Presented to: NSGIC MidYear Conference March 25, 2007

1. Building a Business Case for Shared Geospatial Data and Services: Financial and Strategic Analysis for a Multi-participant Program Presented to: NSGIC MidYear Conference March 25, 2007

2. Bob Samborski Executive Director, GITA Aurora, Colorado, USA — Mary Ann Stewart Strategic Analysis Lead for ROI Project

3. Who is GITA? The Geospatial Information & Technology Association (GITA) is a non-profit association focused on providing education and information exchange on the use and benefits of geospatial information and technology worldwide.

4. GITA Community International Private Government Infrastructure Who is GITA?

5. ROI Project Co-Sponsors

6. Project Phases • Project Conception • Literature Review • Workbook and Template Development • Case Study Development • Business Case Development and Return on Investment Methodology

7. Project Genesis • Highly positive response to 2003 GITA Conference Seminar, “Using Business Case and ROI to Justify GIT Spending” • Lack of relevant information on determining ROI for GIT • Request from FGDC to extend methodology and templates for multi-agency projects

8. Project Principals • Principal Investigators (PI’s) • Susan Ancel, EPCOR • Dave DiSera, FICOH • Nancy Lerner, EMA, Inc. • Mary Ann Stewart, MAStewart Engineering LLC • Project Advisory Committee

9. Project Objective • To develop and document a formal methodology for preparing a business case, including ROI, within utilities and government agencies • To extend this methodology to multi-agency projects • To develop a multi-agency case study

10. Project Benefits • Standardized and documented methodology for developing GIT business cases • Workbook with templates to assist multi-agency projects in applying the standards • Resource for supporting better GIT investment decisions by agencies engaged in complex projects

11. Project Rationale Justification for investments comes from business applications BUT… • GIT benefits are difficult to predict • GIT applications are complex and may require significant upfront investment • Multi-agency projects require a different approach to analysis • Managers often make decisions with incomplete understanding

12. Workbook Contents Chapter 1. Introduction • Why read this book? • Why read about agencies outside my sector? • Who should use this workbook? • How to use the workbook and accompanying CD • Why build shared data and services business case? Chapter 2. Overview of Business Case • Business Uses of GIS • Taking a multiple agency approach • Project Definition • Financial Analysis • Strategic Analysis

13. Workbook Contents Chapter 3. GIT Benefits • Tangible and Intangible Benefits • Capturing Productivity Benefits • Calculating Other Tangible Benefits • Internal and External Benefits • Dealing with Uncertainty • Examples of Benefits for GIT Business Uses Chapter 4. GIT Costs • Start-up and Operating Costs • Sunk Costs • Internal Labor Costs • Examples of GIT Costs

14. Workbook Contents Chapter 5. Financial Analysis • Project Life and Cash Flow Schedule • Time Value of Money (Opportunity Costs) • Dealing with Inflation • Common Financial Metrics • Impact of Recasting Internal Labor Costs • Sensitivity Analysis Chapter 6. Strategic Analysis and the Business Case • Interpreting a Business Case • Strategic Benefits as Intangibles Chapter 7. Research Findings • Literature Review Findings • Case Study Findings

15. Template Components • Project Set-up Sheet • Current Labor Rates Sheet • Labor Cost Multiplier Sheet • Internal Labor Usage Sheet • Internal Labor Cost Sheet • Contract and Procurement Cost Sheet • Productivity Benefits Sheet • Other Benefits Sheet • Financial Analysis Sheet • Productivity Benefit Detail Sheets

16. GIT is a Critical Investment GIT is a Critical Investment

17. Why ROI? • Large amounts of money involved • Competition with other investment opportunities • Ensure full validation of project prior to initiation • Identification of opportunities to structure project to achieve interim benefits quicker • Detailed documentation to improve milestone and post implementation reviews

18. Understand Financial Impact of Projects ProtectInterests of Citizens & Investors Select Best from Many Alternatives Investment Analysis Is a Fiduciary Responsibilityand Public Duty

19. How long before we see a return? Dobenefitsoutweighcosts? By howmuch? How confidentare we in the financial projections? Are there better alternativesfor our money? Financial Analysis Quantifies Investment Value

20. Shifting ROI Landscape • Traditional models were based on labor savings by implementing technology • Organizations are much leaner now and often have existing systems, resulting in less incremental benefits available • ROI should now focus on the financial statement drivers and corporate strategies • Current “hot buttons” • Lean Operations (eliminate waste/shorten cycle times) • Compliance Tracking • Reliability Centered maintenance • Asset Management • Optimization of Material

21. When Should You Do ROI? • Strategy Development • Project Initiation • Project Detailed Design completion • Project completion • When in operation for some time • When assessing replacement of the tool

22. Cumulative Benefits Equal Cumulative Costs Subtract Costs from Benefits Break Even NPV ROI Pay Back Divide Benefits by Cost Time from Now to BreakevenPoint Quantitative Measures

23. Each Measure Has a Best Use • NPV • Best overall measure of financial value • Higher NPV always identifies better investment • ROI • Shows whether benefits outweigh costs • Inappropriate for comparing investments (can have high ROI with low NPV, etc.) • Breakeven Point and Payback Period • Shows whether benefits outweigh costs • Important political measure • Inappropriate for comparing investments

24. STEP 6 PrepareStrategic Analysis STEP 5 PerformFinancial Analysis STEP 4 ScheduleCash Flows STEP 3 CalculateTangible Benefits STEP 2 CalculateCosts STEP 1 Define the Investment Investment Analysis Process

25. Describe & Quantify All Costs • Capital/One-time Costs • Hardware & Software • Data Acquisition & Conversion • Start-up Services • Operating/Ongoing Costs • New Hires • Salary Adjustments • Hardware & Software Maintenance • Training • Support Services • Data License Fees

26. Hardware integration with pre-existing computing infrastructure Evaluation, selection, acquisition and installation of software Undertaking requirements/needs analysis Contractual aspects systems customization Applications portfolio development Interfacing to other ‘data servers’ and operational systems Business case analysis Project management Delivery and installation Business process re-engineering Transitional costs (i.e. parallel running of old and new systems) On-going cost implications (i.e. staff costs and consumables) Data purchase Data capture, data conversion Data re-survey and validation Training, human resources planning, skills development and re-skilling Typical GIS Costs

27. Applications Drive Benefits • Increase productivity • Add revenue source/enhance collection • Reduce fee/fine • Eliminate a service, building, or process

28. Strategic Analysis Looks Beyond The Money Competitive Advantage Safety Goodwill Can WeStay in Business? Morale Regulatory Compliance Growth Clean Environment

29. Literature Review • Focused on FGDC sources • Qualitative information more common than quantitative • Clarified the need for common methodology for financial analysis of multi-agency projects • Clarified the need for common approach to strategic analysis for multi-agency project

30. Case Study Development • Case study selected from pool of original studies • WA-Trans chosen to cover a range of applications, benefits and costs • Refined templates and approach • In-depth interviews with participating agencies • Financial analysis based on individual and combined business cases

31. WA-Trans • Washington Transportation Framework for GIS (WA-Trans) • Project evaluates a proposed future investment • Complex case study involving 19 participants WSDOT in cooperation with Puget Sound Regional Council, Sound Transit, King County Metro, Lincoln County, Spokane County, Walla Walla County, Yakima Valley Conference of Governments, U.S. Bureau of Census Seattle Regional Office, Washington State Department of Fish and Wildlife, Washington Department of Natural Resources, and Washington Utilities and Transportation Commission

32. WA-Trans Project Description WA-Trans will provide a seamless, statewide transportation location-based data set that includes the best information available about roads, railroads, airports, ferry terminals and routes, port facilities, and non-motorized transportation routes such as bike paths and horse trails. The data will be used to improve transportation planning, analysis and design capabilities not only for WSDOT but also for local and regional organizations across the state. Better transportation planning will ultimately lead to better transportation infrastructure and more effectively utilize existing resources.

33. WA-Trans Total Project Summary • Net Present Value: $17.87 M • Annualized Return on Investment: 10.9% • Breakeven Point: 2011 • Payback Period: 4 years • Inflation Rate: 2.50% • Opportunity Cost of Capital: 5.0% • Project Life: 20 Years

34. WA-Trans Total Project Summary • Method for Determining Future Years Cost of Labor, Derived by Applying Average Annual Cost of Living Adjustment to Current Costs: 1.50% • Total Costs (internal and external): $8.2M for life of project, ranging from $203K to $1.6M per year • Benefits: $26M for life of project, ranging from $67K to $1.6M per year

35. DOT alone NPV: $255K ROI: 0.17% Breakeven point: 2025 Payback period: 18 years All agencies NPV: $17.87M ROI: 10.9% Breakeven point: 2011 Payback period: 4 years WA-Trans Total Project vs. DOT Standalone Project

36. What Happened to WA DOT? • DOT assumed majority of cost 2007: $582K of $593K 2008: $1.2M of $1.51M 2009: $1.37 M of $1.64M 2010: $1.02M of $1.02M • DOT received modest benefits 2007: $35K of $57K 2008: $59K of $1.5M 2009: $114K of $1.6M 2010: $454K of $1.2M

37. WA DOT Breakeven Point

38. Multi-Agency Breakeven Point

39. WA-Trans Tangible Benefits • Examples of DOT Benefits • Reduce amount of time to gather data to scope a project in Planning Department = 1260 hours/yr • Eliminate need for Collision Data and Analysis Branch of TDO to review each accident report to determine jurisdiction = 5240 hours/yr • Eliminate research/data acquisition time for Highway Usage Branch of Transportation Data Office to acquire usage data on non-state routes = 80 hours/yr • Cost avoidance on purchase of commercial centerline data = $30K/yr

40. WA-Trans Tangible Benefits • Examples of other agency benefits • Utility and Transportation Commission: eliminate time resolving address and geocoding errors = 240 hours/yr • Sound Transit: reduce customer service rep responses = 208 hours/yr • Dept. of Natural Resources: reduce time compiling trail and forest data for public lands quad map series = 1000 hours/yr • Five largest counties: eliminate edge matching efforts = 1700 hours/yr

41. GIS Strategic Benefits Typical strategic benefits from GIS projects include: • Shared data and services • Improved accuracy, consistency, timeliness of data • Better access to data • Improved services to citizens • Ability to integrate data among other systems • Information for improved decision making • Ability to generate new meaning from the data

42. WA-TRANS Strategic Benefits • Data sharing across county boundaries • Eliminates need for edge matching • One source for data eliminates searches and redundant data collection • Provides means for tracking and communicating progress of projects • Venue for counties and local government to maintain data • Reduced liability due to improved accuracy

43. WA-Trans Strategic Benefits to Large Counties • Have a well-established GIS • No significant change to data maintenance program • Improved data sharing with other counties • Conflation of disparate data for use in analysis and decision making • Streamlined process for planners, replacing manual data review

44. WA-Trans Strategic Benefits to Small Counties • New to GIS, may have nothing in place • Benefit from common data standards • Benefit from geodatabase design available for their use • Use of better control points from counties for other agency flyovers improves accuracy

45. Functional Class Strategic Benefits • WA-TRANS sponsors development of accurate functional class network • Provides accurate tracking of functional class change process • Relates to lost opportunities for Federal funding • Helps resolve disagreements regarding existing classification • Assists in correct determination of urban vs. rural miles

46. Economic Development Strategic Benefits • FAST Corridor and international freight development • Need consolidated intermodal data access • Port development dollars not being spent for WA ($10B for LA) • Provide regional context for decision making for huge freight projects

47. Homeland Security/Disaster Recovery Strategic Benefits • WA experiences significant flooding and wildfires • Constrained transportation corridors • Faster and better recovery efforts with seamless road network • WA-TRANS makes difference between data and missing/outdated data for E911 • FEMA Region 9 address range issues for rural counties

48. Census Bureau Strategic Benefits • Census does not have mandate to be a data provider • Does not plan to continue to update road network • Access to maintained data essential • WA-TRANS means counties won’t have to interface with Census as supplier or consumer of data

49. Comparison of GITA and FGDC Business Case Initiatives

50. Comparison of GITA and FGDC Business Case Initiatives