GFOAT alternative service delivery.ppt

Alternative Service Alternative Service DeliveryDeliveryA Risky Business?A Risky Business?

Presented to:Presented to:GFOAT Spring Institute 2008GFOAT Spring Institute 2008April 14, 2008April 14, 2008

David W. EisenlohrDavid W. EisenlohrManaging PartnerManaging Partner

DefinitionsDefinitions Why ASD?Why ASD? GFOA GuidanceGFOA Guidance An ASD decision modelAn ASD decision model Risk considerationsRisk considerations Question & AnswerQuestion & Answer

Discussion AgendaDiscussion Agenda

[ASD] [ASD] entails the pursuit of new and entails the pursuit of new and appropriate organizational forms and appropriate organizational forms and arrangements, including partnerships arrangements, including partnerships with other levels of government and with other levels of government and nongovernmental sectors, in order to nongovernmental sectors, in order to improve the delivery of programs and improve the delivery of programs and services.services.

Alternative Service Delivery:Alternative Service Delivery:A Working DefinitionA Working Definition

SOURCE: “Alternative Service Delivery,” David A. Good and Barry Carin, Association of Universities and Colleges of Canada, August 2003

Process reengineeringProcess reengineering Cooperation / collaborationCooperation / collaboration Interlocal agreementsInterlocal agreements PrivatizationPrivatization Cosourcing / Shared ServicesCosourcing / Shared Services Outsourcing / Managed CompetitionOutsourcing / Managed Competition

ASD can take multiple formsASD can take multiple forms

Given this definition, who here Given this definition, who here DOES NOT have alternative DOES NOT have alternative service delivery models in service delivery models in

place?place?

Need to focus on core business activitiesNeed to focus on core business activities Requirement to control costsRequirement to control costs Desire to improve service levelsDesire to improve service levels Ability to minimize capital outlaysAbility to minimize capital outlays Opportunities to leverage new Opportunities to leverage new

technologiestechnologies

Why contemplate ASD?Why contemplate ASD?

ASD: ASD: Applicable GFOA Recommended PracticesApplicable GFOA Recommended Practices

ASDASD

“ The Government Finance Officers Association (GFOA) recommends that governments calculate the full cost of the different services they provide .”

“Cost data can be extremely useful in identifying situations where a government should explore a lt e r n a t iv e s e r v ic e

d e liv e r y options. … For example, in considering privatization or other forms of external competition, a jurisdiction should distinguish avoidable costs from unavoidable costs, because only the former are relevant to a privatization decision …Furthermore, decisions involving privatization or other forms of external competition should take into account the cost of transition, as well as any monitoring or oversight costs that are expected to result from a change in service provider … “

Recommended Practice:Recommended Practice:Measuring the Cost of Government ServiceMeasuring the Cost of Government Service

“ The Government Finance Officers Association (GFOA) recommends that governments systematically identify and evaluate the major factors in considering a managed competition option. Service leve l, cost, e fficiency, e ffectiveness, quality, customer service , and the ab ility to monitor the service provider’ s work should be essential components of any managed competition decision… ”

“Governments are continually tasked with providing high quality services within the constraints of limited financial resources. In order to meet this challenge, many governments have turned to the private sector or other governments as an alternative to in-house service delivery as potential ways to save money or improve services. One choice within potential service delivery options is managed competition, in which governments require in-house service units to compete with external providers.”

Recommended Practice:Recommended Practice:Managed Competition as a Service Delivery OptionManaged Competition as a Service Delivery Option

“ The Government Finance Officers Association (GFOA) recommends that program and service performance measures be deve loped and used as an important component of long term strateg ic planning and decision making which should be linked to governmental budgeting .… ”

“When used in the long-term planning and goal setting process and linked to the entity's mission, goals, and objectives, meaningful performance measurements can assist government officials and citizens in identifying financial and program results, evaluating past resource decisions, and facilitating qualitative improvements in future decisions regarding resource allocation and service delivery..”

Recommended Practice:Recommended Practice:Using Performance Measurement for Decision MakingUsing Performance Measurement for Decision Making

“ The Government Finance Officers Association (GFOA) recommends that governments consider budgeting for results and outcomes … ”

“Budgeting for results and outcomes links strategic planning, long-range financial planning, performance measures, budgeting, and evaluation. It also links resources to objectives at the beginning of the budgetary process, so that the primary focus is on outcomes rather than organizational structure.”

Recommended Practice:Recommended Practice:Budgeting for Results and OutcomesBudgeting for Results and Outcomes

“ The Government Finance Officers Association (GFOA) recommends that governments examine the benefits of alternative service de livery that involves shared service efforts.… ”

“Governments continue to address funding issues related to their budgets – often resulting in the reduction of programs and services. In addition, governments often face an increase in service responsibilities. At the same time, residents are demanding that governments demonstrate improved efficiencies and even offer new or improved services without new taxes … In all cases, alternative service delivery that involves shared services requires governments working together to achieve shared policy objectives. Governments are encouraged to cooperate to provide their residents services they could not provide on their own or to provide their residents lower cost and/or higher quality services.”

Recommended Practice:Recommended Practice:Alternative Service Delivery: Shared ServicesAlternative Service Delivery: Shared Services

Conceptual decision modelConceptual decision model

Critical Function

Ancillary Function

HighPerformance

LowPerformance

Example ASD candidatesExample ASD candidates

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Policy considerations for ASD Policy considerations for ASD initiativesinitiatives

PoliticalPolitical - - Does the current political environment allow for legitimate Does the current political environment allow for legitimate consideration of alternative delivery models? Are there political or consideration of alternative delivery models? Are there political or legal reasons why the city cannot engage in this process?legal reasons why the city cannot engage in this process?

CommercialCommercial – Is there a significant private sector market willing to bid – Is there a significant private sector market willing to bid for city services?for city services?

Social Social - - Is the city currently successful at providing citywide services? Is the city currently successful at providing citywide services? What will happen to displaced workers? What will happen to displaced workers?

EconomicEconomic - - What economic factors exist that may either foster or What economic factors exist that may either foster or hinder an ASD program in the city? What is the trade off between hinder an ASD program in the city? What is the trade off between cost savings and service improvement?cost savings and service improvement?

OrganizationalOrganizational – Is the organization receptive to progressive – Is the organization receptive to progressive change? What is the city’s track record of success in major change change? What is the city’s track record of success in major change initiatives?initiatives?

LeadershipLeadership – Is the organization’s leadership – at both the policy and – Is the organization’s leadership – at both the policy and administrative levels - prepared to “stay the course”?administrative levels - prepared to “stay the course”?

ResourcesResources – Will the organization and its governing body commit – Will the organization and its governing body commit resources (budget and staff) to secure the long-term success of the resources (budget and staff) to secure the long-term success of the initiative?initiative?

Project planning and management risksProject planning and management risks Provider selection risksProvider selection risks Contracting and negotiation risksContracting and negotiation risks Transition and startup risksTransition and startup risks Provider performance risksProvider performance risks

The risk management imperativeThe risk management imperative

SOURCE: “Outsourcing-A Risk Management Perspective,” Nicholas A. Benvenuto and David Brand, Information System Control Journal, Volume 5, 2005

Develop a comprehensive project planDevelop a comprehensive project plan Directly involve subject matter experts and Directly involve subject matter experts and

process ownersprocess owners Explicitly identify and plan for risk contingencies Explicitly identify and plan for risk contingencies

upfrontupfront Provide experienced personnel and adequate Provide experienced personnel and adequate

resources to manage the ASD projectresources to manage the ASD project

Project planning and Project planning and management risksmanagement risks


Conduct thorough market research to identify Conduct thorough market research to identify qualified providersqualified providers

Engage the provider community in requirements Engage the provider community in requirements definitiondefinition

Develop a precise and comprehensive RFPDevelop a precise and comprehensive RFP Carefully assess provider viabilityCarefully assess provider viability Complete a rigorous technical evaluationComplete a rigorous technical evaluation Understand and assess third party risks Understand and assess third party risks

(outsourcing by the outsourcer)(outsourcing by the outsourcer)

Provider selection risksProvider selection risks


Create a negotiation plan in advanceCreate a negotiation plan in advance Develop a precise model Service Level Develop a precise model Service Level

Agreement (SLA)Agreement (SLA) Provide the expected contract and SLA in the Provide the expected contract and SLA in the

solicitation documentssolicitation documents Require detailed exceptions and alternativesRequire detailed exceptions and alternatives Evaluate more than price aloneEvaluate more than price alone

Contracting and negotiation risksContracting and negotiation risks


Understand your organization’s change Understand your organization’s change readiness / change historyreadiness / change history

Budget for the costs of transitionBudget for the costs of transition Plan for the handling of any displaced Plan for the handling of any displaced

employeesemployees Develop a change management and Develop a change management and

communication plancommunication plan Develop a problem escalation procedureDevelop a problem escalation procedure

Transition and startup risksTransition and startup risks


Establish a rigorous program of provider Establish a rigorous program of provider performance measurement and monitoringperformance measurement and monitoring

Establish and maintain regular, formal Establish and maintain regular, formal communication with service providercommunication with service provider

Implement a quality assurance function Implement a quality assurance function (consider a third party)(consider a third party)

Have a formalized change control processHave a formalized change control process

Provider performance risksProvider performance risks


Outsourcing a truly strategic functionOutsourcing a truly strategic function Failure to fully understand costsFailure to fully understand costs Inadequately defined service level Inadequately defined service level

understandingsunderstandings Lack of measurement and monitoringLack of measurement and monitoring Ineffective sourcing processIneffective sourcing process Poor contract management disciplinePoor contract management discipline Inadequate attention to initial risk assessment Inadequate attention to initial risk assessment

and mitigation planningand mitigation planning

Potential points of ASD failurePotential points of ASD failure


““You can’t outsource your You can’t outsource your responsibilities”responsibilities”

““You can’t outsource your controls”You can’t outsource your controls” ““You can’t outsource your risk”You can’t outsource your risk” ““You can’t outsource your brain”You can’t outsource your brain”

Source:Source: Calvin Webb, Webb Watch Corporation Calvin Webb, Webb Watch Corporation

RememberRemember

Questions?Questions?Comments?Comments?Gripes or Complaints?Gripes or Complaints?

Thank you!Thank you!

David W. EisenlohrDavid W. Eisenlohr

Managing PartnerManaging Partner

The Azimuth Group, Inc.The Azimuth Group, Inc.

214.987.3423214.987.3423

[email protected]@azimuthgrp.com

www.azimuthgrp.comwww.azimuthgrp.com

http://www.azimuthgrp.com/