Building E-Partnerships

he Internet, which transforms and refreshes itself several times a year, is redefining the ways that many public and private organizations work together. A good example of how quickly things are changing is the whole area of e-commerce on government Web sites.

The movement responds to citizens' demand that government deliver services as efficiently as banks or brokerages do. People want to get building permits, fishing licenses and drivers' licenses electronically and pay taxes online.

These sorts of e-government services are increasingly available at the state and local levels. But federal agencies are lagging, even though Vice President Al Gore's National Partnership for Reinventing Government has been singing the e-business chorus for years. They're now under pressure to do better: An executive memo from President Clinton in December requires agencies to transact business electronically by 2003.

States, cities and counties have taken the lead in developing the new models in part because they have been less burdened with large investments in legacy systems. Because state and local governments have had little money to finance experiments in service delivery, they have had to be innovative in funding expensive capital projects by sharing the costs or savings. Cities and counties unable to afford new traffic enforcement technology were more than willing to give private companies a share of the fees collected as a result of traffic cameras or parking meters installed and financed by the firms.

When governments began to examine how to finance electronic commerce sites, they quickly found ready customers in businesses that would rather pay a small fee than send a person to wait in line for needed records. Kansas created a system to do just that in the early 1990s. The Information Network of Kansas charged a subscriber fee of $75 per year and then tacked on a small document fee for each record obtained. The model worked well and generated enough money not only to pay for the Web site but also to make it a profit center for the state.

The National Information Consortium, of which Kansas was the first member, now operates Web companies in nearly a dozen states-including Nebraska, Georgia, Indiana and Virginia. This for-profit company enters into a contract with a state or local government for three to five years. The state often creates some type of intervening authority that administers the Web portal, and contracts the administration out to the NIC affiliate.

"The state decides it wants to have a robust, comprehensive network," says Dan Houlihan, general manager of the Virginia Information Providers Network, a subsidiary of the Kansas-based NIC. "The state decides on a public/private partnership and the partner then executes the vision of the state in creating the network. We charge user fees on business sectors that demand information from government and then have revenue to apply to other state projects such as a Web site for a small agency that may not have the potential for making money."

The model, though quite successful, is being challenged by major players entering the e-commerce world who see big business opportunities in citizens' interactions with government.

Michael Dell, chairman of the board and chief executive officer of Dell Computer Corp., says only 1 percent of citizens' transactions with government are done online. It's easy to see the growth potential and why companies such as Oracle Corp., American Management Systems and others are interested in the market for this technology. The e-commerce engine developed to power large sites such as the automobile manufacturers' parts-buying Web site can also work with smaller government applications.

Private-sector developers have already shouldered much of the cost of development. Commercial entities offer to deliver a full-functioning e-commerce site at no cost to the government and instead charge a transaction fee that ranges from 0.5 percent to 1.5 percent.

Among the recent entrants into the government Web site market are Atlanta-based Ezgov.com, New York-based GovWorks.com and a number of private-label offerings, such as Lockheed Martin's GovernLink. These companies offer to handle online payment of personal taxes, parking tickets or real estate taxes and, in some cases, provide access to government records or documents. The attraction for government jurisdictions is pretty obvious-for very little upfront cost, they can offer an electronic payment option to customers.

David Camp, vice president of marketing for GovWorks, says his company currently has more than 30 different government agencies participating and new ones signing up each day. "Our pricing structure is flexible. We can charge on a per-transaction basis or arrange a revenue sharing. We have just announced a relationship with AMS, which will strengthen our back-office capability. The reception so far has been universally positive. Government recognizes opportunities inherent in this technology," Camp says.

An even greater benefit is the savings the government agencies can achieve through productivity gains. It's difficult to pin organizations down on exactly how much they have saved by using e-commerce, but the Virginia Department of Motor Vehicles estimates the cost of serving its customers has gone down 50 percent. More typical numbers are in the 20 percent to 30 percent range. Few organizations can afford to pass up such an offer-save big bucks at little or no cost. So why aren't these systems causing a stampede?

While not a stampede, jurisdictions of all sizes have shown a great deal of interest. But that comes with a real concern about fraud and outsourcing what some say are inherently governmental functions. That may be a harder position to attack on taxes than it is on parking tickets. Ezgov and GovWorks Inc. appear to be addressing at least a few of those concerns by adding well-known and respected individuals to their boards as a mark of their quality and respectability.

Some users object to the idea of paying a transaction fee, suggesting they are being charged twice for the same government service. Others are more than willing to cough up an extra dollar to avoid dealing with city hall or the DMV in person.

Certainly another issue is how increasing electronic interactions with government widens the gap between those who have access to computers and the convenience they provide and those who do not. One response is that the money saved by productivity gains through electronic transactions should be plowed back into offering access for all citizens.

Government partners, such as those that are members of the Kansas NIC family, worry that commercial firms will cherry-pick the high-volume sites and leave other, less profitable sites for governments to handle.

However, the market indicates that governments prefer to choose commercial companies to build their electronic business instead of trying to build it themselves. The market is changing so quickly, few governments can afford to build from scratch. Whether one buys the solution, selects a partner or goes the route of transaction fees is a choice not unlike buying or leasing a vehicle-it depends on how much you need to transport, how long you expect to keep it and how much money you have to spend.

Anne A. Armstrong is president of Virginia's Center for Innovative Technology, a private state-funded organization that fosters technology and technology businesses in the Commonwealth.