Kirsten Tisdale, Senior Advisor Corporate Initiatives, ASD Secretariat

February 1, 2005

Joint Solution ProcurementA New Way to Work with the Private Sector

January 2005 Page 2

Transforming Service Delivery

• Through its “New Era Commitments,” the Government of BC articulated a transformation in the way services are delivered to British Columbians.

• Alternative Service Delivery (ASD) is a key step to realizing the Government’s vision. Its primary focus is to provide cost effective and efficient delivery of services to the taxpayers by:

– Maintaining or enhancing service levels

– Increasing private sector involvement in the delivery of services, thereby allowing Government to focus on core businesses

– Reducing costs, increasing revenue, or maximizing cost avoidance

– Supporting general economic development and growth

January 2005 Page 3

• ASD encompasses a range of service delivery options, from the Government’s direct delivery of programs and services, through to outsourcing and privatization.

• Each deal structure is driven both by commercial deal elements and each parties’ unique, project-specific deal drivers. Government carefully considers all delivery options when deciding the optimal way to deliver services to British Columbians.

SharedServices

Government consolidates “like” programs and services from across government into a single operating unit which serves the needs of multiple ministries. e.g Common Information Technology Services

ASD - a Range of Ways to Deliver Services

DevolutionGovernment transfers delivery (and payment) to another governmente.g. federal government collects income tax on behalf of the province

Direct Delivery

Government delivers programs and services through its ministries

OutsourcingGovernment programs and services are provided by private sector companies under long-term contractual arrangements.e.g. Payroll Operations and Information Management and Payroll Services

AgenciesPrograms and services are delegated to a third-party serving on behalf of the government.e.g. Consumer Protection Agency, ICBC, BC Transit

PrivatizationGovernment sells its assets or interest in a program or service to the private sector, but may protect public interest through legislation and/or regulation.e.g. BC Ferries

Service Delivery Continuum100%

government owned and delivered

100% private sector

owned and delivered

January 2005 Page 4

ASD Secretariat

• As the single point of contact for large-scale IT and business process outsourcing ASD initiatives, the ASD Secretariat supports Government transformation by:

– Driving current ASD projects in the short term; and

– Creating a foundation to support ASD in the longer term by building new skills and capabilities.

• More specifically, the Secretariat team provides:

– Specialized expertise and coaching (Deal Architects, Financial Modellers, Negotiation Coaches);

– Results management (track overall benefits; progress reporting);

– Knowledge management (build resources to support future ASD initiatives – tools, templates, documenting best practices, research, advice on JSP process);

– Overall ASD governance (steering committee participation); and

– Regular reporting to Treasury Board.

ASD projects focus on solving complex IT and business process problems to improve back office functions and IT systems for government.

ASD projects focus on solving complex IT and business process problems to improve back office functions and IT systems for government.

January 2005 Page 5

Why Partner with the Private Sector?

• Improve service to British Columbians and get better value for taxpayer dollars.

• Revitalize aging infrastructure through private sector investment.

• Stay competitive in a global economy by sharing results of best practices developed by the private sector.

• Free up government resources to focus on core strategic services.

• Support economic development and growth

– Four large-scale Service Centres are being created to expand service delivery to other public sector organizations. This means benefits for government, the rest of the public sector, and creates jobs in our communities.

– Service Centres will help attract and keep high-value work in the province.

– BC companies are getting the opportunity to participate as part of global consortiums

• Leverage the expertise of our private sector service providers, who are chosen through a competitive procurement process as the very best at delivering the specific services needed by government.

• Share some of the risk traditionally borne entirely by government with the private sector.

January 2005 Page 6

The ASD Secretariat Project Portfolio

Current Project Involvement

Revenue Management

Health Benefit Operations

Payroll Operations and Information Management & Payroll Services

Workplace Support Services

Strategic Sourcing

Residential Tenancy Office

Enquiry BC

BC HealthGuide Services

In addition to driving current projects, the ASD Secretariat also provides support to emerging ASD projects and future priorities.

January 2005 Page 7

Recently Signed DealsProject Description Benefits Status

Revenue Management Project

Amalgamate and streamline government revenue management processes to improve service and collection of receivables through transformation and outsourcing of the function.

• Reduce outstanding receivables and increase revenue collected• Improved service levels to public• Consolidated financial view• Reduced technology risk

Contract signed with EDS Advanced Solutions Inc.

Health Benefits Operations

Outsource and automate majority of MSP and Pharmacare operations to improve service to public and avoid large capital expenditure. Private sector finances new system. (Run-Build-Run deal structure).

• Improved service to public• Maintain or enhance service to health care providers• Capital cost avoidance

Contract signed with MAXIMUS Inc.

Payroll Operations & Information Management and Payroll Services

Outsource application maintenance and development functions for payroll (IT infrastructure & application outsource).

Outsource payroll transaction processing (business process outsourcing).

• Significant cost savings for government•Growth to Broader Public Sector has significant potential for savings• Transform HR processes (self service through investment in new technology and processes)

Contract signed with TELUS Communications Inc. and TELUS Sourcing Solutions Inc.

Workplace Support Services

Transform & outsource management and operations of workstations and desk-top support functions.

•Drive toward standardization and predictable pricing• Enhanced service levels to client ministries (enforceable levels)• Transfer operational risks• Significant cost savings

Contract signed with IBM Canada.

The contract value for these for large-scale projects is approximately $1B, with nearly $500M in benefits expected over the next ten years. Summaries of the

contracts are available at http://www.saip.gov.bc.ca/ASD_projects.htm

The contract value for these for large-scale projects is approximately $1B, with nearly $500M in benefits expected over the next ten years. Summaries of the

contracts are available at http://www.saip.gov.bc.ca/ASD_projects.htm

January 2005 Page 8

Joint Solution Procurement (JSP)

Joint Solution Procurement is a structured, collaborative procurement process that:

Is used to solve complex business problems when there is not a clear “off the shelf” solution;

Levers the combined capability and creativity of the Government and the private sector to create a solution that optimizes total value (and both parties stakes);

Shares risks and rewards of the solution between the third party and the Government;

Is based on developing long term relationships with third parties that allows for flexibility and evolution over time (is “adaptive”); and

Provides a fair, competitive and open procurement process.

JSP is a innovative process that can lead to better solutions and services for customers of Government. Many other governments – both Canadian and

international – have expressed interest in the JSP process.

JSP is a innovative process that can lead to better solutions and services for customers of Government. Many other governments – both Canadian and

international – have expressed interest in the JSP process.

The JSP Process is the procurement process used to select Service Providers in many of the ASD initiatives

January 2005 Page 9

Defined Requirements Complex Business Problem

Purchase Standardized or simple services Service / technology bundles and / or transformation

Selection Low price and feature set Overall value and relationship

ScopeLimited

Defined up-front

Broader, defined, but flexible, evolving environment

Measures Prescriptive Government-defined, cost focus

Jointly developed, ability to evolve, business-outcome focus

Timeframe Fixed contracts (shorter term) Long term (5 plus years)

Frequency Majority of deals / year (90%) Small number of deals / year (10%)

Approach

Traditional RFP

• Prescriptive requirements

• Limited communications with vendors

• Fixed scope contract

Joint Solution Procurement

• Business problem definition

• Jointly develop solution

• Scalable relationship

Joint Solution Procurement or Traditional Approach?

January 2005 Page 10

Duration: 4-7 weeks

Duration: “n” weeks

JSP Qualification

JSP Qualification

Preliminary Vendor

Qualification

Preliminary Vendor

Qualification

Duration: 9-14 Weeks

Solution DefinitionSolution Definition

Duration:10-15 Weeks

00 11 22

Due Diligence/ Negotiation

Due Diligence/ Negotiation

33Duration:Depends on Model

Overall TimeframeOverall Timeframe

Implementation Implementation

Project ManagementProject Management

• Issues Management• Risk Management• Cost Controls

• Research and Quick Response• Meeting/Workshop Logistics

• Information Control Office

WHYWHY WHOWHO WHATWHAT HOWHOW WHENWHEN

Finalize DealFinalize Deal

44

Phase 0 – Assess suitability of potential ASD opportunities for Joint Solution Procurement.

Phase 1 – Select two vendors based on Capability, Capacity and Commitment for Dual-track Solution Design.

Phase 2 – Jointly develop proposed Solution frameworks through iterative design cycles. Select ASD partner.

Phase 3 – Conduct rigorous due diligence in preparation for contractual partnership.

Phase 4 – Negotiate Master Service Agreement, Statement of Work Contracts

Implementation – Transition to agreed deal structure.

Decision “Gates”Decision “Gates”

Duration:Depends on Model

# of Partners: 8-20 23 1+1 11+1

JSP Process

January 2005 Page 11

JSP Success Factors

• Unwavering executive sponsorship to break through roadblocks and keep momentum;

• Applying a “pure” JSP process, meaning one without constraints in the solution development workshops. This leads to real innovation and the best possible solution for everyone.

• Consistency and continuity on the deal / vendor management team which leads to greater efficiency and the avoidance of confusion.

• Clearly defined selection criteria and supporting measures, increasing the likelihood of an optimal JSP process;

• Strictly managed communications with the vendors, so that conflicts of interest (or the perception of conflicts) are avoided.

• Carefully selected deal decision makers (e.g. not choosing executives from the department being outsourced), which increases the likelihood of optimal decision-making; and

• Strict confidentiality in the JSP process to ensure process integrity and maintain credibility with our private sector partners.

Experience has shown that there are a number things that are critical to the success of Joint Solution Procurement:

January 2005 Page 12

Making it Work

• Matching talent with talent– DM/ADM sponsorship and specialized skills

• Privacy & Security– Ensure that personal information is protected when contracting with the private sector

– Privacy solutions tailored to each individual project with privacy protection measures baked into contracts with service providers.

– Freedom of Information and Protection of Privacy Act recently amended

– Other jurisdictions are actively watching the way B.C. addresses this national issue.

• Maintaining credibility with the vendor community:

– Rigorous, transparent process;

– Contract and relationship management talent; and

– Can’t blink and must stay the course.

• Impact on the enterprise– There is an impact when operations are moved off the Shared Services backbone

– Need to manage the cost base by finding new revenue sources and/or reducing costs (both fixed and variable)

– Accounting treatment can have a significant effect on the business case

January 2005 Page 13

Making it Work (continued)

• Breaking down traditional barriers– Sharing risk and reward with the private sector represents a massive cultural shift for

Government

– Need to incent private sector service provider to exceed targets – this means sharing benefits as well as risks

– So that the private sector can drive benefits for Government (e.g. flexible contract terms, asset transfer, shared risk/reward - penalties/bonuses)

– Appropriate treatment of intellectual property (rights to use vs ownership)

• Change management– Increased focus on alliance management vs. direct service delivery

– Requires new skill set and mindset

– Changing policy and transforming business processes will have a big impact on Ministries

January 2005 Page 14

In Conclusion – What We Have Learned

A few of the things we’d keep

• Outstanding Executive Sponsorship, Cabinet and Treasury Board as well as Ministries

• Rigorous business cases for each initiative

• Joint Solution Procurement Process

– Better solutions and greater benefits than forecasted

– Positive vendor reception – positive feedback and continued support

– Significant international and multi-jurisdictional interest

• 100% of impacted staff have received exciting job offers from world class organizations – who are setting up centres of excellence right here in Victoria

• Access to expert resources – specialized expertise and coaching - to drive the deals

• Central integration and governance – has driven cross government issue resolution, reduced duplication of effort, and ensured consistency

• Skill transfer to public sector – developing expertise in government and establishing repository of tools, templates, white papers to support future ASD initiative

What we’ll do differently

• Lower our expectations on the maturity and experience of our outsourcing partners…in many cases these projects are a first for them

• Insist on greater level of transparency and detail on subcontract relationships…these have been an Achilles heel

• Expect resistance right up to signing date…it’s not over until its over

January 2005 Page 15

Contact Information

For more information, please contact:

Kirsten Tisdale

Senior Advisor Corporate Initiatives

Ministry of Management Services

Government of British Columbia

T: (250) 387-2506

email: kirsten.tisdale@gems2.gov.bc.ca