Joint Solution Procurement A New Way to Work with the Private Sector

1. Joint Solution ProcurementA New Way to Work with the Private Sector Kirsten Tisdale, Senior Advisor Corporate Initiatives, ASD Secretariat February 1, 2005

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

3. ASD - a Range of Ways to Deliver Services • 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. 100% government owned and delivered 100% private sector owned and delivered Service Delivery Continuum Devolution Government transfers delivery (and payment) to another government e.g. federal government collects income tax on behalf of the province Shared Services 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 Agencies Programs and services are delegated to a third-party serving on behalf of the government. e.g. Consumer Protection Agency, ICBC, BC Transit Direct Delivery Government delivers programs and services through its ministries Outsourcing Government programs and services are provided by private sector companies under long-term contractual arrangements. e.g. Payroll Operations and Information Management and Payroll Services Privatization Government 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

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.

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 theexpertise 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.

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

7. Recently Signed Deals 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

8. Joint Solution Procurement (JSP) The JSP Process is the procurement process used to select Service Providers in many of the ASD initiatives 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.

9. Joint Solution Procurement or Traditional Approach?

10. JSP Process WHEN WHY HOW WHO WHAT Overall Timeframe # of Partners: 8-20 3 2 1+1 1+1 1 Implementation Finalize Deal Due Diligence/ Negotiation JSP Qualification Preliminary Vendor Qualification Solution Definition 4 0 1 2 3 Duration: 4-7 weeks Duration: 9-14 Weeks Duration:10-15 Weeks Duration:Depends on Model Duration:Depends on Model Duration: “n” weeks Project Management • Issues Management • Risk Management • Cost Controls • Information Control Office • Research and Quick Response • Meeting/Workshop Logistics • 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”

11. JSP Success Factors Experience has shown that there are a number things that are critical to the success of Joint Solution Procurement: • 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.

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

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

14. In Conclusion – What We Have Learned What we’ll do differently 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 • 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

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