Picking Up The Tab - a Government Technology story about self-funded eGovernment
S o lu t i o n S f o r S tat e a n d lo c a l G ov e r n m e n t i n t h e i n f o r m at i o n aG e
A publication of e.Republic
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It’s no secret that the Internet forced society to change as the
general public discovered the new electronic medium’s many conveniences.
Businesses scrambled to whip up Web sites to meet the sudden demand,
and those sites evolved rapidly from simplistic to sophisticated, able to
handle a variety of transactions directly with consumers or through third
parties such as PayPal.
Public-sector leaders also recognized the benefits of various Web-
based transactions with the range of constituents that different agencies
serve. Government Web sites popped up on the Internet soon after the
public’s fascination with all things online proved permanent.
S h a n e P e t e r S o n | a S S o c i at e e d i t o r
The problem is that once an agency went beyond a simple South Carolina, like other states, sought the best product at the
online brochure, nobody had a clear idea of how to proceed. best value, said Ruth Kirkland, director of strategic communica-
Surprise, surprise — the biggest unknown was devising a way to tions for the Division of the State CIO.
pay for electronic government. “Cost and funding was a critical component,” Kirkland said.
Governments had three choices: build and manage their own “Also, managing the project from beginning to end, all the way to
Web sites; pay somebody else significant money to build and making the citizen aware of what services are available.”
manage them; or sign a self-funding contract, which unlike the Doing all this at no cost to the state played a big part in NIC’s
first two options, doesn’t cost the government a dime. eventual success in winning the bid, Kirkland continued, as did
The self-funding model clearly holds a certain attraction. Who the company’s familiarity with operating self-funding portals for
doesn’t like something for nothing? A significant number of states various states.
have deployed portals that pay for themselves through convenience As part of the contract, the state’s existing portal will get a
fees for certain e-government transactions, known as self-funding makeover, slated to include customization and personalization
portals. features, and more than 30 existing e-government services with
There are strings attached to the approach, it’s just that they’re online payment functionality will be moved to NIC’s payment
attached to somebody else. Still, the self-funding model seems to engine.
make sense with today’s ultra-tight government budgets, and sup- “Our current portal is somewhat dated,” said Barbara Teusink,
porters argue they made more progress on e-government than South Carolina’s deputy CIO. “We’ve had a difficult time finding
they would have otherwise because they adopted a self-funding adequate time and resources to keep it as current and fresh as we
approach. would like internally, so we’re looking to NIC to give it a fresh
face, bring in updated information and give it a little more current
South Carolina Wades In perspective.”
In April, South Carolina signed with Kansas-based e-govern- The portal’s current design is vintage 2000, Kirkland added,
ment provider NIC to build and manage the state’s e-government and the state would like the portal to reflect advances in Internet-
portal, making the state the 17th to contract with the company. related technologies. Though the state is happy to turn over the
The state went to bid November 2003 and chose NIC from portal maintenance to somebody else, doing so doesn’t completely
among 11 competitors, including BearingPoint, IBM and Official absolve state officials of duty.
Payments Corp. State officials said the first new service launched “The biggest headache is working with all the agencies to find
this summer, and NIC representatives worked with state agencies out what their needs are, what services they have that we need to
and the E-Government Oversight Committee to identify and pri- make available to the citizens, how we’re going to get those ser-
oritize new applications. vices online and going through all the technical gyrations to make
them available,” Kirkland said. “Then, once it’s there, letting citizens the end of this year for completing the transition to the new portal
know it’s there and how to use it. From that aspect, it relieves a environment.
big headache for us. Obviously it creates a minor headache in that Teusink said reactions to the new portal include excitement,
we have to manage NIC to make sure they’re doing what they’re cautious optimism and unenthusiastic.
supposed to be doing.” “There are a few agencies out there that are somewhat reluctant
In some ways, South Carolina’s experience mirrors that of to consider becoming involved,” she explained. “But I think the
Texas. design and model behind what we’re trying to do will win them
In 1999, the Texas Legislature approved a pilot for creating an over.”
“eGovernment Framework” — an infrastructure for state agencies Still, Kirkland and Teusink expressed surprise at the amount of
and local governments to provide online services to citizens and what they called “pent-up demand” for Web applications in certain
businesses. The Legislature also stipulated that there would be no agencies.
state funding for it, and no requirement for state agencies or local “The small- to medium-size agencies that have these needs but
governments to develop applications to use on the framework. have not had the funds to even consider such offerings are excited
Texas eventually awarded a contract to BearingPoint, which about the possibilities,” Kirkland said. “The lists are growing.”
built the infrastructure behind TexasOnline — the super-portal Officials believed that interest was out there, but the magnitude
that would serve as Texas’ e-government face.The portal’s business is nearly overwhelming, Teusink said.
model relies heavily on self-funding — TexasOnline services “We knew there was going to be demand,” she said. “We just
generate revenue through user, subscription and hosting fees. didn’t expect such volume right off the bat.”
The company receives a convenience fee for each transaction,
and a 15-citizen governing board, established by the Legislature, Long Time Online
determines services provided and establishes associated fees. Utah’s self-funding portal has been live since May 1999, said Al
Sherwood, the state’s deputy CIO, adding that Utah is happy with
Up to Speed the use of the portal services by both businesses and the public.
South Carolina’s portal platform was slated to go online June 1, “The self-funded model, by the way, has been very successful
Teusink said, followed by conversion of legacy Web applications to in Utah,” Sherwood said. “I can’t imagine being this far along in
the new platform.The next steps are the portal’s new look and feel, e-government without it. We were so pleased with the results
and adding more applications, she said. South Carolina is targeting over the first four years that we simultaneously executed two
renewals at the same time.”
The “self-funding” part of the portal is the fee charged to cer-
tain users for access to premium services. Most consumer services,
Sampling of States’ such as registering a pet or checking availability of vanity license
plates, are accessible for free, but businesses often pay “convenience
Online Services fees” for corporate services on the portal.
Still, a self-funding portal creates kinks that need working out,
Digitally Certified Records in Indiana Sherwood said.
In December 2003, nIc and the Indiana Bureau of motor The complaint about self-funding portals is that convenience
Vehicles simplified the process of certifying driver records to fees will drive adoption down because people won’t pay the fee
be admitted in county court proceedings. Indiana became to do something they can do for free at a physical office.
the first state to allow government records to be digitally “If you’re talking about motor vehicle registration renewal,
signed, legally certified and delivered electronically by using why should somebody that goes online pay extra? And some-
electronic Postmark technology. now available in all 92 body who walks into an office gets a better deal?” Sherwood
Indiana counties, the service has reduced turnaround for said. “That’s essentially the question we had to address here. Even
record requests from up to six weeks to a matter of sec- though we needed this model to work in Utah, philosophically
onds. we knew that if agencies can’t drive toward 35 percent adoption,
their internal efficiencies aren’t going to be that great because
Alabama’s Point-of-Sale Outdoor Licenses they’re going to have to manage multiple channels.”
last summer, nIc worked with the Alabama Department of The state wanted a funding mechanism for its portal but had to
conservation & natural Resources and wal-mart to build balance that against the reality that a convenience fee would drive
an online hunting and fishing license service. the solution consumers to physical offices instead of using the portal.
resides on a licensing agent’s existing computer and auto- Sherwood said Utah passed legislation in 2003 to let state agen-
mates the licensing process. more than 140,000 licenses cies modify the fees they collected for services so those fees would
were purchased at wal-mart stores during the first hunting cover the cost of providing that service.
season, which dramatically reduced bookkeeping demands “We opened it up so the portal provider could still charge a
for licensing agents. the agency estimates it will save fee, but it wouldn’t be charged directly to just the people using the
$200,000 annually from the service. Internet service,” he said. “There was a registration service, and it
was charged to everybody. You paid the same thing at the door as
you did on the Internet.”
(acquired in 2001 by govONE Solutions)
(now part of First Data Government Solutions)
(acquired by govONE Solutions in 2002)
(acquired by ChoicePoint in 2005)
SDR Technologies Inc.
(acquired by NIC in 2000)
Because of the legislative change, Utah gradually eliminated To some extent, it changes the rules of the game.”
convenience fees for most online citizen services, Sherwood said, Bringing existing, separate contracts and the outsourcing rela-
though the motor vehicle registration renewal service does include tionships created by smaller agencies into the newly created central
a small convenience fee built into the overall renewal fee. IT shop creates an unknown, Sherwood said, and it’s not certain
Corporate customers, however, pay convenience fees on many whether the results will be more outsourcing, less outsourcing or
business-oriented services. In part, Sherwood said, businesses don’t closer coordination of outsourcing.
mind the fees because the application software on the portal is “It will be an interesting area to keep an eye on,” he said. “There
designed to work seamlessly with corporate IT systems. will be some have-not agencies that will now have internal resources
“They don’t have a problem paying the convenience fee they haven’t had in the past.There will be some options where, in the
because they save money,” he said. “People don’t typically gripe past, there haven’t really been options. Things are going to change,
about those fees.The bulk of the fee area in the self-support model and it may be that some of that work will be done internally because
comes from those business services.” the capability is there to do it internally.”
Changing Structure Change of Heart?
Utah is moving to a centralized IT environment, a move that will Massachusetts put together its Mass.gov portal in late 2001 and
complicate the state’s self-funding portal contract, Sherwood said. early 2002 with an official launch in May 2002. The state con-
One aspect of NIC’s relationship with the state is that, despite tracted with a vendor to build and implement the portal, said Susan
the current decentralized IT environment, the portal gives the Parker, director of Mass.gov, though the state’s IT staff developed
CIO an arena to develop enterprise applications, he said. On all portal content.
the flip side, NIC can market directly to agencies for work on State officials considered the self-funding model for por-
agency-specific applications — since NIC signed a statewide tals, Parker said, but Massachusetts opted not to pursue such an
contract, smaller agencies don’t have to go through the procure- approach.
ment process to use NIC. “When we developed the portal and our e-gov strategy back
“That doesn’t mean an agency has to use NIC,” he said. “It also in 2000 and 2001, the self-funding model was relatively new and
doesn’t mean an agency doesn’t have a right to do an RFP if they unproven,” she recalled. “There were states doing it, but we didn’t
wanted to see what the state of the market is at any particular time. necessarily know how sustainable it was. There was also a percep-
They’ve got an option to do that.” tion that there would be a heavy reliance on charging fees to
That flexibility to use the contract for either enterprise or citizens.
agency-specific purposes might be constricted by the emergence “I think that perception may have been slightly off, because now
of a central IT shop, which was created by HB 109. The bill it’s clear that NIC is relying more on things like fees for motor
passed the Utah Legislature in early May, and consolidates IT vehicle records that citizens never or rarely end up paying,” she
services and governance in the executive branch of state govern- explained.“Those fees are charged to insurance companies or other
ment into one department. Utah will now have a consolidated large entities that collect and sell that data.”
IT department reporting to the CIO.The transition, which began What’s catching officials’ eyes now is self-funded application
after the bill’s passage, is scheduled for a 16-month period. development, and Massachusetts would like to explore opportu-
Small agencies without IT resources have used that contract to nities in that vein, Parker said, because even though Mass.gov is
work with NIC on Web applications, Sherwood explained. successful and has built up a community of users, IT staff struggles
“The question then becomes, ‘If everybody is one operation or with how long it takes to develop applications.
organization, then who’s going to do the work?’” he continued. “We think the self-funding model could help us jump-start
“Are you going to do it internally? Are you going to outsource some application development,” she said. “We’re not philosophi-
part of it? How are you going to coordinate that so it’s efficient? cally or morally opposed to the whole model, but a decision was
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