Solving The Government Budget Gap: The Strategic Software Initiative

The government’s budget problems are not going away any anytime soon. The problems facing the Federal government get the headlines, but the problems facing counties and towns are even more problems. While the Feds can print their own money, and change regulations that drive a lot of expenses, local governments have limited power to produce more money or change demand for services. Furthermore, as government gets smaller, the staff not only shrinks, but it often becomes less sophisticated. A town doesn’t have the financial leverage of a state of Federal agency. It cost more to finance, and there is less
negotiation power for purchasing. The individuals voted into power in a local government may not have the skills and experience to handle their management responsibilities. Pension funds are in trouble and local budgets are at risk. Local governments are looking for solutions: more money from the Federal government, citizen agreeing to reduced services and higher taxes, and town workers accepting pay cuts and reduced benefits. These solutions provide temporary, but necessary relieve. An overlooked long-term solution is to reduce administrative costs by making communications between the local, state and Federal government more efficient. How?

For one example, look at New York State. NY has 62 counties, which contain 932 towns. Every day, these government units talk to each other, passing in formation up and down this chain of command. They report on work accomplished, requests for funding, changes in project assumptions, changes in schedule, regulatory reporting, budget updates, and just about a everything else needed to fund and run a government. These units of government then communicate with suppliers, the corporations and private entities that sell products and services to the government. Each town may work with tens if not hundreds of unique suppliers (real estate, lawyers, books, paper, car dealers, the electric company, furniture suppliers, etc.). Multiply this times not just New York’s 932 towns, but the 20,000 to 50,000 towns (depends on how you measure a town, vs. village, vs. other local government), and you  have hundreds of thousands of entities sending emails and paper mail with data that needs to be re-keyed (often many times) into other systems, so that the wheels of government can slowly grind forward.

What if we could still communicate all the richness of data that we have currently, while eliminating the majority of re-keying and most of the errors (that consume administrative time)? That is a part of what an Enterprise Reporting System (ERP) can do. However, ERP systems become truly magical when the number of users is very large. When we have to manually manage large groups of people and documents, costs (and errors) tend to rise with size, due to human limitation. With computer systems such as ERP, cost drop dramatically as you increase the number of users. If an entire state adopts one ERP systems (or a single ERP specification), then the potential is enormous.  There are some hit and miss implementation of ERP in government today, but they tend to be aimed at just one town or city, or at the state level but do not require participation by all towns, or many towns in a state-run individual ERP systems that do not communicate with each other. You need to walk before you can run, but early returns on ERP certainly indicate that they work, now we have to see if they can work together on a much larger scale.

Is this Strategic Software Initiative a totally radical idea? Not at all! In the late 70’s and early 80’s major railroad companies had a similar but less ambitious plan to reduce administrative overhead; they created a standard for EDI (Electronic Data Interchange). Before this initiative, all railroad purchases required some use of paper order forms. Some railroads were highly automated, and some were not. Likewise, different suppliers had different levels of computerization. However, no railroad used the same systems as suppliers, leading to a minimum of re-keying of data between the two systems. And any mistakes led to very costly human intervention. Sounds familiar? By being required to use the same electronic ordering system, re-keying errors are eliminated and administrative time is greatly reduced. Today’s modern procurement department requires suppliers to use or connect to their procurement systems. Many clerical processes were no longer
needed, and the cost of administration dropped dramatically. ERP has the potential to deliver greater efficiencies to local governments.  This initiative would work something like

  1. FEDERAL SPONSORSHIP: The Federal government would set up guidelines for the Strategic Software Initiative, an aggressive ERP program to reduce the administrative cost of managing government. State governments that implemented a compliant program would receive federal funding (based on the potential administrative savings). ERP suppliers would receive specifications for an “open” ERP standard; suppliers who were compliant with the standard would receive federal certification. Any program receiving federal funds would be required to use a certified product.
  2. EFFICIENT ADMINISTRATION: The Federal government, state government, local government, and private supplier firms would each have separate components, since each entity plays a different role. By using a single system, re-keying of data is virtually eliminated and fixing of data errors is greatly reduced. Whatever the current cost of administration, by folding all four roles in the ERP, it could reduce 75% of reworking, or more. Still, lets assume that administration is only reduced by 50%.
  3. CLOUD BASED: Previous computerization efforts in smaller governments stalled or failed when equipment and software licenses were not kept up to date. A cloud based solution, with a fixed annual cost, would resolve these issues. A cloud provider can provide a higher level of service (and availability) and would reduce unexpected costs (broken server, software updates, hard drive replacement) that a small and unsophisticated IT department often fails to anticipate when a budget is approved. Typical savings for moving a network to the Cloud is usually in the range of 50%.
  4. FASTER PAYMENTS: In addition to the benefits of a streamlined system that requires a smaller administrative staff, the ability to process billing faster and with fewer errors and corrections means that suppliers can be paid more quickly.
    Granted, today small government (just like individual families) may be juggling
    and delaying payments, but even when governments want to pay on time, there may be too many approvals and a system that is too inefficient to deliver payments in a timely fashion.  If payments can be on time or even early, better discounts can be negotiated, reducing the cost of government. Discount of even 1% or 2%, applied nationally, represent huge savings.
  5. BEST PRACTICES: The greatest benefits may come from as yet unidentified best practices. ERP systems are tremendous resources for data mining. The Feds could develop a small (not a cast of thousands) office of best practices, and put out regular reports to all government parties on: state and national pricing, new contract patterns, a library of best contract clauses, how long it takes to complete
    different types of projects, which projects tend to be the most successful, and
    other important ERP data. For example, copier/printer paper: best rates; rates
    in-state vs. nationally; how rates fall with increased volume; how towns can contract jointly to lower pricing; most successful projects to automate work and reduce paper purchases; calculating the full impact of paper efficiency (cost of: ink, toner, printer purchases, maintenance contracts, etc.). The benefits across all
    purchases and projects would be enormous. Today, the data to drive those savings is buried in multiple systems and paper receipts.

Global corporations have developed the tools and techniques to coordinate the purchases and reporting of their many departments. The effort needed to put all US local governments on a single ERP system is at least an order of magnitude greater; then again, the potential benefits are equally high. Greater administrative efficiency has the potential to deliver cost savings to close the budget gaps affecting local government, without taking
away services or raising taxes. There aren’t too many proposals left out there that can do this. Think about it! A Strategic Software Initiative is the single greatest opportunity to boost government efficiency in our lifetime… at least, that’s my Niccolls worth for today!

This entry was posted in Best Practices, Common Sense Contracting, Decision Making, Improvement, Continuous or Not, Unique Ideas and tagged , , , , , , . Bookmark the permalink.

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