Risk Management

Building a Better Bureaucracy

By going online, government agencies are giving more power to the people.
John P. Mello Jr.October 1, 2000

Al Gore’s personal involvement aside, there’s no doubt that the federal government can take credit for creating the Internet. But while E- commerce is now routinely discussed in such terms as “B2B” and “B2C,” the letter “G” has been conspicuously absent.

No longer. Government entities from Capitol Hill to the county clerk want to make life easier for businesses–and citizens–by Web- enabling a vast range of services. The U.S. Postal Service, for example, is scheduled to launch its Mailing Online service this fall to allow small businesses to transmit correspondence electronically to the USPS. And both the Army and the Navy are spending millions of dollars (in the Army’s case, hundreds of millions) on Internet-based education so that sailors and soldiers can learn everything from computer programming to English Lit.

Driving this E-government frenzy, for the most part, is citizen demand. “If people can buy books on Amazon.com and get them delivered with very high reliability and at minimum cost, then that becomes their expectation of the norm,” says Paul Turner, chief technology officer for American Management Systems Inc., in Fairfax, Virginia, a provider of E-government services. But equally important is the business community’s need to cut through governmental red tape that can entangle everything from permit applications to sales-tax collections. In addition, many businesses see vast potential in helping the federal government move some of its $260 billion in annual purchases to the Web.

But most companies are less interested in selling to Uncle Sam than in getting him to move more nimbly. “No more driving to the government office, no more waiting in line, no more wondering if an important application ever got there,” says Forrest Claypool, senior vice president for business development for Chicago-based Netgov.com, one of a vast array of Internet providers that are aiding in the proliferation of E-government services. “No wonder Web-based government services are seeing exponential growth.”

Some question whether government entities have the technological or business savvy to move quickly into the Internet Age. Staff limitations and imprudent contracts are cited as major stumbling blocks, and Andrea Di Maio, an analyst at research firm Gartner Group Inc., believes “more than 50 percent of E- government projects will fail to deliver the level of service that citizens and businesses require through 2004.” But a rocky road is better than none, others argue, and government at all levels seems committed to the effort.

All The Right Reasons

In some cases, a strong commitment is needed simply to keep pace with what’s happening elsewhere. The federal government is slated to spend billions of dollars on its E- commerce systems over the next five years, according to Gartner. Still, the United States trails other countries in catching the E-government wave, according to French Caldwell, research director at Gartner. “I’d say E-government efforts, especially on the federal level, are pretty poor,” he says. To support that assessment, he cites the United Kingdom’s goal of having all of its services online by 2005 and Canada’s goal of having 50 percent of its services wired by 2002 and 100 percent by 2004.

Part of the problem lies in connecting the Internet to older computer systems. “The first actual capability tends to be information flow,” says Ira Goldstein, worldwide industry director for government services in the Washington, D.C., office of Arthur Andersen, “because it’s easily implemented and doesn’t require the same integration to government financial systems.” As with industry, he adds, governments usually have legacy financial systems that have been around a long time. “Integrating an outside payment capability is much more difficult than providing information on which parks have open ball fields on Thursday,” he says.

But the economic impetus to change is compelling. Kaleil Isaza Tuzman, chairman and CEO of govWorks.com, a Web-based E- government firm based in New York, contends it can cost as much as $20 for a public official to process a simple parking ticket offline through lockbox services and other semiautomated procedures. Online, the cost drops to $1 to $1.50. E-procurement promises similar savings. According to NIC Commerce, in Reston, Virginia, a provider of E-government services, electronic procurement can reduce government procurement transaction costs from more than $100 per action to less than $20.

Governments are being driven into the Internet Age not only by citizens and businesses that want faster, more efficient access to government services, but also by a spate of dot-coms that often provide much of the technological infrastructure governments need to become Web- enabled. Such companies as Netgov.com, NIC Commerce, PayTheTicket.com, Ezgov .com, govWorks.com, and the ingeniously named E-The-People are among those rushing into this market.

Netgov offers an array of services to municipalities, from customized E-mail tailored to the interests of individuals to a searchable resource center and a civic-events calendar. NIC Commerce has supplied E-procurement services to NASA, the Department of Defense, and local entities as well; it recently cut deals with Bank of America and Citibank to allow government credit- card holders to buy goods and services online. Several other sites act as portals, giving businesses and citizens the ability to do everything from pay taxes to sign petitions.

They also provide a huge boon to companies that have government clients. Corporate Express, a subsidiary of Dutch office-supply giant Buhrmann NV, taps into the federal government procurement market through NIC Commerce. “It’s given us expanded exposure to a market we’ve been pursuing heavily over the past few years,” says Laurie Schwartz, federal alliances manager for the Broomfield, Colorado, company. “Through the Web, we’re able to be on the desktop of every federal employee out there.”

She explains that the company’s alliance with an E- government service provider gives its sales force another tool for leveraging business. “It allows us to enhance our professional sales force by giving them another value-added service that they can offer the government employee,” she says. That service is the ability to buy Corporate Express products online and with a minimum of red tape. The Web, she says, has taken a sales cycle that could be measured in weeks and made it almost instant.

Eliminating Red Tape

For companies that deal with the government, the Web also offers the chance to cut down on red tape. At Taylor Heating, Air Conditioning, and Electrical, in Pleasanton, California, for example, partner AnnaMarie Taylor was initially skeptical when fledgling firm NetClerk Inc., in San Francisco, called her to pitch its online permit service. Taylor had been looking for relief from the time-consuming process of driving to a town clerk’s office to obtain construction permits, but with no previous exposure to E-commerce, she wasn’t sure she was ready to handle the chore online.

But “it’s been incredible,” she says. “It’s easy to use, and it’s probably spared us having to hire an extra person.” Taylor Heating is a six-person firm, so that means a lot. Using NetClerk, Taylor says she can “pull” (obtain) a permit in half an hour, and has used the system to pull as many as 60 permits a month. “Compared with what it would cost me just to drive to each town,” she says, “the $250 monthly fee is a huge bargain.”

Similar convenience is now being offered in Texas, where eight state agencies have signed on for the launch of an ambitious new Web service. Transactions ranging from insurance-agent and real-estate license renewals to municipal-waste environmental permits to sales-tax collections can be handled online. Payments can be made by credit card or electronic checking, with a flat “convenience fee” charged for each transaction.

E- Risks

Despite all the hoopla surrounding E-government, the trend does hold some risks. One pitfall noted by some watchers is that a dearth of qualified techies in the public sector may result in governments being snared into unfavorable arrangements with service providers. That scenario is unlikely, contends Arthur Andersen’s Goldstein, because governments don’t have to provide the technical savvy for these projects. “The capability is coming from the private sector,” he observes. “What the government brings to the table is access to a large body of users.”

There may also be a downside in the dominant emerging model for E-government services, which often calls for zero start-up costs. The government entity outsources all of its E-government services to a third party, which collects a percentage of or flat fee for each transaction, a sort of pay-as-you-go system. “The problem with that is it makes it almost too easy for government to get into E-commerce,” contends Gartner Group’s Caldwell. “Government could end up getting locked in to some long-term relationships that prove difficult to change.”

Goldstein agrees that there is, at least in theory, some danger that governments could be trapped in exploitative contracts, but adds that “most of the arrangements I’ve seen are ones in which governments seemed quite attuned to the need to require a fully open architecture.” That is, governments are requiring vendors to provide services in a way that won’t tie them to a specific technology.

The shortage of qualified IT talent may also hamper government efforts to get wired. But don’t tell that to AnnaMarie Taylor, who hopes her online permit system will let her spend more time winning business and less time chasing permits. 

John P. Mello Jr. is a freelance writer based in Woonsocket, Rhode Island.


U.S. E-government spending forecast

  1999 2000 2001 2002 2003 2004 2005 CAGR%
State and local 630 854 1,158 1,571 2,130 2,888 3,917 36%
Federal 475 619 807 1,052 1,372 1,789 2,333 30%
Total government 1,105 1,473 1,965 2,623 3,502 4,677 6,250  33%
Total B2B 807 1,018 1,319 1,734 2,244 2,998 4,006 30%
Total B2C 297 455 647 889 1,257 1,679 2,244 41%

-Values in $ millions
Total expenditures on E-business-related hardware, software, and internal and external services.
B2B represents sum of government-to-government, government- to-supplier, and government-to-business.
B2C represents government-to-citizen only.

Source: Gartner Group Inc.