or term contracts such that the tender is put out, the contract is awarded competitively, with one period of performance and say four options for a year each, and then the following year, a new option is awarded if you would, and at the same time the contract is extended out another year.

“It means you always have a rolling five years of performance in front of you, based on how you do and based on the government’s evaluation of your progress to date.”

Geiger says he was impressed by the potential of the model to both cut the amount of money spend by service providers and consultancies in the tender process, and ultimately the cost to government.

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