Shifting Sands: ESD in a P3 World

For government, electronic service delivery (ESD) is turning out to be almost exactly what it always promised to be – the delivery of services and information through a variety of both simple and complex electronic delivery systems.

Risky business

It’s mainly because of the . . . risk.

When all’s said and done, private sector specialists agree, risk is a key consideration in P3 projects of any kind – including ESD ventures.

Tony Baldock, for example, believes there has been a trend across all levels of government to insist that private companies incur a larger portion of risk.

“That,” says Baldock, a former technology executive, “is going to add to costs and increase reluctance to get involved.”

The public needs ESD access to all three levels of government on a contiguous platform, says Baldock. The payback would be worth the risk for both partners as long as government didn’t make the entrance requirements too stringent.

Bob Moraine, vice-president of public sector business at IBM Canada, believes risk can’t be shared equally until the private sector is able to exert control over that risk. “We know what we do well – I’ll bet money on that – but if we can’t get some control over risk, there is no partnership.”

Shared risk approaches will take time, Moraine suggests. “The big bang approach is not the way to go. You have to have a large vision, then take it a step at a time.”

Moraine cites a payroll system for the government of Alberta which began as a joint venture – a 50-50 partnership. After it began to work, the government got out of the business leaving it to be 100 per cent run by the private sector. Moraine describes the venture as an example of shared risk coupled with a solid business plan and a win-win-win conclusion for the public, the government and the private sector.

Along similar lines, Gary Cameron, vice-president of federal sales with Bell Canada, says that “the Crown has to determine how to give up some control to share risk.” Governments that want all the control find themselves obligated to keep most of the risk when they seek to acquire services.

Cameron cites government marketing applications as an area in which the private sector could get more control and everyone would benefit.

More shared risk is essential to both the public and private sectors, Cameron says.

“Huge enterprises always have to find ways to become more effective and efficient. That is especially true for the public sector. On the other side, there is so much potential upside in these deals that the private sector is recognizing they must take some of the risk.”

On a more general level, Jane Peatch, executive director of the Canadian Council for Public-Private Partnerships, says the true value of such arrangements is that they place responsibility for projects in the hands of people with the expertise to carry out the work on time and on budget. “Let business take on responsibilities where they can be “beneficial and efficient.”

Peatch also argues that P3 can “depoliticize” a project. Government, she notes, often faces political pressure to move standards and that raises costs; P3 projects provide an additional measure of discipline that can help bring a project to completion.

Peatch warns that changing political commitment to projects can undermine P3 ventures: “Companies who fail to properly access the political commitment to a project can spend a lot of money only to find a project going nowhere.”

The accomplishments of ESD are well known. Canadians have been able to roam through vast reservoirs of information online for years now. They can even file tax returns online. And they’re clearly heading for a world in which they can do much, much more.

With so many of the fundamentals in place – or about to be – public policy thinkers are increasingly focusing on the tools which can help build the ESD world.

One of those tools is P3 – public-private partnerships, which let governments use private sector expertise, experience or technology to launch and sometimes administer public projects. More familiar in infrastructure initiatives, P3 can help with ESD by marrying new technology – often developed by the private sector – to commitments to fiscal restraint. The thinking is obvious: when you couple the need for new technology with government mantras of fiscal restraint, a marriage of government and business seems logical. While the parties may occasionally squabble about who leads whom down the aisle, both bureaucrats and entrepreneurs see some wisdom in the partnership.

That’s not new. What is new, according to some observers, is the backdrop for decision making around P3 and ESD.

Brian Wallace, team leader of Innovation and Investment at Industry Canada, notes a change in the way government presents itself in P3 arrangements, “less as service providers and more as ensuring the service is provided.”

The challenge for government, Wallace says, will be to get the private sector to compete effectively for delivering public services.

Wallace’s boss Lucien Bradet, director-general of the department’s Services Industry branch, suggests that ongoing service delivery programs will be in the P3 mix in some cases. “The government develops the service, but where the right tools are available in the private sector, we go there to get the job done.”

Adds Wallace: “In the right cases, payback is worth it – no question. Saving capital costs plus the costs of integrating design, construction and application increases cost effectiveness.”

To be sure, both provincial and federal experts issue a caveat. Each project must be looked at on a case by case basis – and some business applications simply won’t prove worthwhile.

From the private sector, John Davis, CEO of the Ottawa consulting firm Partnering and Procurement, notes another change in the environment around P3: “Health care, taxes, Statistics Canada – governments are moving from being consumers of information to being publishers of information.”

That, says Davis, means that ESD becomes increasingly useful in particular areas. “We focus on content, not the medium. That is a long term consequence of ESD. We can see it already.”

Put another way, he adds, ESD is “a tactical alternative to the delivery of services – not a strategic change.”

On another front, Davis suggests that the public could gain long-term benefits through the eventual standardization of services between the three levels of government. The goal is familiar: one-stop shopping, sending Canadians to the same place whether they needed federal, provincial or municipal services

To do that, Davis says, the public and private sectors would have to cooperate – meaning both would require a clear understanding of expected outcomes. “You must manage expectations across both sectors to proceed.”

For the private sector, the big issue in P3 propositions generally remains unchanged: the division of risk and reward. Wallace, acknowledging that risks must be shared, says they must be well defined and assigned. “Political risk (will the project succeed and be of benefit) is solely in the public sector while the technological risks (can we do it for what we said it would cost) is the realm of the private sector.

“The essential ingredients for ensuring a competitive process in public private partnerships are: one, create an environment of certainty, and two, ensure the controllables are addressed for both parties,” Wallace adds.

Davis too calls for well-established ground rules. “We must ensure that we manage expectations across both sectors to proceed,” he says, adding that both public and private players had to maintain a pragmatic perspective, meaning proper business cases before anything was done.

But even the most ardent supporters of P3 in ESD are concerned about the potential reach of some projects. Industry Canada’s Bradet, for example, notes that the right tools can always be bought for a given project – but the wholesale transfer of a service is another thing.

“I have real problems with giving the private sector control of public services,” Bradet says. “The role of government is to assure the public of the right services at the right price. We should not leave them at the mercy of the private sector.”

Robert Wilson is a freelance writer and translator, and former broadcast journalist, based in Aylmer, Que.