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Volume 18, No. 2, June 2008

Table of Contents

Public-Private Partnerships in e-Government

Eng. Hamed Al Ali

Management & Information Systems Engineering Department, Nagaoka University of Technology, Japan

Alali.hamed@gmail.com

 1.      Introduction

Public-private partnership is a risk-sharing relationship based on a shared aspiration between the public sector and one or more partners from the private and / or voluntary sectors to deliver a publicly agreed outcome and / or public service[1]. PPP models are often used for building a country’s infrastructures such as bridges, roads, power stations, hospitals, etc. Lately, PPP models have also been used to build ICT infrastructure in many countries. The main aspects which support the use of PPP models are: lowering the short-term costs; improving the quality of services; and utilizing the professional expertise of the private sector for development. PPP models accelerate implementation of e-government projects by increasing the cooperation between government leaders, public agencies and private sectors to find and fix the problems with e-government systems. Government leaders create the scope and plan for the project, while private parties develop it and invest in the implementation. Other public agencies and voluntary organizations help to identify the requirements of citizens and to test the e-government services.

This paper uses study cases to examine the performance of six PPP models1 used in e-government - PFI (private finance initiative), JV (joint venture), BOOT (build, own, operate, and transfer), ASP (application service provider), DBFO (design, build, finance, and operate), OM (operate and maintenance), and D&B (design and build). This paper identifies the responsibilities of the public and private sectors in each PPP model’s processes, and explains how to select the right PPP model for e-government services.

2.      Frameworks of Analysis

The study cases illustrate six PPP models used in e-government. The advantages and disadvantages of each model will be examined using the following frameworks of analysis:  

• A table of public and private involvement in the model’s processes: Each model considers seven stages of processing: planning, analysis, design, development, testing, implementing and maintenance. Based on each model’s strategy, the public and private sectors’ involvement in each of these processes has been identified. Some processes involve both public and private activities.

• Model SWOT table examines the basic strengths, weaknesses, opportunities and threats of each model

• Radar charts explain the extent of risk in each PPP model. The risks are classified as:

1. Responsibility Division: Each model has a different type of public and private responsibility sharing. Some PPP models are still unclear as to the sharing of responsibility and ownership between public and private sectors. I will leverage the risks in the responsibility division based on the conditions of each model.

2. Scope Division: Each model has different project scopes, and some PPP models are able to change their project scopes in the middle of project. Therefore including the scope division in the radar chart will identify whether the risk in each model’s scope is high or low.

3. Human Resources Division identifies the risk levels of transferring employees between public and private sectors before and / or after the signing of the contract.

4. Time Division explains the risks in time management of each model. Some models allow the extension of projects over a longer term, and normally, the risks are low in fixed-term models.

5. Development Division: Adapting new technologies to e-government services is important, but it will increase the risks of incapable systems and the program’s errors. Thus, risks will increase in the development division when private companies are allowed to change their services program.

3.      Study Cases

There have been general efforts to assess the quality of e-government and PPP models throughout the world. This section provides an overview of six public sector projects that have used PPP models for implementation or / and service delivery.

3.1       Private Finance Initiative (PFI) in UK

Private Finance Initiative (PFI) is an important PPP model developed by United Kingdom’s government, to support public services and private sectors by specifying the responsibilities, requirements, conditions, budgets, and quality standards of projects. The government used the PFI model where it was appropriate to deliver value of money to public sector enterprises and private contractors in the long-term. Recently, there have been several articles explaining the PFI model in UK’s e-government system. We will summarize some of them in brief.

The relation between the PFI model and e-government explains e-government history, strategy, infrastructure and services in UK[2]. In May 1997 the new Labour Government’s main priorities were ‘Open Government’, to be achieved through the Freedom of Information Act and better regulations in e-government. However, the PFI model helps the government to provide new technology for simple, efficient and responsive services to citizens and businesses. As a key to the future, the UK government used the PFI model to share the investment with private sectors in public services. In February 2001, the Office of Government Commerce (OGC) launched the OGC Gateway Process that could be applied at specific stages to all large civil central government construction, IT and PFI spends. The ‘Gateway Review’ system ensures that these major projects pass through a series of ‘gates’ during the planning and implementation stage, only when rigorous tests have been met.

A publication by HM Treasury (2003)[3] explains the government’s investment plans for public services, and shows the steps in building a partnership between public sectors and private contractors, and how the government ensured that budgets were kept to in the PFI model. A later report (HM Treasury, 2006)[4] shows the benefit of using the PFI model in the UK, and evaluates the financials in procurement of major information technology services through e-government. It also explains how the government used PFI over the long-term by focusing on whole-life costs, risk management expertise, and greater certainty for the public sector. However, private contractors and public sectors shared the risk in PFI after the government steps in. The PFI model in the UK, spanning more than 20 different sectors, was expected to account for around 10% of total investment in public services in 2005. PFI as a proportion of total investment in 2005-06 was 50 billion pounds[5]. Table.1 depicts the largest users of the PFI model in terms of capital value.

Table.1 Largest Users of the PFI Model by Capital Value

Table.2 places the activities of the public and private sectors in PFI model process based on several studies. PFI model in UK delivered effective utilization of investment in public services and IT, and became one of the successful models in PPP by using the experience and investment of public and private sectors. Table.3 explains the SWOT analysis of the PFI model. Strengths could be the power of knowledge sharing between the public and private sectors to use the most innovative technology and provide the highest quality of service. On the other hand, the unclear responsibility of each is a weakness in the PFI. Implementing market strategy to explore people’s needs is one of the opportunities. However, threats of the PFI are in the scope of the project. Planning by the government alone increases the possibility of the scope being changed later in order to lower costs and deliver better quality of services. Changing the scope may also allow the private sector to change their project requirements. Figure.1 shows the risks of the PFI model in terms of responsibility, scope, human resources, time and development. The risks of changing the scope of PFI project will change the responsibility of partnerships. If the scope is changed, the possibility of altering the responsibilities of the public and private sector in the project will increase, and may occur in loss of time.

Table.2 Public and Private Involvement in Activities of PPP Models

Pub=Public, Pri=Private, Pub/Pri=Public and Private  

Table.3 SWOT Analysis for PPP Models in E-government

Figure.1 Risk Levels in PPP Models

3.2       Joint Venture (JV) in Nova Scotia, Canada

Joint venture (JV) model implies co-operation of public and private sectors to provide services. However, the basic idea of a JV in PPP is sharing of benefits (joint) and risks (venture) by the public and private sectors in the long-term. PFI and JV are similar to each other and from the same long-term group of PPP models. The difference between PFI and JV strategies is in responsibilities and the ownerships of public and private sectors in e-government service delivery. In the PFI model, the unclear responsibilities of each sector prevent PFI from being successful in e-government. On the other hand, the JV model can solve this problem by engaging the public agency with private sectors to provide services. Furthermore, sharing the knowledge management to provide better services is one of JV model’s advantages.  

Satyanarayana (2004)[6] mentions that JV model projects are generally used in service delivery, setting up of infrastructure in the long-term, handling of sensitive data and information relating to citizens, business and government, and for close coordination with government agencies. The use of a joint venture business model in Nova Scotia Municipal e-government systems allowed flexible co-operations between the public agency and private sector, and enabled public services to achieve greater levels of transactions. Table.4 describes the achievements in Nova Scotia’s government[7].  

Table.4: Achievements of Service Nova Scotia and Municipal Relations in 2004-2005

Table.2 shows the roles played by public and private sectors in the JV model. Most of the activities in the JV model are shared between public and private sectors. Stating data center and integrating citizen services are strengths of the JV model. On the other hand, because of the involvement of public and private sectors together in the JV model partnerships, the risks of losing control and authority, and sharing of costs and employment would be difficult. In the case of Nova Scotia, the Government considered that risks of sharing costs and employment between public and private sectors have to be solved by estimating the costs before starting a JV in e-government projects. Normally, the JV model contract is a long-term model that lets the employees of public agencies work under private management but this can lead to friction between the two sectors. Therefore, the highest risk of the JV model lies in human resources.

Moreover, the government needs to set up the agreement between public and private sectors carefully to prevent loss of control and authority in the future. Usually, JV is a long-term model in PPP and it allows changes, including technology changes that could be considered a threat of this model. As shown in Figure.1, the JV model risk is high in scope and human resources. The scope in the JV model can not be so clear, and the risk in human recourses is the responsibility of both public and private sectors. Ensuring the ability of human resources in long-term is difficult to be controlled by two sectors.

3.3       Build, Own, Operate and Transfer (BOOT) in eSeva

Build, own, operate, and transfer (BOOT) model is a popular PPP model used to build and improve infrastructure, enhance efficiency and economic growth. ESeva service in Andhra Pradesh, India is a good example of the BOOT model in e-government where the government has easily integrated several citizen services. The eSeva center serves as a one-stop delivery point for citizen services such as payment of taxes, water, electronic and telephone bills, filing passport applications and registration of birth and death. eSeva services started in 2001 and uses the BOOT model, with the private partners being paid by government departments for the transactions.

The eSeva case shows that when new technologies are to be introduced, business process re-engineering (BPR) should be undertaken after examining the current needs of the citizens. BPR was required to detect changes that IT would bring, which would require retraining of people for new services and re-design of the business processes to integrate e-government services. In Andhra Pradesh’s e-government services, the private sector takes primary responsibility for financing, designing, building and operating the project until the project attains a certain degree of maturity. It is then transferred back to the government or the contract is extended. BOO, BOT, BOMT and BBO models are similar to the BOOT model, but with deferent procedures depending on the service type. With the BOOT model in eSeva, the government’s responsibility was to provide the premises (land, building and furniture), while the operations, software, hardware, networking, power, water, security systems, and maintenance were taken care of by private parties.

Normally, in the BOOT model, the public sector helps private companies to analyze the project with the help of non-governmental organizations (NGOs) or others public organizations. Table.3 explains the BOOT SWOT table in brief. The model’s strengths would be the swift building of networks, IT and ICT infrastructure in a fixed-term. The private sector can implement and control a large number of e-government projects using BOOT models. Data security and responsibility replacement are opportunities in the BOOT model. Private parties in the BOOT models can be convinced to provide low-cost high-quality services to the citizens in the short term if the government pays them a fair price for transactions. Otherwise, the project needs to follow the BPR process to design suitable technology for e-government services and incurs the risk of service expenditures.

Figure.1 shows the risk levels in BOOT. The returning of project staff from private companies to the government agencies or retraining of new staff is required to continue the services in e-government systems at the end of BOOT contract. That means the risk is in the replacement of private companies by public sectors agencies after the BOOT contract has ended. These kinds of risks have to be considered by government agencies in the early stages of BOOT models because adapting to new technology while keeping service delivery on will take time.

3.4       Application Service Provider (ASP) in USA

ASP model is a third-party entity that manages and distributes software-based services and solutions to customers across a wide area network from a central data center[8]. Normally, the private and public sectors work together to implement ASP models and build the networks and portals to provide e-government services. Most successful e-government services in the world have used the ASP model by outsourcing all aspects of their information technology needs and service provisioning. This helps organizations and government agencies to meet their information technology requirements.

The US government extensively uses the ASP model to build portal web pages for many its states to provide information, new jobs, insurance, maps, online services, pay taxes, small business, parks and licenses. Using an ASP to automate its e-mail communications software helped California’s Department of Insurance save around US$ 250,000 in the first year[9]. The ‘Citizen Advantage’ framework[10] developed by Deloitte measures benefits to government, businesses, and citizens, and provides a fuller picture of the costs and benefits associated with information technology investment opportunities. It is used by US e-government strategists to develop systems after considering the advantages that they offer to citizens. California’s Department of Transportation uses ASP contracting for off-site operations and maintenance of a pre-existing website, with no new interfaces and no software development[11]. This essentially involves leasing a pre-existing service, which is better than buying the product itself, to maintain the high performance of e-government portals. The advantages of the ASP model in e-government are that it enables immediate access to e-government networks system, and easy update of data and information through the Internet. It can be developed and implemented quickly, and allows government agencies to focus more on their work and to cater to people’s needs.

Table.2 shows the public and private sectors activities in the ASP model. Design and hosting of web sites, providing forms services and control servers are the private sectors’ responsibilities. Table.3 shows that the ASP model’s strength is the ease of implementation, and its weaknesses lies in the risks of allowing external users to access e-government servers, thus raising the risk of leakage of government information. The threats arise when government extends the ASP model and changes the private contractor. The change in program and security systems will increase program errors risks. Finally, Figure.1 shows that most of the risks are associated with the scope and responsibility in ASP models. Information security systems are crucial to the ASP model, and sharing knowledge management between public and private sectors results in the ASP model focusing more on citizen needs to develop the services on the website. Therefore, based on citizens’ demand the website will change and changing of services requires change in the ASP model’s scope.

3.5       Design, Build, Finance and Operate (DBFO) Model

The first DBFO model was proposed in UK by the conservative government in 1993, under the PFI model. Under this framework, the private sector designs, builds, finances constructions and operates the government services with public approaches. Specifying details of performance measurement for e-government services in the DBFO model makes it a realizable model in the PPP. Usually, the DBFO model is a long-term model with a contract term of 25 years being common in the UK. Project requirements, project financing, project design, bid process, build process, operation and maintenance, and ownership are traditional project delivery processes of the DBFO model[12].

Table.2 shows the activities of the DBFO models. In analysis and development, the public sector approaches private companies to ensure the quality of services. Strength of the DBFO model is the clear responsibility of public agencies and private sector. The DBFO weaknesses are in letting one company control and provide services using its preferred technology, which in the long term will prevent new technology being used in the e-government systems of the future. The DBFO opportunities can save government costs on e-government services. On the other hand, private sector will bear the risks of long-term investment which is the threat of the DBFO model. The concept of the DBFO is similar to the BOOT model, except that the DBFO model lets private companies invest and finance the project better than the BOOT model. Also, the DBFO model is able to change the project scope easily with public approaches. Figure.1 shows risk levels in the DBFO. Development is the most important issue in the DBFO. Government agencies have to ensure two points – first, the ability of public agencies to find technology suitable for e-government services; and secondly, the ability of private sector to renew the e-services with new technology when public demands it in the long-term. Governments have to ensure that the private contractor in the DBFO model is flexible to changing its specific programs and technology when required for developing e-government services further.

3.6       Design and Build (D&B) and Operation and Maintenance (OM) Models

Normally, the Operation and Maintenance (OM) model comes after the Design and Build (D&B) model in PPP. This kind of D&B and OM package model in e-government is used to facilitate contracts with several private parties for one type of service. Though D&B and OM models have different facilities and strategies, the two models are compatible with each other. The difference between these two models and the DBFO model is on the financial aspect. As mentioned before, the DBFO model is a long-term financing model in PPP. On the other hand, the D&B and OM package models are excellent for a fixed-term project directly financed by the public sector. Also, the flexibility of changing IT and ICT is one of the advantages in the D&B and OM models[13].

It is important that the government avoid any involvement in the design-build phase to ensure that responsibility and risk lie with the private sector[14]. In the D&B and OM case, transferring ownerships between companies will increase risks of government cost. Furthermore, public agencies have to ensure the matching of the services programs between private companies.

Table.2 shows the activities of the D&B and OM models. In the D&M model table, the services are planned by public agencies, designed and developed by private sector, and the rest of the processes are controlled by the public sector. In the OM model, the activities of private sector are limited to implementation and maintenance processes. Table.3 explains that public control and stable businesses are strengths in both models. On the other hand, the co-operation of several companies within the public sector to provide one type of service makes management of facilities difficult to handle, and this issue could be the disadvantage point in the D&B and OM models package. Opportunities of the D&B and OM models are that the public sector has a better opportunity of choosing companies that are using similar systems and standards to prevent system errors in e-government services. The responsibilities can be shifted from one company to another at the end of D&B and OM models contracts, and this kind of threat results in public sector spending more time on contractor replacement issues. The risk levels of the D&B and OM models in Figure.1 show that scope and time have to be considered by government in the D&B and OM models. Fixed-term of the D&B and OM models ensures that the development is on schedule. On the other hand, scope needs to be changed to suit the new technology, and normally, planning for a new scope is one of the government tasks. So the risk increases in time and scope in this case.

4.      DISCUSSIONS

4.1       PPP Models Activities

Based on the study cases, Table.2 shows the activities of the public and private sectors in the six PPP models. It can be observed that the JV model involves the maximum sharing of activities between public and private sectors. BOOT model is the one that has the most private activities, whereas OM has the largest number of public activities. Normally, planning is an activity of the public agency in all PPP models, but the planning process may involve different strategies and sometimes requires the private sector’s approach. Figure.2 shows the responsibilities of the private and public sectors in PPP models based on Table.2. Based on its experiences of e-government, a government can choose the capable model. Knowing the responsibilities in PPP models is very important for understanding the rights and authorities of public and private sectors in e-government services.

Figure.2 Public and Private Responsibilities in PPP Models

4.2       PPP Risks

Table.3 identifies the main strengths, weaknesses, opportunities and threats of PPP models in e-government. Figure.3 shows risk levels of PPP models in e-government by gathering resources from radar charts of study cases. In PFI model, the risk of placing responsibilities of public and private is the highest. Scope risk is highest in the ASP model, human resources risk is highest in the JV model, risks on time is highest in the D&B and OM package models, and development risk is highest in the BOOT and DBFO model.

Figure.3 Risk Levels of PPP Models in E-government

E-government in countries around the world can be defined to have achieved certain maturity levels, on the basis of which, PPP risks may change. These stages of maturity can be defined as information, interaction, transaction and integration. Or to be more specific to e-government services, as emerging, enhanced, interactive, transactional and networked stages[15]. Figure.4 shows risks of PPP models at different levels of e-government maturity.

Figure.4 Risks of PPP Models at Different Levels of E-government Maturity

Information level in e-government maturity levels means disseminating government information through portals, ministries’ websites, and other electronic devices such as through SMS messages by mobile phones. In the information level, governments can handle the planning and implementation of most projects. Therefore, BOOT and D&B models would be suitable to this level as these models are useful for building projects and transferring them to the public. Integration level involves downloading of applications. At this level, the public sector needs to co-operate with the private, especially for programming and developing e-government services, and ASP and OM models would be useful for it.

Transaction level demands provision of full electronic services and imposes certain challenges on e-government services. For delivering full services at the transaction level, it is better to use the experiences of public and private sectors for exploring people’s needs and providing useful services. The involvement of private sector is necessary in huge contracts. JV model is excellent for letting public and private sectors work together. Conversely, the risks on human resources between public and private have to be considered in JV model.

At the integration level, e-government services delivered include most transactions and networking services across government ministries right from basic electronic services to public agencies’ decisions made through e-government network services. Integrating e-government services to this level needs to be planned carefully and costs more. Therefore, we need to understand how to finance the services, and the PFI model can be used to let public and private sectors work together in this kind of a situation. On the other hand, risk associated with sharing of responsibility between public and private would be higher.

As government upgrades to a higher e-government maturity level, the type of PPP model also changes. The early stages of e-government maturity are more concerned with building the basic services of e-government. On the other hand, higher levels require organization and preparation for future e-government services. Therefore, PPP risks and e-government maturity increase together. It does not mean that each PPP model has to be placed at a specific e-government maturity level, but it means that the model that has been placed at a higher maturity level is a superior PPP model.

Each model has different type of risks dependent on the model’s processes. Usually, risks in PPP models will increase with the increasing of public and private sectors involvement in e-government services.

4.3       The Important Keys for Successful PPP in e-Government.

While there are no special set formulas or techniques for a successful PPP in e-government, there are a few keys that are involved in varying degrees[16]. Table.5 lists the six important keys for successful PPP. Political leadership can be the most important issue in e-government. Senior public officials must be willing to actively support PPP projects and take a leadership role in choosing the partnership. Public sector involvement in PPP projects extends to monitoring the performance of different aspects of each partnership on a daily, weekly, monthly or quarterly basis.

Table.5 Important Factors for Successful PPP in E-government

A carefully developed plan should constitute an extensive, detailed contract clearly describing the responsibilities of both public and private partners. Private partner commitment must be a real partnership, sharing burdens and rewards with the public sector to make a winning team. Communications with stakeholders including public officials, private-sector partner, affected employees, the beneficiaries of the service, the press, appropriate labor unions and relevant interest groups, would have to be open and candid to minimize potential resistance to establishing a partnership. And finally, selecting the right partner has to focus on the best value, not on the lowest bid.  

4.4       Selecting the Right PPP Model in E-government

Using several PPP models in e-government services at the same time is possible. PPP models enable public agencies to find explore people’s needs and identify services that can be useful to citizens and businesses. When the PFI and JV models are used to increase private sector investment in e-government projects, private companies help public agencies to find the services requirements and choose the right companies to deal with them in small contracts with other PPP models. However, the usage of PPP models together means increasing the responsibilities and risks in both sectors. Therefore, selecting the partner carefully is very important in PPP models. And for this reason, most of the countries around world prefer to develop their PPP models in e-government step by step, to prevent project failures.

Figure.5 shows the sequence of steps involved in selecting the right PPP model in e-government. We can start selecting the right PPP models in e-government based on the four e-government maturity levels. Normally, in developed countries, the government can start from the transaction or integration level. On the other hand, other governments need to start from the beginning of e-government. It really depends in how far e-government services have been implemented until now. After identifying the e-government maturity levels in the country, selecting the models will be based on the type of e-government service that public agencies would like to deliver.

Figure.5. Selecting the Right PPP Models in E-government

When e-government systems are at the information level and need to build their ICT infrastructure, they can use BOOT and DBFO models, because both models are faster and easier to implement than other models, and facilitate building of ICT infrastructure. D&B model is convenient for public agencies that have the ability to operate and own their own services. On the other hand, OM model is suitable when the agencies can design and build their own services.

However, at the interaction level, the services pertaining to uploading and downloading of forms could be built using the ASP model. Afterward, ASP model could be placed with OM model to continue the services. Some public agencies need a full e-government service at their transaction level. Choosing the JV model would be right for building full e-government services. After building full services, OM model would be suitable for providing these services.

At the integration level, government exceeds high levels in e-government by providing many services in the G2G, G2B and G2C domains. Therefore, PFI model is the right one for using both of public and private experiences in financing and controlling a large range of e-government services. BPR and private approaches are needed at the integration stage to ensure that e-government services succeed in meeting citizens’ needs.

5.      CONCLUSIONS

It is better to consider each PPP model before involving the private sector in e-government services. This study found that choosing the right PPP model requires better understanding of PPP models in e-government. The usage of PPP models is likely to increase as e-government services can be provided faster than by using other business models because of sharing of experiences between public agencies and private sector. On the other hand, risk in responsibility sharing has to be considered in PPP models.

PFI models require the largest investment because they involve financing of several e-government services. Most other PPP models can be applied under PFI model. However, PFI risks can be in sharing of responsibility and ownership between public and private sectors. JV models are most useful in integrating citizen services by sharing experiences of public and private sectors. JV model risk level is high when it comes to transfer of human resources from private sector to public agencies. BOOT models are able to build e-government infrastructure faster than other models. Also, BOOT model has the largest share of private activities. On the other hand, public agencies have to ensure that the new partner is capable of providing services when the BOOT contract ends. Therefore, BOOT model’s risks in development are higher than in other models. ASP model is excellent for saving costs and time by providing services through e-government portals. On the other hand, changing the scope of services based on public request will require that private partners rebuild their programs and services portals. Therefore, risk of changing the scope is the biggest issue in ASP models. DBFO models can clarify the responsibilities of each public and private sector in e-government services. DBFO model’s risk in development is high when the private partners use their own proprietary technology. They will prevent other companies from continuing the services when the contract is changed. D&B and OM models are simple and flexible models that can be used to provide many kinds of services in e-government. On the other hand, risks of time will increase when public agencies spend more time in planning and management before and after the contracts for changing contractors in the next service.