**Alternative Funding**

**Strategies for Electronic**

**Commerce Projects**

![](media/image1.png){width="1.5965277777777778in"
height="1.5965277777777778in"}

> **Robert H. Smith School of Business**

**University of Maryland**

**Management Consulting**

**Project Team**

Amit Chandok

Kristi Miller

Alison Otis

Erich Parker

Tira Robinson

Siddharth Shah

> **Faculty Advisor:** Dr. Jonathan Palmer

**May 2000**

### Table of Contents

**Executive Summary [i](#executive-summary)**

Background [1](#background)

A New Economy [1](#a-new-economy)

The Challenge [1](#the-challenge)

Finding Alternative Funding Strategies
[2](#finding-alternative-funding-strategies)

The Report [3](#the-report)

Funding Strategies [4](#funding-strategies)

Budget Appropriation [5](#budget-appropriation)

Working Capital Funds [7](#working-capital-funds)

Innovation Fund [10](#innovation-fund)

Fee for Service/Franchising Model
[12](#fee-for-servicefranchising-model)

Rebate Funds [15](#rebate-funds)

Capital Funding [17](#capital-funding)

Share-in-Savings/Self-Funding [19](#share-in-savingsself-funding)

Public-Private Partnerships [22](#public-private-partnerships)

CIO Czar Model [25](#cio-czar-model)

Hybrid Approach [28](#hybrid-approach)

Evaluation of Funding Strategies [30](#evaluation-of-funding-strategies)

Agency Technological Maturity [30](#agency-technological-maturity)

Stage in Project Lifecycle [33](#stage-in-project-lifecycle)

Degree of Required Inter-Organizational Collaboration
[34](#degree-of-required-inter-organizational-collaboration)

Recommendation [37](#recommendations)

Conclusion [40](#conclusion)

Appendix A -- Interviews A-[1](#appendix-a-interviews)

Appendix B -- References B-[1](#appendix-b-references)

# Executive Summary 

The continuing emergence of the Internet, and related advances in
communications technology, provide a unique opportunity to greatly
improve the delivery of government information and services. Emerging
technology presents a challenge to fundamentally rethink existing
processes. Numerous government agencies have made great strides in
implementing new business models, but other agencies languish with
barely developed or incompatible information technology (IT)
infrastructure systems. To date, significant attention has not been paid
to a coherent, government-wide IT policy. As a result, a divergent
collection of largely isolated, agency-specific electronic government
programs has been undertaken.

Funding has remained one of the most important impediments to
implementing Federal government electronic commerce (e-commerce)
projects. The conventional funding mechanisms, like the budget
appropriation process, move very slowly compared to the pace of rapidly
changing technology. Consequently, agencies have resorted to creating
innovative funding approaches in order to 'work-around' the existing
funding process.

Agencies are exploring a number of approaches to provide funding for
their electronic commerce projects. The approaches identified and
evaluated during the course of this research project, and described in
detail in the report, include:

-   Budget Appropriation

-   Working Capital Funds

-   Innovation Fund

-   Fee for Service/Franchising

-   Rebate Funds

-   Capital Funds

-   Share-in-Savings/Self-Funding

-   Public-Private Partnerships

-   CIO Czar

-   Hybrid Approach

The track records of these funding strategies have been mixed. The
single most important factor behind the success of any of these
strategies is having strong top-level support. Implementation of
e-commerce projects, especially the required innovative funding
approaches, requires changes in the conventional way of doing business.
In the absence of strong top-level support, the resistance to change
that is inherent in most organizations would stifle these initiatives.

Similarly, ownership of a project is of great importance. Every
initiative must have an individual champion, otherwise it is at risk of
losing momentum quickly through neglect. However, the mere presence of a
designated leader may not, in itself, be sufficient, as the leadership's
credibility with all of the project's stakeholders is also essential.
This is particularly so when considering multi-agency coordination and
private sector participation. Strong leadership can be in vain if all
the participants are not committed to the cause.

Before adopting a particular funding strategy, agencies should consider
the following practical issues:

-   **Agency Technology Maturity.** Determining the agency's current
    state of technological sophistication is crucial. For example, an
    agency without proper IT infrastructure in place should not attempt
    to implement complex Web-based transactions. If implementing a
    project requiring multi-agency coordination, such an agency could
    limit the success of the entire group.

-   **Stage in Project Lifecycle.** The nature of the project may alter
    the choice of funding strategy. One-time funds, like "Capital
    Funding" or an "Innovation Fund", may be ideal for the pilot phase
    of a project, but are not appropriate for mature production systems
    which need continuous funds for maintenance and operations.

-   **Degree of Required Inter-Organizational Collaboration.** Assessing
    the degree of coordination required among the participating agencies
    is critical. For example, the success of the "Public-Private
    Partnership" model, involving multiple agencies and multiple private
    parties, requires a high degree of coordination.

To date, most agencies focus internally when considering IT projects.
Thus, even if individual agencies become successful in implementing
electronic commerce projects, their uncoordinated programs are likely to
result in a maze of different systems that businesses and citizens must
navigate. It is important for the government to take advantage of the
current opportunity to present a single face to all users, and this
requires cross-agency leadership. Such government-wide leadership would
ensure standardization, a common look and feel, and interoperability
among different government systems.

Hence, the goal is two-fold: First, all agencies must quickly be brought
to a base level of infrastructure maturity so that all stand to benefit
from, and contribute to, commonly developed systems. Second, the Federal
government must design a process which encourages and rewards agencies
for recognizing the common elements that their IT and electronic
commerce objectives share with other agencies' plans. The establishment
of this overarching decision making process will bring convergence to
what has been a highly scattered process.

Private industry has recognized the fundamental importance of elevating
the CIO position to the highest levels of management. Only at this level
can the CIO have the necessary authority and visibility to successfully
impact the government's IT development. However, a government CIO 'Czar'
alone cannot achieve the necessary progress. An advisory panel,
responsible for both technical and funding recommendations to this CIO,
is an essential part of a successful strategy.

This national CIO position and its associated advisory board could be
structured in several different ways including the model used for the
Federal Reserve Board, an expansion of the existing CIO Council's role,
or the creation of a new Cabinet level post. Regardless of the structure
chosen, the national CIO position must have the funding and
decision-making authority to develop and implement government-wide IT
policy. A national CIO board, headed by a Chair- or Chief-CIO, can bring
focus, discipline, and coherence to the government's electronic commerce
programs.

Recent studies, noted in this report, have similarly concluded that a
strong, central, and highly placed national CIO position is required.
This report not only supports the call for a national CIO, but also
delineates the current funding environment and provides a structure for
evaluating the applicability of available funding strategies under a
variety of circumstances. This will provide a starting point for Federal
agencies to appraise their own status and to understand which strategies
are appropriate.

The greatest benefit of a more rational, disciplined approach to
government electronic commerce funding will accrue to the citizens who
interact with government every day.

# Background

## A New Economy

In recent years, advances in telecommunications, computing, and the
Internet have drastically transformed the way we live. With the advent
of the Internet, the private sector has completely reengineered the way
it does business. New technologies have not only made it possible to
achieve greater efficiencies and service levels within traditional
businesses, but they have also allowed completely new business models to
develop. Electronic commerce now enables businesses and consumers to
interact directly and complete transactions on-line. The need for
intermediaries has been reduced, while the opportunity for new markets
and alternative value-added services and products has been expanded.

Today, consumers can complete most everything on-line---from grocery
shopping to applying for a mortgage. The Internet has exponentially
increased the speed and convenience of doing business because it is open
24 hours a day, seven days a week (24/7) and consumers never have to
leave the comfort of their homes or offices. In addition, the Internet
has radically altered consumer expectations for quality and efficient
service.

The revolution in the private sector has also impacted citizen
expectations of government services. Now, more than ever before, people
expect and demand better, more cost-effective, and convenient services
from their government. In contrast to the progress made by the private
sector, the public sector has been slow to transform the way it conducts
business. The introduction of the Internet and electronic commerce has
challenged all levels of government to determine how they can
effectively leverage new technologies to provide better and more
efficient services to citizens. Although agencies have taken large steps
towards using new technologies to modernize their businesses, much more
must be done at all levels of government.

The bottom line is clear: To meet its customers' expectations,
government must find a way to incorporate the advanced
telecommunications and information technologies that the private sector
has been able to leverage so well. The 'Digital Divide' exists between
the public and private sectors, as well as between population groups.

## The Challenge 

Perhaps the most challenging aspects of effectively implementing new
technologies is coordination and funding. Traditionally the Federal
government has operated with a "stove-pipe" structure under which each
agency operates independently of other government agencies. This
approach is supported and enhanced by the congressional committee
configuration and the budget structure. Congress typically focuses its
oversight on individual agencies, allocating funding on an agency by
agency basis. Relatively little attention has been paid to strategic
planning or to directing e-commerce programs for the Federal government
overall.

With no structure in place for an enterprise-wide approach to
government, opportunities to fund or coordinate multi-agency initiatives
are limited. Agencies continue to operate under this same "stove-pipe"
mentality in their daily operations. They usually focus on their
narrowly defined missions, without regard to the greater needs of the
government as a whole. Often agencies support projects that compete for
funding against similar projects in other agencies. Agencies that have
implemented new technologies have traditionally done so independently of
other agencies, typically requesting funding through annual budget
appropriation.

Although some government-wide contracts have been established, such as
the General Services Administration supply schedule, they do little to
facilitate extensive inter-agency collaboration. For the most part,
agencies use contracts for their own projects, independent of other
agencies.

Those agencies that have collaborated on projects have often used a
"pass the hat" approach.[^1] In general, this model is implemented when
one agency takes the lead and funds are contributed by participating
agencies. The *ad hoc* nature of this funding strategy makes it
unsuitable because it fails to provide a steady stream of funding for
ongoing projects. But it may work for pilot projects in which only a
discrete amount of money is needed. Although this model has proven
useful in many cases, it does not provide a disciplined, coordinated
government-wide IT policy.

Clearly the Federal government needs to find alternative approaches to
fund and coordinate its effort to enhance government services through
technology. Traditional funding strategies are insufficient to pilot the
transformation.

## Finding Alternative Funding Strategies

To assist in identifying and evaluating innovative funding strategies
for government-wide e-commerce projects, the GSA Office of Electronic
Commerce (OEC) contracted with an MBA consulting team from the Robert H.
Smith School of Business at the University of Maryland. OEC is a Federal
government office that was established "to promote and nurture
government-wide electronic commerce projects."[^2] OEC asked the
consulting team to investigate alternative funding approaches that have
been used by governments and other organizations. To accomplish the end
goal of the project---delivering recommendations on funding strategies
which could be implemented in other areas of Federal government---the
consulting team was encouraged to interview key government officials, as
well as examine the current government IT situation.

The MBA team conducted thirty-two interviews, gathering knowledge from
experienced players within Federal government, state government, and
various private and not-for-profit organizations. The purpose of the
interviews was to understand the problems with current funding
mechanisms, identify funding strategies that had been successful, and
determine how those strategies could be introduced or further put to
advantage for government-wide e-commerce projects. A complete interview
list is provided in Appendix A.

Web-sites, legislation, and policy papers were reviewed, as well as
previous reports on similar issues faced by organizations internal and
external to the Federal government, to help the team understand the
Federal government environment and its use of existing funding
strategies. The interviews and document review assisted the team in
determining some of the factors that are required for specific funding
strategies and the obstacles that might prevent their successful
implementation.

Once this information was collected, the team developed an analytical
framework through which each funding strategy was evaluated. The
framework attempts to evaluate each strategy based on the level of an
agency\'s technology maturity, the phase of the project (pilot or
production), and the level of inter-agency collaboration required by the
project. Each strategy is then evaluated to determine its most
appropriate application.

## The Report

The report is designed as a reference tool for Federal agencies seeking
innovative funding approaches for various types of information
technology projects. In addition, the report provides a final
recommendation for the Federal government's approach to future
government-wide technology projects. While no funding strategy is right
for all types of projects, this report attempts to help the user
determine those strategies that would best fit a particular situation.

The structure of this report includes:

-   Funding Strategies

-   Evaluation of Funding Strategies

-   Recommendations

-   Conclusion

The Funding Strategies chapter describes the ten individual funding
strategies researched as part of this project. For each strategy, the
report includes a brief summary of how the strategy works, a case study,
critical success factors, advantages of that particular funding
strategy, and obstacles to implementing the funding mechanism.

In the Evaluation of Funding Strategies chapter each funding strategy is
examined to determine how it is best used depending upon three practical
considerations: the level of the agency's technology infrastructure,
whether the project is in the pilot or production stage, and how much
collaboration among agencies is required.

The final chapter provides recommendations on the use of these funding
strategies and recommends an organizational structure to fund,
coordinate, and implement an enterprise-wide approach to technology
within the Federal government.

# Funding Strategies

This chapter examines ten funding strategies used for information
technology projects including:

-   Budget Appropriation

-   Working Capital Funds

-   Innovation Fund

-   Fee for Service/Franchising Model

-   Rebate Funds

-   Capital Funding

-   Share-in-Savings/Self-Funding

-   Public-Private Partnerships

-   CIO Czar Model

-   Hybrid Approach

Each strategy provides a unique funding mechanism for government
projects with varying levels of inter-organizational coordination. The
exhibit provided below assigns these ten funding strategies along a
continuum from the least required amount of inter-organizational
collaboration for successful implementation to the most required
collaboration.

![](media/image2.wmf){width="4.6in" height="2.7in"}

The continuum organizes this chapter and provides a tool for evaluating
the strategies in subsequent chapters. Placement of these strategies
along two other dimensions, agency technological maturity and project
lifecycle stage, is discussed in the following chapter. The following
pages examine the individual funding strategies in more detail. Each
section includes:

-   Placement on the Collaboration Continuum

-   Description

-   Case Study

-   Critical Success Factors

-   Advantages

-   Obstacles to Implementation

## Budget Appropriation

### Description

The budget appropriation process is the conventional funding strategy
for the Federal government. Each year, the Federal government raises and
spends more than \$1.5 trillion through this budget process. In general,
this process is widely regarded as complex and time-consuming. It is
seen as "an arcane set of activities often suffused with controversy,
frustration, and delay." These characteristics of the process are
attributable to various factors, including the vast scope and complexity
of Federal activities.[^3]

As agencies formulate their budgets, they maintain continuing contact
with the Office of Management and Budget (OMB) examiners assigned to
them. These contacts provide agencies with guidance in preparing their
budgets and also enable them to alert OMB to any needs or problems that
may lay ahead. Agency requests are submitted to OMB in late summer or
early fall. OMB staff, in consultation with the President and his aides,
review these requests and develops the President's budget from them. The
President submits the final budget to Congress for its review,
modification, and approval. The Budget and Accounting Act of 1921 bars
agencies from submitting their budget requests directly to Congress.[^4]

### Critical Success Factors

The funding of inter-agency projects via the budget appropriation
process requires:

-   Lead agency responsibility

-   Top-level support

-   Planned annual budget

To successfully use this method of funding, a designated lead agency
must seek the required additional funding. Most likely, the lead agency
would be the agency to which the project is closely linked in mission.
This submitted budget request must have support from the President and
Congress, as well as agency leadership, otherwise the proposal would
never be approved. Efforts to submit the request must be completed
within the planned cycle and can contain few last-minute revisions. If
approved for funding, the requesting agency must assume responsibility
for the outcomes of the project. If failure occurs, the lead agency will
likely be required to explain because it was awarded the funding.

### Advantages

The budget appropriation funding model has some advantages:

-   Uses standard operating procedures of the Federal government

-   Evokes necessary support

-   Provides checks and balances

Because the Federal government uses the budget appropriation model to
fund most government activities, it is widely understood and therefore
can be used easily. Since the process requires multiple levels of
approval before it is complete, it must also elicit support at all
levels, ultimately making approval of the project funding more likely.
In addition, the budget appropriation system uses the checks and
balances fundamental to the U.S. government to ensure government funds
are appropriately spent.

### Obstacles

The major obstacles of the budget appropriation process include:

-   Time-consuming nature

-   Agency competition over limited funds

-   Limitations to multi-agency coordination

The budget appropriation process is rather slow and tedious. Preparation
of the budget typically begins in the spring (or earlier) each year, at
least nine months before the budget is submitted to Congress, about 17
months before the start of the fiscal year to which it pertains, and
about 29 months before the close of the relevant fiscal year. Such long
lead times mean an agency must begin preparing its budget for the
succeeding year before it has received final approval of its budget
appropriation for the coming fiscal year. As a result, agency budgets
are prepared with a great deal of uncertainty about economic conditions,
presidential policies, and congressional actions. This lengthy cycle
makes it difficult to use the budget appropriation process to fund
cutting edge technology projects that require fast action.

Limited amounts of discretionary funding also means many projects will
fail to receive any funding. This structure leads to inter-agency and
sometimes intra-agency competition as they attempt to convince OMB and
Congress that their projects deserve funding.

In addition, the budget appropriation process provides funds on an
agency-specific basis. Congressional committee oversight and OMB budget
allocation maintain an agency-specific approach. That is, the focus is
only on individual agencies and not horizontally across the government.
The result is that there are few opportunities for agencies to work
together to fund common initiatives.[^5]

## Working Capital Funds

### Description

Working capital funds are an outgrowth of the difficulties agencies face
in matching spending requirements to the budget process. In many cases
working capital funds are used to bridge fiscal year boundaries, or to
fund projects for which an urgent need has arisen, making it impossible
to obtain funding through the lengthy budget appropriation process. The
funds used to establish a working capital fund may come from direct
appropriation or from otherwise uncommitted funds.

Typically, operations that receive financing from the working capital
fund are expected to reimburse the fund on a fee-for-service basis. This
arrangement allows the working capital fund to continue to support
projects on an on-going basis without further appropriations.

### Case Study -- Environmental Protection Agency[^6] 

The Environmental Protection Agency's National Technology Services
Division (NTSD) owns and operates the EPA\'s Public Access World Wide
Web servers under the auspices of the agency\'s working capital fund. In
order for an EPA office to create and maintain a Web-site, and to place
information on the agency\'s Web servers, it must order support
subscription from NTSD. These subscription fees are reimbursed to the
working capital fund to support further NTSD projects. In this sense the
EPA's working capital fund operates as a fee-for-service reimbursable
fund and allows for rapid action in meeting the agency's Web needs.

### Case Study -- Department of Energy[^7] 

In 1997 the Department of Energy's working capital fund was set up to
provide a cost-based billing structure for administrative services,
including IT support, payroll, etc., to the various DOE programs.
Services are provided on a fee-for-service basis and these fees are
returned to the working capital fund. By centralizing and rationalizing
the management of these administrative support functions, DOE has
realized greater efficiencies and an increased awareness of
administrative support costs. In addition, the working capital fund
structure allows for greater flexibility in meeting the needs of all DOE
programs for this type of support. As demand for these functions
increases it can be easily scaled up.

### Case Study -- Department of Agriculture[^8]

The National Information Technology Center (NITC), part of the United
States Department of Agriculture\'s (USDA) Office of the Chief
Information Officer, offers an example of a multi-agency application of
the working capital fund strategy to technology projects. The NITC
provides services and technology to support the USDA and its sub-units,
the Federal Aviation Administration, and other government clients.
Mainframe computing services are funded from USDA\'s working capital
fund operates on a fee-for-service basis with fees reimbursed to the
fund. Mainframe operating costs are recovered only through usage fees
for each service and fees for the resource usage of each customer. The
USDA has found that demand for the NITC\'s computing services has grown
because of the increased value associated with the greater economies of
scale that centralized, shared services can achieve relative to similar
resources distributed agency by agency.

### Critical Success Factors 

Critical success factors key to the working capital funds model are:

-   Top-level support

-   Agency technological maturity

Working capital funds have proven quite useful in many government
settings. As with most strategies, strong top-level support is critical
in order to overcome the organizational culture of resistance to change.
Also important is the ability of an agency to recognize the need for a
new way of doing business, and to identify the appropriateness of the
working capital fund approach to satisfy that need. In the examples
shown above, the working capital fund approach allowed for not only
greater access to technology support services, but also for greater
recognition of the costs associated with providing those services.

As with many funding strategies, the technological maturity of the
agency is of great importance when undertaking the working capital fund
strategy to pursue technology projects. Without the proper level of
technological sophistication and the credibility that goes with it, the
working capital fund approach may not succeed. Agencies attempting to
use this strategy for technology projects beyond their level of
readiness will find that the fee-for-service structure will not support
continued fund operation.

### Advantages

The working capital fund has several advantages since it:

-   Crosses fiscal year boundaries

-   Continues internal self-funding

-   Fosters competition

The major advantage of the working capital fund approach is its ability
to fund projects that provide service across fiscal year boundaries. In
addition, since this strategy usually includes aspects of a
fee-for-service approach, it thrusts participants into a competitive
environment in which only those that genuinely provide value-added
services survive, resulting in greater efficiency and lower costs to all
users.

### Obstacles 

Some identified obstacles with this model include:

-   Agency resistance to change

-   Congressional resistance

The primary obstacle to implementation of the working capital fund
approach to funding technology projects is agency resistance to change.
Since many organizations do not perceive any problems with the way they
currently do business, it can be difficult to introduce new methods,
even under innovative strategies like working capital funds.

Even if support is gained internally, Congressional approval for working
capital funds may prove difficult. The use of working capital funds does
not require the same level of congressional oversight that projects
funded through the normal appropriations process require. Thus Congress
has some concern that the funds may be spent unwisely.

## Innovation Fund

### Description

A government innovation fund operates very much like a venture capital
firm from the private sector. In general, an agency or board that
reviews agency applications for available funding to pilot new project
ideas oversees the fund.[^9] Based on established evaluation criteria,
the board selects projects to fund. In many cases the projects are
chosen based upon the savings they are expected to generate. Projects of
great significance can also be selected even if they are not expected to
provide any monetary rewards. Both single-agency or multi-agency
projects are possible under this model.

The fund is created either by charging an existing revenue stream or by
direct appropriation. A certain percentage of this incoming revenue is
set aside to create the fund. Payouts from these funds can take the form
of either loans or grants to the requesting agency depending on the
fund's structure.

### Case study -- GITS IT Innovation Fund[^10] 

The Federal government's Information Technology (IT) Innovation Fund was
created in FY 1995 from a one percent surcharge on the FTS2000 long
distance telecommunications program's annual income. In addition to this
source, the participating agencies were encouraged to provide
supplementary funds and were expected to absorb overhead costs such as
office space. The IT Innovation Fund was established to provide seed
capital for government-wide IT initiatives (i.e. useful to the state and
Federal level) and projects that serviced the public. The projects were
expected to begin paying back the seed money within two years of receipt
and provide replenishment to the fund where feasible.

A joint committee representing the Interagency Management Council and
the Government Information Technology Services (GITS) Board was formed
to oversee the fund. This committee reviewed and approved projects that
were to be funded from the various proposals submitted by different
agencies. OMB served as an advisor and GSA provided administrative and
program management support. Each project proposal was evaluated on
criteria such as expected benefits, innovativeness, multi agency
application, and potential plan for repayment.

### Critical Success Factors

The factors that need to be in place for the creation and use of an
innovation fund include:

-   Identification of initial funding source

-   Top-level support

-   Credibility of oversight management

The success of this funding strategy revolves around the selection of a
viable revenue stream that can be tapped. It is very likely that there
will be some resistance towards redirecting any funding stream for this
purpose as happened in the case of FTS 2000. As a result top-level
support is all the more important here. The applicant agencies must also
trust and support the committee overseeing the fund. Hence it is crucial
to have competent and credible people on the committee.

### Advantages

The innovation fund model includes three key advantages:

-   Provides constant source of funds

-   May be scaled up

-   Fosters competition

    If implemented correctly, the innovation fund can be self-funding,
    providing a constant source of money for IT projects. As a result,
    this funding mechanism can be institutionalized better than other
    *ad hoc* strategies. Though the focus of this strategy is to finance
    pilot projects, continuous availability of funds means that large IT
    projects can be financed through this funding mechanism. As funding
    is awarded on a competitive basis, the model provides for a more
    efficient utilization of funds.

### Obstacles 

The principle obstacle in creating an innovation fund is resistance to
revenue diversion. In regard to the charge on an existing revenue
stream, concerned parties may object. In the case of the GITS IT
Innovation Fund, GSA stopped charging FTS 2000 revenue as they feared
that agencies would leave the FTS 2000 program because of the
one-percent fee added.

## Fee for Service/Franchising Model 

### Description

The "fee for service" or "franchising" model involves the establishment
of a business or support unit that provides services internally to its
own agency, as well as other government agencies for a set fee. This
"fee" can be either a flat rate or a percentage of the total costs of
the service. The total revenue generated from the fees supports the
infrastructure and administrative costs of the unit providing the
service. Most appropriate for administrative services which cross all
government agencies, the fee for service model creates economies of
scale for services that are repetitious and would require substantial
expenditure of resources for multiple agencies. The business unit may
compete against other internal and external competitors to provide
services to other agencies, ensuring the service is as efficient and
inexpensive as possible.

The concept of franchising has been recognized by the National
Performance Review (NPR) as a mechanism for adopting "good business
practices" within government. Functions performed government wide
including payroll, personnel, finance, and facility management are
recognized as areas that have increasingly been provided via this model.
Other services such as information technology and quality management
have been identified as future areas of opportunity for this model.[^11]

### Case Study -- Division of Payment Management, DHHS[^12] 

The Division of Payment Management (DPM) in the Department of Health and
Human Services (DHHS) is an example of a fee for service model that is
serving multiple agencies using an electronic commerce approach to its
service delivery. DPM serves as the payments manager between grant
making agencies and recipients for a flat fee based on the number of
open grants. The costs are most often paid from the administrative
funding associated with grant programs and are substantially less than
the costs associated with operating independent systems. Due to its
service structure, DPM is fully self-sustaining and does not require
direct appropriation.

The development of DPM has progressed since the early 1970s when it was
the single source of payments for all of the National Institutes of
Health (NIH). In 1975 the office was moved to the DHHS Office of the
Secretary and began serving other DHHS agencies and in 1989 it began
serving outside agencies. Prompted by an appeal from grant recipients to
the Office of Management and Budget (OMB) to simplify the grant payment
system that varied drastically from agency to agency, an OMB led
taskforce was formed, bringing all grant-making agencies to the table.
This group presented a series of recommendations to the Chief Financial
Officer's (CFO) Council. In June 1998 an agreement was reached by the
CFO Council to create a standardized payment system. This system would
be administered by three agencies, the U.S. Department of Treasury,
Department of Defense, and DPM in DHHS. All agencies were to move from
their proprietary systems to one of the three agencies' systems by
October 2002.

To date, eleven agencies are using the grants payment service offered by
DPM and four others will soon start. Today, over \$159 billion of grant
funding, which represents 75% of total Federal grant dollars, are
electronically paid through DPM. Using an Internet-based program,
grantees can now check the status of their accounts, request and return
funds, as well as report cash transactions. The benefits of the program
include reductions in errors from written reports and requests, and
greater accessibility.[^13]

### Critical Success Factors

Critical success factors of this model include:

-   Top-level support

-   Internally developed core competencies within the agency

-   Identified revenue streams that are reimbursable, competitive, and
    conducted within government-wide principles and criteria[^14]

Without top-level backing, there may never be enough motivation to adopt
the fee for service model. For example, agreement to standardize the
payment systems of various grant-making agencies would not have been
achieved without top-level interest. The leadership of OMB brought the
convening authority to have this issue addressed by the CFO Council. In
addition, this funding model requires that an agency be prepared to
provide a value-added service to other agencies. DPM was ready to
provide the grant payment service through its development within DHHS.
Lastly, to become a viable servicing unit, revenue streams must
accompany services. Competition among agencies and the private sector
stimulates the need for quality and efficiency of services. This model
requires the support of the various agencies along with a commitment to
use the services offered by the competing offices.

### Advantages 

The fee for service/franchising model provides three primary advantages:

-   Identifies and builds on existing governmental strengths

-   Increases the economies of scale through cross-servicing of agencies

-   Promotes competition, leading to higher levels of quality at better
    prices

The fee for service/franchising model allows agencies that are
efficiently and effectively performing services and/or functions to
leverage this strength throughout the government by selling the service
to other agencies. This type of service allows the government to build
on its strengths and generate greater cost savings. For example, if an
agency has developed a state-of the art payroll system it is more cost
effective for other agencies to use this system than to develop their
own. Because these servicing agencies compete for contracts against
other agencies and private sector organizations, they have incentives to
improve their services and find ways to be more efficient. By doing so
the agency hopes to retain or win more contracts.

### Obstacles[^15] 

Several obstacles must be addressed for the fee for service model to be
effective, including the following:

-   Current governmental structure restrictions

-   No incentives for success

-   Parent agency's self-concept of mission

    Under current law, agencies that generate a profit from the fees
    charged for services are significantly restricted in their use of
    the funds. Thus there is some disincentive to provide the service to
    other agencies since little financial benefit can be gained.
    Although there may be cost savings to the government as a whole, and
    thus the service is in the best interest of the government, there is
    little financial incentive for agencies to adopt the model. In fact,
    few incentives exist to succeed at this model. Finally, an agency
    may not seek the responsibility of providing service to other
    agencies because the agency views the work as detached from its
    mission.

## Rebate Funds 

### Description

Rebate Funds are often viewed as "free money" because they come from
outside entities and cannot be traced back to a specific budgetary line
item. Sources of these funds typically include a contractually agreed
upon percentage of a sale that is refunded by the vendor to the
government. Because this money is not part of any appropriation process,
it has offered greater flexibility as a source of funds for pilot
projects. Rebate funds can be tied to one agency or several agencies.

Rebate funds can also be combined with other funding strategies. For
instance, in many self-funding models, there is a rebate clause. If a
target revenue level is reached, the private-side partner rebates an
additional percentage of the money to the government agency.

### Case Study- Smart Card[^16] 

The "Smart Pay" Government Credit Card program, in affiliation with a
few major banks, allows government employees greater freedom and speed
in making small purchases (purchases \$2500 and under). A percentage of
total purchase dollars is rebated back to the government from the credit
card issuer. In essence, the government is rewarded for making its
purchases through this private channel. The money is often refunded to
the individual bureaus and offices that generated the charges. These
funds are distributed or spent depending on the needs of the respective
organizations.

### Critical Success Factors 

Rebate funds require:

-   Coordination between agencies

-   Top-level support

Because the dollar amounts refunded to individual offices and bureaus
can be quite small, funding projects may require the participation of
several offices, bureaus, or divisions to achieve a critical mass. This
strategy demands agreement among the participants as to how the funds
are allocated. The agency that receives the rebates and the agencies
that generated the rebates must agree on ownership and stewardship of
the money and the nature of the project which receives it.

### Advantages 

The primary advantages of rebate funds are:

-   "Free money"

-   Flexibility of Use

The burden of rebate identification and processing is handled by the
private sector. Because these funds cannot be clearly traced to a
specific appropriation, there are fewer restrictions on their use.
Therefore, these funds are ideal sources for rapidly evolving technology
projects.

### Obstacles 

Obstacles to the successful use of rebate funds are:

-   Ownership issues

-   Negative perceptions

The primary problem with rebate funds has been disagreement over
ownership of the rebates. Do all agencies share equally in the rebate
pool? Or should the funds be distributed on a percentage basis, with the
agencies, bureaus, and offices receiving their share proportional to the
amount they charged? Or if one agency receives the aggregate rebate, can
it retain the funds and unilaterally determine their use and appropriate
the money as it sees fit?

A secondary problem is the perception by Congress that "free money" is
often wasted by the agencies because it does not fall under the same
oversight guidelines as other funds. The budget appropriation process is
designed to target funding to "appropriate" uses that serve the
citizens. While there is little debate on whether the projects getting
the funds are worthwhile or not, there is an ever-present concern that,
because the money is unregulated, measures should be enacted to assure
more accountability.

## Capital Funding 

### Description

Capital funding is a common financing tool. Governments have long used
bonds to fund capital projects such as new schools, roads, and other
infrastructure development. Increasingly states are using this same
capital funding strategy to support their information technology
projects. Under this model, capital funds are used for a specific
technology project until it is operational. At that time, maintenance
funds are usually appropriated through the operational budget. Typically
one central agency or department will oversee the administration of the
bond, as well as the appropriation and oversight of the funds and their
specific projects.

### Case Study -- Commonwealth of Massachusetts[^17]

The Commonwealth of Massachusetts has used the capital funding model to
finance large IT projects for the state government. The Commonwealth's
Information Technology Division (ITD) oversees the bonds, taking primary
responsibility for management and allocation of the funds.

The Commonwealth permits ITD to allocate an estimated \$49 million from
the bond proceeds each year to specific projects. During the budgeting
process, ITD meets with the various agencies and departments to review
their technology plans and funding needs, and establish priorities for
the state's information technology projects. Once these priorities have
been established ITD prepares a capital spending plan which is then sent
to the state legislature for review and comment.

If the state legislature does not object to the capital spending plan,
ITD starts fund allocation at the beginning of the fiscal year. The
allocation is not transferred to the agency responsible for each project
in its entirety, rather the money is sent in periodic allotments
determined by ITD and the respective agency. The State Treasurer repays
the bonds from the general fund.

### Critical Success Factors 

For the capital funding model to succeed, several elements must be in
place including:

-   Top-level support

-   Public backing

-   Standard policies

-   Repayment plan

Top-level support from the executive and legislative branches of the
government ensures that the project is taken seriously and will be
monitored. Without the support, the project is unlikely to receive the
attention it needs to be successful, and the public will undoubtedly
withdraw its support for the funding mechanism. In addition, the
government must establish policies for the management, use, and
repayment of the bonds. These policies will make certain that the funds
are used appropriately and are sound investment opportunities for the
public.

### Advantages 

Some advantages in the capital funding model include:

-   Coordinated decision making

-   Facilitates multi-agency projects

-   Unified technology vision

The greatest advantage provided by this funding strategy is the fact
that it provides for some common oversight of IT projects throughout the
government. In addition to providing another source of funds for
technology projects, this strategy also facilitates coordination and
communication among various agencies and departments. Since one agency
or unit manages the funds and develops the capital spending plan, that
agency has the ability to facilitate agency coordination on similar
proposed projects. In addition, this agency can also facilitate one
technology vision for the entire organization because it controls the
funds needed to realize that vision.

### Obstacles 

The obstacles that may prohibit the application of the capital funding
model include:

-   Repayment method

-   Fund management

-   Agency competition

Many factors may prevent the capital model from succeeding. One,
governments must determine how they will repay the funds generated from
the bond issuance. Consequently, alternative funding streams must be
found in the long-run. In addition, legislative support of the model
must be generated to allow this type of bond issuance to take place at
all.

Once the bonds are approved, the actual coordination and allocation of
the funding presents another obstacle. Governments must determine how
they will manage the bonds to ensure they are appropriately spending the
funds. If a centralized body controls the funding, the government also
faces the challenge of gathering buy-in from the individual entities
seeking the funding.

Moreover, multiple agencies must still compete for the funding to some
extent since the funds are limited. The agencies must also be willing to
collaborate with each other to make this model work.

## Share-in-Savings/Self-Funding 

### Description 

The share-in-savings/self-funding model is a type of performance based
contracting that places maximum risk on the contractor. This unique
funding mechanism allows the government to pay a private contractor (in
part or in total) from the savings or new revenue generated by the
project. The contractors typically provide the initial funding for the
project under the agreement that they will be paid a percentage of the
savings or new revenue streams at a specified time or period. In most
cases, the government provides no initial funding of the project, but
does contribute significant oversight in the development and tracking of
savings and revenues.

### Case Study -- National Information Consortium[^18]

The National Information Consortium (NIC) is a private firm that has
provided portals for nine states using a variation of the
share-in-savings funding strategy. In most cases, the states served by
NIC issued a request for proposal (RFP) identifying the transactions
they wished to put on-line using electronic commerce. NIC provided the
initial capital funding to develop the portal including all hardware,
software, and personnel costs. Although the majority of the services
provided on the portal are free to citizens, several services, such as
business licensing, charge fees. These fees can take the form of either
an annual subscription or a usage-based fee. NIC then receives a
percentage of these fees as stipulated by the contract with the state.

Under this model the state retains control of all its data and back-end
systems. NIC develops the interface between the Web-site logged onto by
the user and the state's databases where the information is stored.

The state typically appoints an oversight board to regulate the actions
of NIC. This board makes decisions on what services will be provided
on-line and in what order they will be implemented. The board verifies
that the portal reflects the overall vision and strategy of the state
and takes responsibility for determining what information should be made
available to the public, and what should remain private. The board also
approves the fee structures for the portal. The make-up of the board
varies by state. Typically, it includes elected officials, government
employees, and representatives from the private sector. In some cases,
the NIC network manager for the state portal is also on the board.

These contracts are often three to five years in length. During this
time frame the vendor has sufficient time to recoup its costs and earn
some profit without having to charge exorbitant fees to customers. At
the end of the contract, the state may re-bid it or extend it, depending
on the procurement guidelines of the state.

### Case Study -- California Franchise Tax Board[^19] 

In 1993 the State of California Franchise Tax Board entered into a
shared revenue contract with American Management Systems (AMS) to
develop a new collection system to collect back taxes from businesses
and corporations. Under this contract, AMS received a percentage of the
back taxes collected as payment. The contract was a success. AMS
developed their system in 11 months and state collections totaled \$42.6
million in the first year, almost six times the expected collections
from the new system of \$7.4 million.

### Critical Success Factors 

Several elements must be in place in order for the share-in-savings
model to be effective including:

-   Specific historical data on costs or revenues

-   Method for determining the costs savings or revenues generated from
    the project

-   Mechanism in place "to approve, capture, control, monitor, report
    on, and share the revenues or 'savings' generated"[^20]

-   Top-level support

    Baseline information must be documented at the outset in order to
    accurately determine and quantify the savings or revenue
    specifically generated from the project or system. In addition the
    method of calculating these savings or revenues must be clearly
    articulated within the RFP before the contract is awarded and should
    be restated during contract negotiation so that all parties involved
    can agree before making substantial investments. Contract management
    must include a mechanism through which the revenues or savings
    generated are approved, recorded, managed, overseen, reported, and
    shared or distributed among the appropriate stakeholders in the
    project. Without these three pieces in place ahead of time, there is
    likely to be much disagreement on the exact quantity of savings or
    revenue resulting from the project. Finally, because this model has
    not been used extensively, it requires top-level support to be
    accepted.

### Advantages

The share-in-savings/self-funding model offers many advantages to the
government including:

-   Reduction of initial capital costs

-   Leverage of limited funds

-   Contractor accountability and reduction of risk to the government

    Using the share-in-savings model allows the government to avoid the
    large up-front capital costs usually incurred when implementing a
    new system. Instead the vendor incurs most if not all of these
    costs. Consequently the government may reallocate the funds it would
    have used on the project to other valuable projects. In addition,
    this model increases accountability by ensuring the contractor's
    system or project will deliver or they will not get paid, greatly
    reducing the risk to the government.

### Obstacles 

Despite the advantages of the share-in-savings model, there are several
obstacles that must be overcome for the model to succeed including:

-   Agency buy-in

-   Control of the project

-   Support from private sector

    This method of contracting has only been used on a limited scale
    within the Federal government. Perhaps the most recognized use of
    this mechanism is the Department of Energy's Energy Management
    Program which used this method for funding energy efficiency
    contracts for buildings.[^21] In 1996 the Clinger-Cohen Act gave the
    Federal government the authority to use this mechanism, on a
    demonstration basis for IT projects. To date there have been no
    takers, however. There is some concern that agencies find it
    difficult to develop mechanisms to quantify the baseline savings or
    revenues. This issue must be dealt with before any agencies can
    proceed with this contracting and funding mechanism.

    Another important issue is the question of governmental control
    within this type of funding mechanism. If vendors are to be paid by
    the savings or revenue generated by the project they will want to
    pursue it under their own guidelines to ensure the largest reward
    possible. Moreover, once the system is developed there is some
    question as to how ownership will be determined. For example, when a
    contractor creates a portal for a state, who owns that portal? At
    what point does it become property of the state? If the state
    chooses not to extend its contract with the initial vendor how will
    the maintenance of the portal be transitioned to a new vendor? All
    of these questions must be answered before a project is undertaken
    in order to avoid lengthy and costly disputes.

In addition there are some questions as to how many private vendors are
able and willing to operate under such a contract. Small businesses
could be shut out of such contracts, as they are unlikely to have the
funds to cover up-front costs. This problem may have to be addressed
prior to a wide spread adoption of share-in-savings.

## Public-Private Partnerships

### Description

The public-private partnership model involves the development of a
non-profit entity that creates a forum by which the public and private
sides can meet essentially as peers. While individual firms do not form
partnerships with government agencies, a non-profit consortium
facilitates communication between the private and public sides of the
partnership. The role of the consortium is to identify and invite
private sector participants who exhibit a certain level of commitment to
the project. Their commitment is essential to make this project work. In
addition, the consortium serves as the project manager for projects. A
consortium may be formed for a single project, then disbanded following
project completion, or may remain for a longer term, assembling multiple
teams and addressing multiple pilot projects. The latter has significant
advantages because it retains hard-won institutional knowledge and
builds credibility by establishing a track record of successful
projects.

On the government side, the partnership may involve one or multiple
agencies. When more than one agency is involved, coordination between
the agencies is vitally important. A critical element for this side of
the partnership is the presence of top-level support for the proposed
project. This leadership is necessary in order to establish the
credibility that will help to bring together quality participants and
enable the government to deliver its portion of the project.

The non-profit entity is at the center of the project and manages the
agreements made by both the private and public participants. Multiple
options for funding of this type of partnership are possible, but
usually include funding and/or resource commitments from both sides. In
many cases, resources include people, hardware, and software, in
addition to dollars, and are often held and tracked by the non-profit
entity. Agreements may stipulate that systems and software developed are
deemed to be non-proprietary and can be used by all members of the
consortium.

### Case Study -- Catalog Interoperability Project 

The Catalog Interoperability Project is a partnership endeavor between
several Federal agencies and CommerceNet, a non-profit consortium of
private high-tech firms. This experience provides an excellent example
of a successful implementation of the public-private partnership model.
Private sector participants in CommerceNet include Lexmark, PartNet,
Saqqara, V-One, American Management Systems, Office Depot, Oracle,
PricewaterhouseCoopers, SAIC, and Digital Commerce Corp., among others.
These firms contribute technical expertise, personnel, and computer
hardware in support of the project. The project goal is to provide
user-transparent interoperability among numerous electronic catalogs
across an Internet interface.

The final product envisions Federal employees with purchasing authority
having the ability to search for and purchase items from multiple
electronic catalogs; owned by both government agencies and private
sector organizations, each developed to different standards. Phase I
succeeded in demonstrating that a single interface could be used to
query multiple, differently structured catalogs and present a coherent
result, regardless of the differences among catalog databases. This
ability allows individual agencies and vendors to structure their
catalogs to suit their differing needs, and at the same time to
participate in a common government-wide searchable catalog system. Phase
II, currently underway, will address scalability, payment processing,
and security issues. Phase II will involve more than \$600,000 in
private sector investment.

In this project GSA is taking the role of lead agency and partnering
with National Aeronautics and Space Administration (NASA), the
Department of Defense (DOD), and the Department of Commerce\'s National
Institute of Standards and Technology (NIST). Participating agencies
have provided funding, personnel, and computer hardware, as well as
access to their electronic catalogs, in support of Phase I of this pilot
project. Additional agencies, including Veteran's Administration (VA),
National Institutes of Health (NIH), and the Environmental Protection
Agency (EPA) have expressed interest in participating in Phase II.

### Critical Success Factors

Public-private partnerships require several factors including the
following:

-   Leadership by public-sector "Champion"

-   Top-level support

-   Participant commitment

-   Agency technological maturity

The leadership of a public agency "Champion," an individual usually
associated with the lead agency, is critical in attracting support from
both the public and private sides. The level of commitment that this
individual exhibits can be influential in establishing the credibility
of the project with the private firms, and in garnering support from
other interested agencies. Lack of this top-level leadership will lead
to increased coordination, accountability, and commitment difficulties
as the project progresses.

The selection of participants, from the public and private sectors, can
greatly influence the chances of project success. On the public side,
technological readiness to benefit from the project is a crucial factor,
as is compatibility of the expected final product with each agency's
mission. On the private side, the key factor is commitment to the
project. It is the role of the private-side consortium to evaluate firms
for suitability to the proposed project.

### Advantages

Advantages to using the public-private partnership model include:

-   Private side gains experience in working with government

-   Government gains private-sector expertise and support

The individual firms that form the private side of this partnership
model enjoy multiple benefits from this arrangement. These benefits
include increased exposure to and understanding of government processes,
enhanced visibility as a participant, and opportunities to demonstrate
their technological capabilities. Participation in the partnership may
also increase the likelihood of a firm's involvement in follow-on
projects.

The consortium of firms, as an independent entity, benefits through
credibility gained as an aggregator of talent and ideas. This standing
as an intermediary to the partnership can be leveraged to pursue further
projects. As the consortium builds credibility through initial
successes, private firms will increasingly desire to participate and
public agencies will come to view the consortium as a source of
innovation.

The public side of the partnership benefits from access to a wide range
of ideas and technologies not otherwise readily available. By partnering
with a consortium of private firms, the public agencies achieve broader
exposure to available technologies and are not tied to any individual
firm's methodologies, as would be the case if the project were conducted
under a contracting arrangement.

### Obstacles

The following obstacles should be considered in implementing the
public-private partnership model:

-   Multi-agency coordination

-   Cultural differences

The primary obstacle to this model is the difficulty in establishing
coordination among participating agencies such that all agencies are
adequately represented. Closely related to this obstacle is the need to
clearly appoint both a lead agency and a champion within that agency,
such that all participants agree on the leadership structure.

Differences in bureaucratic temperament and pace of change between the
public and private sides may be a source of friction. The hierarchical
nature of the Federal government does not facilitate flexible
decision-making sometimes creating slow commitment and slow delivery.
The private sector, especially the high technology companies, move at a
much faster pace. The consortium must play a critical role in balancing
out these differences.

## CIO Czar Model

### Description

The CIO Czar model represents an organizational, and perhaps cultural,
change through the creation of a new office, whose focus is a horizontal
view of IT development within government. This organization will serve
to coordinate resources for enterprise-wide IT projects within the
Federal government. This model would unify the design of agency
information systems reducing current interoperability problems and
allowing greater efficiencies of scale to be realized. The newly created
office would perhaps manage an appropriated fund to sponsor and
coordinate project management across various agencies and set
government-wide IT standards. An appointed CIO Czar would lead this
office and would work in partnership with the existing CIO council to
evaluate, select, and fund projects.

Support for the adoption of this model is spreading. In a report
released March 2000, the Democratic Leadership Council's Progressive
Policy Institute recommended the creation of a Federal government-wide
CIO Czar position report directly to the President.[^22] It further
recommends a \$500 million annual budget to fund cross-agency electronic
government projects, maintain oversight, and develop uniformity among
government IT programs. Senators Lieberman (CN) and Turner (TX) have
announced support for the idea and plan to submit legislation to create
the position.[^23]

A report published by the General Accounting Office also supports the
need for a CIO Czar.[^24] Their report summarizes the experiences of
three state governments and three private companies in establishing a
central CIO office and finds that the CIO position must be raised to
peer status with the highest levels of government management. Absent
this standing, CIO issues, including a coherent electronic government
policy, will not receive appropriate attention. Currently, many Federal
agencies do not include the CIO in the executive business
decision-making processes. David McClure, a GAO associate director
testified before the House subcommittee on Government Management,
Information and Technology that information management is still often
treated as a technical support function rather than a strategic
asset.[^25]

In contrast, states are taking a more progressive stand in this area. A
recent survey released in February 2000 by the National Association of
State Information Resource Executives found that CIOs are increasingly
having an elevated role in government with 27 now reporting directly to
their governors, up from eight in 1996.[^26]

### Case Study -Y2K 

The Y2K Czar was commonly described as the reason behind the success of
the Federal government's readiness and response efforts coordinated
prior to the arrival of January 1, 2000. With the impeding approach of
Y2K and its unknown effects on government-wide IT systems, Y2K Czar,
John Kotzen was appointed to coordinate the needed programming within
all agencies. In this arrangement the Czar had only a limited budget and
no mandate authority over agencies, but rather coached and developed
efficient ways of sharing information across agencies. The Czar had the
convening ability to bring to the table members of both the public and
private sectors to address this IT issue, a feat that was unprecedented.

### Critical Success Factors 

There are several factors, must accompany the CIO Czar model including:

-   Strong leadership and credibility

-   Sense of crisis

-   Top-level support

Presence of a "Czar" or a strong leader with a vision is the key to
successful implementation of this strategy. The Czar would act as a
facilitator between various agencies, centralize project management,
have high visibility, must have a sense of the overall picture across
agencies and should aim for long term improvements of the systems.

Further, the heightened urgency to solve the Y2K bug brought about
cooperation that is rarely seen in the IT community. A similar sense of
urgency is needed to prioritize electronic commerce projects. At
present, building up an IT infrastructure seems to have a higher
priority in the government than electronic commerce. This model is
replicable to electronic commerce projects, however, provided there is a
high level support.

### Advantages

The advantages of the CIO Czar Model include:

-   Strong leadership

-   Coherent planning of complex projects

-   Creation of a format for uniform standard setting

The primary advantage of this funding model is that it provides
leadership for projects that are government-wide. In addition, this
model allows for centralized planning and coordination of potentially
complex IT projects. Projects that involve either a single agency or
multiple agencies require greater levels of project management and
decision making that can create deadlocks without leadership. This
strength of leadership provides an overall sense of direction and \"big
picture planning\" ability that is lacking in other models.

Currently, each of the Federal agencies function autonomously and has
selected its own architecture and platforms from which to operate its IT
activities. The placement of a CIO Czar, having the authority to set
standards, would have positive effects. An agreed upon architecture
would eliminate the interoperability problems which can be a costly
stumbling block to surmount in developing electronic commerce projects.

### Obstacles 

Potential obstacles to implementation include:

-   Appropriate selection of the Czar

-   Facilitating agreement of priorities

-   Current culture within the Federal government

The primary obstacle to this model is the appropriate selection for the
Czar. This position is vital to the agency infrastructure and ultimately
the electronic delivery of government services. The selected individual
must have the appropriate mix of technical ability and political savvy
to manage the competing demands of citizens, private industry, political
appointees, civil servants and elected officials. Next they must also
facilitate the development of standards and priorities and have the
fortitude to hold agencies accountable. For this model to work, the Czar
must also have the trust of all participants and must be capable of
making difficult decisions between competing project proposals.

The Czar will have to battle heavily against the status quo. Agencies
which have long operated independently in developing IT solutions will
be unlikely to support what they will view as another oversight entity.
Similarly, the structures of Congress and OMB that have supported "stove
piping" may balk against the idea, insisting that this office infringes
upon the missions of agencies. Lastly, because other Czar models have
been implemented without the appropriate funding and authority, a newly
appointed Czar may feel powerless and saddled with a monumental task.

## Hybrid Approach

### Description 

Any of the strategies described above can be merged to create a hybrid
approach where funding from multiple sources is provided for a specific
project. Although a number of opportunities exist, the hybrid model is
probably most likely to be used successfully if its component strategies
are used to fund the individual phases of a project. For example, an
agency may receive funding for a project's pilot phase from an
innovation fund, use capital funding to implement the full-scale system,
and maintain the system with funds received from the general budget
appropriation process.

### Case Study -- In-Q-Tel[^27] 

Recognizing that it was no longer at the cutting edge of technology, the
Central Intelligence Agency (CIA) was appropriated funds by Congress to
establish a private, nonprofit corporation, In-Q-Tel. Operating like a
venture capital fund, In-Q-Tel is somewhat of a variation on an
innovation fund. In-Q-Tel's mission is to invest in high-tech start-up
companies that will develop technology to benefit the CIA's operations.
It is intended to help the CIA regain its status as the leader in
technology and help it find answers to its technology problems.
Eventually In-Q-Tel will become self-funded (like the Self-Funding
Public-Private Partnership Model described above) as its assets
appreciate. In total, this particular hybrid strategy uses three of the
models identified previously: budget appropriation, innovation fund, and
the self-funding public-private partnership models.

### Critical Success Factors 

Factors critical to the success of the hybrid funding model will include
the critical success factors identified for each component model when
used on its own. In addition, the hybrid model must have:

-   Strong management

-   Clearly identified project segments

    A strong manager is required to oversee and administer the various
    sources of funding effectively. Having multiple sources of funding
    complicates the project even further requiring diligent oversight.
    Moreover, the project must have clearly identified segments so that
    funding can be allocated to a specific portion of the project easily
    and managed appropriately.

### Advantages

The advantage to a hybrid approach is that the project is not entirely
dependent on one source of funding. Although the elimination of one
element may disable the project entirely, it is also possible that if
one funding stream was no longer available, the other models used could
be leveraged to make up for the lost funding. In most cases, the
advantages offered by the individual models themselves would also apply
to the hybrid approach.

### Obstacles 

The hybrid funding mechanism would include most if not all of the
obstacles of the individual funding mechanisms that compose it. It may
also be difficult to gain approval for such a unique and potentially
complex approach. Certainly a project with several different funding
mechanisms would also be far more complex to manage.

# Evaluation of Funding Strategies

This chapter evaluates the funding strategies identified above and
provides recommendations for their implementation. Although each
strategy offers a viable option for funding technology projects, it may
not be the right choice for all situations. The success or failure of a
particular funding strategy will depend upon a number of factors
including:

-   Agency Technology Maturity

-   Stage of Project Lifecycle

-   Degree of Required Inter-Organizational Collaboration

Undoubtedly, many other issues will impact how well a particular funding
strategy will work; however, the factors specifically noted here are
certainly three of the most critical areas that must be considered when
choosing one funding strategy over another. Therefore, this report
evaluates the usefulness of each of the funding strategies in terms of
these three factors. Specifically, it considers which funding strategies
will work best under various levels of technology maturity, different
stages of the project lifecycle, and varying degrees of collaboration
among organizations.

## Agency Technological Maturity 

The maturity level of an agency's technological infrastructure will
significantly influence the effectiveness of a particular funding
strategy. For example, an agency with limited technological capabilities
may have a difficult time finding a private sector company to implement
an electronic commerce project under the self-funding public-private
partnership model. It is unlikely that any private company will want to
take such a risk with an organization that does not yet have the proper
infrastructure to support electronic commerce.

The technological maturity of Federal government agencies varies
significantly. Although some agencies are highly advanced, others do not
have the infrastructure required to support electronic commerce.
According to a study from the Progressive Policy Institute, some State
Department employees work with as many as three computer systems at once
because of interoperability problems.[^28] Other agencies are still
managing issues of multiple incompatible e-mail systems, making internal
electronic communication almost impossible.[^29] In this report,
agencies are considered to fall into three broad categories of
technological maturity, as shown below:

Segmenting agencies by their utilization of technology would be a large
and arduous process and is outside of the scope of this project. Broad
classifications are used in an effort to organize an agency's level of
technological maturity. Using these definitions, agencies can be roughly
classified in three ways:

-   **Weak Infrastructure.** Various and incompatible e-mail systems;
    full or partial access by a limited number of employees to the
    Internet and Intranets; generally have static Web-sites for the
    agency with no utilization of Web-based transactions

-   **Emerging Technologies.** Internally unified e-mail systems; full
    or partial access by most employees to the Internet and Intranets;
    generally have static/informational Web-sites for the agency;
    limited involvement with Web-based transactions within the agency,
    primarily for external patrons

-   **Innovative and Cutting-Edge Technologies.** Internally unified
    e-mail systems; complete access by all employees to the Internet and
    Intranets; actively involved in Web-based transactions throughout
    the agency for many internal and external relationships

Recommendations for funding strategies based on various levels of
technology maturity are provided below.

###  Weak Infrastructure 

Agencies in this category are likely to focus most of their technology
efforts on developing the infrastructure needed to support electronic
commerce. They will not be spearheading multi-agency initiatives or
strategic systems projects because they do not have the building blocks
in place to do so. Thus the most successful funding mechanisms will be
those that require the least multi-organizational collaboration and a
stable source of funds with which to complete their technology projects.
While many of the funding models identified may be used to fund
technology infrastructure projects, an agency should look for strategies
that can provide a significant infusion of investment including:

-   Budget Appropriation

-   Working Capital Funds

These funding strategies require limited multi-organization
coordination, if any at all, and provide a discrete source of funding.
As a result, they work well for projects that have a clearly defined
scope and focus, such as single-agency infrastructure projects.

Although the budget appropriation process is lengthy, it allows an
agency to easily allocate funding for a specific project from its
general appropriation. Since budget appropriation is the mechanism used
to fund most government services, it is the most direct and accessible
method of funding a project.

The advantage of using working capital funds to agencies that are just
building their technological capacity lies in the ability to bridge
funds across fiscal year boundaries. Thus, this approach can provide for
a more even flow of funding for the volatile early stages of IT projects
which often take more than one year to complete. Since the budget
appropriation process does not permit agencies to easily budget for
multiple years, the working capital funds model can be a sound
alternative.

###  Emerging Technologies 

Agencies in this category have established the basic technical
infrastructure needed to begin exploring e-commerce opportunities. At
this point, they are positioned to look at other agencies to learn from
their projects, and perhaps to partner with them on larger scale
projects. These agencies will undertake more innovative projects that
may benefit multiple agencies. The projects will be on a much smaller
scale than those undertaken by agencies with cutting-edge technologies
already in place, however. Again, while many funding models might well
apply, the most applicable funding strategies for agencies in this
category will be:

-   Innovation Fund

-   Capital Funding Model

Both the innovation fund and the capital funding model will provide the
opportunity to fund projects spanning several agencies. The innovation
fund will typically support projects that are more strategic and forward
thinking than basic infrastructure projects. As a result, this model
would work best for agencies at the emerging technologies level that are
trying to advance their technology further. The capital funding model
offers a similar opportunity. Under this model funding is allocated from
a central agency looking for projects that benefit multiple agencies and
fulfill the government-wide IT vision. Thus, it is best suited for
advanced but relatively conservative projects that span multiple
agencies.

###  Innovative and Cutting Edge 

Agencies with cutting edge technology are best positioned to lead and
assist other agencies at lower levels of technology maturity. They are
also prepared to take on more strategic projects that may reinvent
traditional operations. While they may use many different funding
mechanisms, those that are most appropriate include:

-   Share-in-Savings/Self-Funding Model

```{=html}
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```
-   Public-Private Partnership Model

-   Hybrid Approach

Agencies with a relatively high degree of technological maturity are
well positioned to partner with private sector organizations on larger,
more strategic systems projects either using the share-in-savings model
or the public-private partnership model. Such agencies will be able to
quickly capitalize on the state-of-the-art systems that the private
sector can bring to the project. The more strategic the nature of the
projects, the more likely they will result in savings or new revenue
streams necessary for the share-in-savings/self-funding public-private
partnership model to work. In addition, these agencies are more likely
to find a private partner willing to share the risk of the project with
them.

Because of their technological maturity these agencies may be best
suited to employ the hybrid approach as well. This model is complex in
nature and would require an agency with experience in implementing
technology projects successfully.

## Stage in Project Lifecycle 

###  Pilot Projects Production Stage

Electronic commerce projects are often tested in a pilot phase before
full-scale design and production begins. Pilot phases are simply
small-scale productions of the project and are used to better determine
the feasibility and potential benefits of a full-scale production. If
the pilot phase is deemed successful, the project may be adopted and the
production phase is initiated. The funding structure for these separate
stages is very different, however.

### Pilot Project 

Pilots require a one-time initial investment, smaller than the
full-scale project. Because this investment is less than and more
discrete than funding for the production phase, funding strategies most
suitable for pilots are:

-   Budget Appropriation

-   Innovation Fund

-   Capital Funding

-   Public Private Partnerships

These strategies work well for pilot projects because they provide a
discrete, although limited, source of funds. Since pilot projects are
usually shorter in duration, however, these funds offer a viable option.

Innovation funds are typically established to provide funding for pilot
projects to promote the trial and testing of new ideas. Capital funding
could also be used to support pilot projects. Both models offer a
significant source of funding. However, since they do not necessarily
have continuous revenue streams to replenish the fund, they are not
ordinarily intended to support the ongoing expenses that would be
incurred during the production phase. Thus, they are best suited for
pilot projects.

The Public-Private partnership may also offer an opportunity for a
private company to provide up-front funding on a pilot project for the
public sector. If that project is successful, the public sector
organization can then enter the production phase with the vendor using
alternative funding models.

### Production Stage 

The production stage not only includes development of the full-scale
system but also the maintenance of the system. Consequently, a stable,
continuous source of funding is required to pay the maintenance
expenses, as well as any unexpected costs incurred in the development of
the system. Although other strategies may work, the following funding
strategies will likely work best for these types of projects:

-   Rebate Funds

-   Fee for Service/Franchising Model

-   Share-in-Savings/Self-Funding Model

Each of these funding strategies offers some opportunity for initial as
well as on-going funding for the project. Rebate funds provide
continuous revenue streams for technology projects assuming the agency
or agencies continue to use the mechanism that provides the rebates.
Under the fee for service/franchising model, revenue is received as long
as the agency continues to provide services for the fees. The
self-funding model requires up-front investment from the private sector
partner, but little or no investment from the public sector. The fees
generated from the project provide ongoing funding for the project for
maintenance and vendor payment.

## Degree of Required Inter-Organizational Collaboration

The funding strategy selected for a project will also determine the
level of coordination among government agencies and/or private sector
partners. This report categorizes the ten funding strategies identified
in the previous chapter along a continuum from the least coordination
required to the most coordination required as shown below.

![](media/image2.wmf){width="4.799305555555556in"
height="3.6840277777777777in"}

### Least Required Degree of Inter-Organizational Collaboration 

At the far left of the continuum lie funding strategies that require
little collaboration among multiple organizations to generate funding
including:

-   Budget Appropriation

-   Working Capital Fund

Both the budget appropriation model and the working capital model
require little if any collaboration among agencies on a particular
project. A single agency may request funding for a project directly from
Congress through its agency budget appropriation. It does not have to
involve any other agencies or private sector organizations for funding.
The working capital model allows an agency to allocate funding to a
specific fund for its own purposes. No other organization has to provide
funding or be involved with the project. This strategy is appropriate
for agencies requiring funds for intra-agency IT projects, such as the
EPA and DOE examples cited, in which the beneficiaries of the funded IT
project are all within the sponsoring agency.

### Most Required Degree of Inter-Organizational Collaboration 

At the far right of the continuum lie funding strategies that require
some coordination with either other government agencies or private
sector organizations including:

-   Rebate Funds

-   Capital Funding

-   Share-in-Savings/Self-Funding Model

-   Public-Private Partnership Model

-   CIO Czar Model

    Rebate funds require some coordination with the private sector
    vendor providing the rebates. They may or may not require
    inter-agency collaboration, however, depending on the structure of
    the rebates and the nature of the projects funded. For example, if
    one central agency collects all rebates generated, then individual
    agencies will have to request the funds for specific projects from
    this central unit. If the rebates are instead returned to the
    individual agencies generating the rebates, multi-agency
    coordination required.

    In general, the capital funding model requires one agency or entity
    to oversee and manage the funds generated from the bond issuance.
    This entity then designates the funds to specific projects as
    appropriate. Normally this agency ensures that all technology
    projects undertaken fit within its strategic vision. This agency
    also facilitates collaboration among agencies with similar project
    goals. These projects may be completed by one agency or by many
    agencies in collaboration. In either case, the agency must at least
    work with this oversight body to obtain funding for a specific
    project. The CIO Czar model provides a similar structure in that it
    requires an agency or a group of agencies to seek funding from a
    centralized body that controls funds set-aside for IT projects.
    Under the share-in-savings/self-funding model and the public-private
    partnership model, an agency must work with a private sector partner
    to secure funding.

At the center of the continuum lie strategies that require a lesser
degree of collaboration including:

-   Innovation Fund

-   Fee for Service/Franchising Model

An innovation fund is similar to the capital funding model in that it
requires an agency to apply to the oversight board of the fund. The
oversight board does not necessarily facilitate collaboration among
agencies or develop one vision for the technological infrastructure of
the government. Instead it typically evaluates projects based upon their
individual merits. Therefore, it requires only minimal collaboration.

The fee for service/franchising model also requires some collaboration
among agencies. An agency that provides a service must work with other
agencies to sell the service and then to ensure that it meets the needs
of the agency being served. There is little need for extensive
collaboration beyond that, however.

Finally, the hybrid approach falls across the entire range of the
continuum depending on the combination of funding strategies chosen.

The three dimensions, as outlined above, together form a structure with
which funding strategies can be analyzed. The appropriateness of any
particular strategy, under a given set of conditions, can thus be
evaluated and compared to other available strategies.

# ![](media/image3.wmf){width="5.0in" height="4.513888888888889in"}  {#section .unnumbered}

# Recommendations

To a large extent, the approaches discussed in this report represent
successful attempts to 'work-around' a process that does not adequately
address funding for these types of high-paced, high-risk projects. This
has particularly been the case when more than one agency is involved.

The evaluation presented in the previous chapter describes, along
several practical dimensions, how these existing funding strategies can
best be applied under various circumstances. However, despite the
usefulness of such guidelines, the underlying funding process remains an
obstacle, rather than an aid, in the pursuit of a rational procedure for
funding multi-agency or government-wide IT projects. Federal government
IT and e-commerce projects, with some notable exceptions, are designed,
funded and implemented by individual agencies, with little or no
inter-agency coordination. With few incentives for agencies to work
together, and numerous funding structures that keep them apart, it is no
wonder that the current variety of strategies has evolved.

In addition, the fundamental ability of agencies to undertake electronic
commerce initiatives varies widely. These differences derive from the
agencies' level of technological maturity. While some agencies are at a
quite advanced level, and thus able to undertake complex, advanced
projects, others are still grappling with basic infrastructure issues.
In order to gain the maximum benefit from investment in technology
programs, it is imperative that all Federal agencies be quickly brought
to a common, advanced level of technological readiness. As long as
individual agencies continue to pursue a divergent set of IT
architectures, under widely varying levels of technological maturity,
through a 'work-around' set of funding strategies, the goal of
implementing a unified government-wide IT policy structure, or
presenting 'the one face of government' using electronic commerce, will
not be realized.

Thus, the goal moving forward is three-fold:

1.  All agencies must quickly be brought to a common, high level of
    > infrastructure maturity so that all stand to benefit from, and
    > contribute to, commonly developed systems.

2.  Priority must be given to evaluating the many existing agency
    > projects that have been developed through a successful pilot
    > phase, and identifying those with the greatest promise of
    > providing multi-agency benefits, for production-stage funding.

3.  Continued priority must be placed on evaluating emerging
    > technologies and processes for their potential government-wide
    > benefits, and targeted funding of the most promising of these in
    > the form of pilot projects.

> In order to accomplish these goals, the Federal government must design
> a process which is able to :

-   Identify current best practices among agencies and encourage their
    broader use

-   Encourage and reward agencies for recognizing the common elements
    that their IT and e-commerce objectives share with other agencies'
    plans

-   Provide overarching decision making support, taking into
    consideration the technical and funding requirements of all agencies

As noted elsewhere in this report, several investigators have recently
argued in favor of the establishment of a 'National CIO' position, with
oversight responsibility and funding authority, for government-wide IT
programs. However, an independent National CIO, along the lines of the
'Y2K Czar', cannot alone achieve the necessary progress. An advisory
panel, one which makes both technical and funding recommendations to
this CIO, is an essential part of any future system. A primary
consideration in envisioning the structure of such a panel is that of
political independence. Some independence from the usual political
cycles would be desirable in order for the panel to concentrate on
strategic and technical issues. However, a panel too far removed from
the political realities might be ignored by important stakeholders, and
thus rendered ineffective.

There are several existing panels that provide examples of how such a
National CIO and its associated advisory board could be structured. The
Federal Reserve Board, with national representation and a strong chair
position, has brought credibility, accountability and increased
stability to U.S. financial systems. While probably not ideally suited
to the CIO Board concept, the Federal Reserve Board structure has the
qualities of independence, authority and accountability that are
desirable in this new structure. Similarly, a National CIO Board, headed
by a Chair- or Chief-CIO, has the potential, through its own authority
and credibility, to bring focus and discipline to the government's
implementation of fast changing IT and electronic commerce technologies.
By making the Chair of this CIO Board an appointed position, with
congressional approval and a six-year term, the political struggles
associated with multi-agency coordination should be greatly reduced. To
further isolate the operations of this Board from day-to-day political
consideration, its existence might initially be limited to twelve years,
or two six-year leadership terms, after which time the continued
necessity of such a board should be re-evaluated.

The existing CIO Council provides perhaps the best model from which this
National CIO Board could be constructed. By reducing the number of
members of this panel, and electing or appointing a chairperson from
among the membership, the CIO Council could quickly be transformed into
the desired decision making body. The reduction in number of seats on
the panel to perhaps twelve, made up of both permanent and rotating
seats, is necessary in order to minimize deliberation time-lags and the
risk of factions developing. Larger agencies would retain perhaps half
to two-thirds of the permanent seats, while smaller agencies would
achieve representation through rotating membership. This model has the
potential to achieve both the independence and the authority necessary
to be successful.

A third model envisions the National CIO position as a Cabinet level
office, with the Cabinet member's staff acting as the board of advisors.
While this structure would provide significant visibility and authority
to the role, it lacks independence from political pressures. This
approach also risks giving the appearance of increasing government's
bureaucracy, rather than its efficiency.

Regardless of the eventual structure, the National CIO position must be
supported with the funding and decision-making authority to develop and
implement government-wide IT policies. Without these elements, the
structure would become simply an advisory body likely to be averted as
agencies continue to pursue their own individual strategies for
technology. Funding mechanisms used for this model could include one or
more of the strategies evaluated in the previous chapter. New funding
approaches may also be developed as a result of this coordination model.

In addition, in order to achieve the maximum advantage from this
Chief-CIO role, candidates for this position should be drawn from both
inside and outside of the government. Members of the advisory board, or
other government agency CIOs, would be obvious candidates for the Chair
position, and would be likely to bring valuable insider knowledge and
insights that come with government experience. However, the commercial
technology industry, although it changes rapidly and unpredictably, has
produced a number of visionaries who could serve the nation as a whole
if appointed to this position.

The greatest benefit of this more rational, disciplined approach will
accrue to the citizens who interact with government every day. There is
potential for significant financial savings in reducing the redundancy
inherent in the current way of doing business, as well as for increased
efficiencies in delivery of services to the citizens whom it is the
government's mission to serve.

# Conclusion 

Recent and ongoing innovations in communications and other technologies
have permanently changed the way businesses and governments operate.
There is no longer a debate over whether or not government should go
"digital." The question now is*: How can government harness these
emerging technologies?* The government faces a unique opportunity to
fundamentally redesign the way it delivers services to citizens. By
seizing this opportunity, government can greatly improve efficiency and
convenience in the delivery of information and services, and, perhaps
more importantly, it can dramatically improve the public's perception of
government.

To date, advances in the Federal government's technology have largely
been fragmented, with individual agencies having no systematic
motivation to work together. The government's traditional funding
mechanisms have proven inadequate to support a coherent IT policy,
forcing agencies to develop innovative techniques to circumvent existing
processes. In most cases, agencies have sought to apply new technologies
individually, with little effort given to multi-agency collaboration.
This funding atmosphere has resulted in a divergent process, producing a
maze of different systems throughout the government that offer varying
levels of service and little interoperability.

This fragmented process of funding and coordinating IT projects cannot
continue if the government is to succeed in leveraging new technologies
to transform the way it does business. Although the funding strategies
used in the past may be serviceable if implemented under the right
circumstances, they must be applied within a unified vision of IT for
the Federal government as a whole. Only a centralized, broadly
responsible and accountable decision making board, one that considers
the technical and funding requirements of all agencies, can provide the
necessary leadership and vision to bring convergence to the government's
IT programs and successfully address the current opportunities.

### 

> **[Current Status]{.underline} [The Goal ]{.underline}**

-   Uneven Infrastructure  Common Infrastructure

-   Fragmented Projects  Unified Oversight & Direction

-   Stove-piped Processes  Incentives for Collaboration

-   Redundancies & Waste  Leveraging Common Interests & Abilities

-   Work-around funding strategies  Unified Funding Processes

-   Different Faces  One Common Face

# Appendix A -- Interviews 

**Angeloni, Louis**. Chief Financial Officer. Executive Office of
Administration and Finance, Information Technology Division.
Commonwealth of Massachusetts. Personal Interview conducted by Alison
Otis on March 22, 2000.

**Balutis, Alan**. Deputy Chief Information Officer. U.S. Department of
Commerce. Personal Interview conducted by Tira Robinson and Siddharth
Shah on March 30, 2000.

**Bradford, Harry.** Director. Division of Payment Management, U.S.
Department of Health and Human Services. Personal Interview conducted by
Tira Robinson on March 21, 2000.

**Erwin, F. Deane.** Program Manager. Dimensions International, Inc.,
Electronic Commerce Resource Center. Personal Interview conducted by
Amit Chandok and Erich Parker on April 20, 2000.

**Femino, Mickey.** Director. Office of Smart Card Initiatives,
Information Technology Integration, Federal Technology Services. U.S.
General Services Administration. Personal Interview conducted by Kristi
Miller and Erich Parker on March 9, 2000, with Nancy Potter in
observation.

**Glaser, Gerry.** National Science Foundation. Telephone Interview
conducted by Erich Parker on April 20, 2000.

**Grant, Paul D**. Office of the Department of Defense Chief Information
Officer. Personal Interview conducted by Amit Chandok and Kristi Miller
on April 26, 2000, with Ken Glasser, DOD Analyst, in observation.

**Grove, Jeffrey H**. Staff Director. Committee on Science, Subcommittee
on Technology. U.S. House of Representatives. Personal Interview
conducted by Kristi Miller and Alison Otis on April 19, 2000, with
Matthew Ryan in attendance.

**Guttman, Barbara**. Information Technology Laboratory, National
Institute of Standards and Technology. Personal Interview conducted by
Kristi Miller and Alison Otis on February 28, 2000.

**Jaeger, Diana L.** Director. Office of Policy for Extramural Research
Administration, National Institutes of Health. Personal Interview
conducted by Kristi Miller and Alison Otis on April 17, 2000.

**Kappleman, Leon**. College of Business Administration, University of
North Texas. Telephone Interview conducted by project team on April 11,
2000.

**Kelly, Jack**. Office of Management and Budget. Personal Interview
conducted by Kristi Miller and Siddharth Shah on March 27, 2000, with
Nancy Potter in attendance.

**Kelly, Ron.** Executive Director. Regulatory Information Service
Center, U.S. General Services Administration. Personal Interview
conducted by Alison Otis and Siddharth Shah on March 10, 2000.

**Keohane, Ron**. Senior Advisor. Electronic Commerce Working Group,
Office of the Vice President. Personal Interview conducted by Amit
Chandok and Alison Otis on March 10, 2000.

**Kimmel-Frantz, Joan**. Personal Interview conducted by Amit Chandok
and Erich Parker on April 13, 2000, with Charles Nethaway in attendance.

**LaPierre, Kara**. National Information Consortium. Telephone Interview
conducted by Alison Otis and Tira Robinson on March 8, 2000.

**Lenoir, Brandon**. National Electronic Commerce Coordinating Council.
Telephone Interview conducted by Alison Otis on April 5, 2000.

**Lesher, R. Schuyler.** Director. Office of Financial Management,
Deputy Chief Financial Officer. Office of the Secretary, U.S. Department
of the Interior. Personal Interview conducted by Kristi Miller and Erich
Parker on March 9, 2000.

**Nethaway, Charles D**. Deputy Director. National Business Center, U.S.
Department of the Interior. Personal Interview conducted by Amit Chandok
and Erich Parker on April 13, 2000, with Joan Kimmel-Franz in
attendance.

**Pauli, Jim.** Personal Interview conducted by project team on April
25, 2000.

**Parsons, Ron**. CommerceNet. Telephone Interview conducted by Amit
Chandok and Siddharth Shah on April 14, 2000.

**Phillips. Elizabeth**. U.S. Department of Health and Human Services.
Personal Interview conducted by Tira Robinson and Siddharth Shah on
March 13, 2000.

**Potter, Nancy**. U.S. General Services Administration. Personal
Interview conducted by Kristi Miller and Erich Parker on March 9, 2000,
with Mickey Femino in attendance.

**Potter, Nancy.** U.S. General Services Administration. Personal
Interview conducted by Kristi Miller and Siddharth Shah on March 27,
2000 with Jack Kelly in attendance.

**Ryan, Matthew D.**, Senior Policy Director. Committee on Government
Reform, U.S. House of Representatives. Personal Interview conducted by
Kristi Miller and Alison Otis on April 19, 2000, with Jeffrey Grove in
attendance.

**Shaw, Dennis**. Patent and Trade Office, U.S. Department of Commerce.
Personal Interview conducted by Kristi Miller and Erich Parker on March
10, 2000.

**Sindelar, John.** Chief of Staff, Office of Government-Wide Policy.
U.S. General Services Administration. Personal Interview conducted by
Tira Robinson and Siddharth Shah on March 30, 2000.

**Slocum, Patricia D.** Senior Evaluator. Accounting and Information
Management Division, U.S. General Accounting Office. Personal Interview
conducted by Kristi Miller and Tira Robinson on March 10, 2000.

**Stack, Thomas**. Maximus. Personal Interview conducted by Kristi
Miller and Tira Robinson on April 3, 2000.

**Stepka, Ken.** National Aeronautics and Space Administration. Personal
Interview conducted by Amit Chandok and Kristi Miller on February 28,
2000.

**Sturm, Robert**. Vice President, Business Development. National
Information Consortium. eFed Inc. Personal Interview conducted by Amit
Chandok and Kristi Miller on April 26, 2000.

**Williams, J.D.** State Controller of Idaho. Telephone Interview
conducted by project team on April 18, 2000.

# Appendix B -- References

## Other Suggested Readings 

Acquisition Solutions, Inc, "Share In Savings Acquisition: Acquisition
Working Paper", Chantilly, VA, April 1999.

Atkinson, Robert and Jacob Ulevich, [Digital Government: The Next Step
to Reengineering the Federal Government,]{.underline} Progressive Policy
Institute, Technology and New Economy Project, Washington, DC, March
2000.

Breslau, Karen, "Snooping Around the Valley: The CIA sets up a High-Tech
Investment Fund" [Newsweek,]{.underline} April 10, 2000.

Clinton, William J, "Narrowing the Digital Divide: Creating
Opportunities for All Americans in the Information Age", Internal
Memorandum, Office of the Press Secretary, White House, Washington, DC,
December 9, 1999.

Clinton, William J., "Electronic Government", Internal Memorandum,
Office of the Press Secretary, White House, Washington, DC, December 17,
1999.

Clinton, William J., "Use of Information Technology to Improve Our
Society", Internal Memorandum, Office of the Press Secretary, White
House, Washington, DC, December 17, 1999.

Frank, Diane, "Building a Blueprint for Agency CIOS" [Federal Computer
Week,]{.underline} Washington, DC, April 3, 2000.

Haubold, Natasha, "Purchase Card Fees Pinch Vendor Profits" [Federal
Computer Week,]{.underline} Washington, DC, March 27, 2000.

O'hara, Colleen and Diane Frank, "CIO Czar Concept Gains Momentum"
[Federal Computer Week,]{.underline} Washington, DC, March 27, 2000.

Thibodeau, Patrick, "GAO: Federal CIOs Need More Power"
[Computerworld]{.underline}, Washington, DC, April 27, 2000.

US Department of Commerce, "Commerce Secretary Daley Calls For Public
Comments on Ways to Facilitate the Growth of Electronic Commerce",
Washington, DC, Press Release, February 1, 2000.

US Department of Health and Human Services, Program Support Center,
Financial Management Center, Division of Payments Management, [Quick
Draw]{.underline}, Newsletter, Rockville, MD, April 1999.

US Government Working Group on Electronic Commerce, 2nd Annual Report
(1999), "Towards Digital eQuality", Washington, DC, www.ecommerce.gov.

## Endnotes

[^1]: Jack Kelly, Draft memo, "Funding Government-wide Management
    Activities," December 1999: 4.

[^2]: Office of Electronic Commerce, General Services Administration,
    Consulting Project Proposal. January 2000: 1.

[^3]: National Library for Environment, 27 April 2000
    \<[http://www.cnie.org](http://www.cnie.org/)/nle\>.

[^4]: Budget Analyst, 28 April 2000
    \<[http://www.budgetanalyst.com](http://www.budgetanalyst.com/)\>.

[^5]: Robert Atkinson and Jacob Ulevich, [Digital Government: The Next
    Step to Reengineering the Federal Government]{.underline},
    (Washington: Progressive Policy Institute, Technology & New Economy
    Project, March 2000) 5.

[^6]: Environmental Protection Agency, 27 April 2000
    \<http://www.epa.gov.html\>.

[^7]: Department of Energy, 27 April 2000
    \<[http://www.doe.gov.html](http://www.doe.gov.html/)\>.

[^8]: U.S. Department of Agriculture, 27 April 2000
    \<[http://www.usda.gov.html](http://www.doe.gov.html/)\>.

[^9]: Government Information Technology Services, "IT Fund Background"
    27 April 2000 \<http://www.gits.gov\>.

[^10]: Government Information Technology Services, "IT Fund Background"
    27 April 2000 \<http://www.gits.gov\>.

[^11]: National Performance Review, "Improving Financial Management,
    Adopt Good Business Practices: 'Franchise' Internal Services" 21
    April 2000 http://www.npr.gov/library/reports/fmo6.html\>.

[^12]: Division of Payment Management, DHHS. Personal interview. 21
    March 2000.

[^13]: Department of Health and Human Services, Program Support Center,
    Financial Management Center, DPM, [Quick Draw]{.underline},
    (Washington: Department of Health and Human Services, April 1999)
    1-6.

[^14]: National Performance Review, "Improving Financial Management" 21
    April 2000.

[^15]: National Performance Review, "Improving Financial Management" 21
    April 2000.

[^16]: Natasha Haubold, "Purchase card fees pinch vendor profits,"
    [Federal Computer Week]{.underline}, (March 27, 2000) 42.

[^17]: Executive Office of Administration and Finance, Information
    Technology Division, Commonwealth of Massachusetts. Personal
    interview. 22 March 2000.

[^18]: National Information Consortium. Personal interview. 8 March
    2000.

[^19]: Acquisition Solutions, Inc., [Acquisition Working Paper:
    Share-In-Savings Acquisition]{.underline}, (Chantilly, Virginia:
    Acquisition Solutions Inc., April 1999) 55.

[^20]: Acquisition Solutions, Inc. 17.

[^21]: Acquisition Solutions, Inc. 11.

[^22]: Colleen O'Hara and Diane Frank, "CIO Czar Concept Gains
    Momentum,\" [Federal Computer Week]{.underline}, 27 March 2000: 15.

[^23]: Diane Frank, "Building a Blueprint for Agency CIOS," [Federal
    Computer Week]{.underline} 3 April 2000: 25.

[^24]: Frank, 25.

[^25]: Patrick Thibodeau, "GAO: Federal CIOs Need More Power,"
    [Computerworld]{.underline} (March 24 2000). 27 April 2000
    \<[http://www.computerworld.com](http://www.computerworld.com/)\>.

[^26]: Thibodeau, 27 April 2000.

[^27]: Karen Breslau, "Snooping Around the Valley: The CIA sets up a
    high-tech investment fund," [Newsweek]{.underline} 10 April 2000:
    45.

[^28]: Atkinson and Ulevich, 3-4.

[^29]: U.S. General Accounting Office. Personal interview. 10 March
    2000.