Governments struggle with e-gov savings

In Tennessee, millions of dollars are available, without legislative approval,

to state agencies that can prove that an information technology project

will recoup all costs in five years.

But the same is not true for e-government applications — although they

clearly fit into the umbrella of IT projects. E-government projects are

being planned and implemented without the same extensive cost analysis simply

because no one is sure how to do it.

Government officials nationwide are pushing e-government projects,

assuming that by eliminating paper and redundant administrative work, money

will be saved. Just don't ask them how much. Despite the proliferation of

dot-coms pandering to government interests, the industry is still too new

to predict concrete cost savings.

"We're just getting into it," said Bradley Dugger, Tennessee's chief

information officer. "I think what we have to do is figure out online traffic.

No one really knows — at least I haven't met anyone — how many people are

going online to e-government."

In some cases, such cost estimates may be the difference between a project

that goes the distance and one that dies on paper.

When Riverside County, Calif., wanted to put property tax payments online,

cost savings were an important concern. EzGov.com promised to set up an

end-to-end payment system for no money down and no yearly maintenance fees

because the company had just started up. Typically, there would be a $12,000

installation fee, plus $20,000 annually.

Riverside would pay only a $3 "convenience fee" per transaction. The

county decided to pick up the fees instead of passing them onto the customer,

said Deputy Treasurer/Tax Collector Tom Mullen.

But how much the department might recoup in efficiency savings was a

mystery. Mullen said that because property tax payments required a lot of

manual processing and a "lot of hands," he reasoned that an automatic system

in which citizens enter their own data had to save money.

"We knew we'd save something, but we didn't know how much," Mullen said.

Dugger said that the state is working to build a portal, and any agency

that wants to put a transaction online must come up with a cost estimate

for a typical transaction. Dugger has asked that every cost associated with

a transaction — "whether that's postage, people payments on checks or whatever" — be calculated.

The per-transaction cost analysis aims to eliminate uncertainty, but

agencies can only estimate how many people may use the service, Dugger said.

But agencies are taking a stab at estimating adoption rates as well.

They look at the adoption rates of similar e-government applications within

the same government (if possible) and those nationwide, then figure in how

many people have Internet access in the area, the amount of government Web

site usage and other data. The numbers are rough estimates, but officials

say it's the best they have.

In Riverside, the county decided the deal was worth the risk. Even elected

county officials, who must explain spending to the public, are confident

savings will come.

John Tavaglione, Riverside County Board supervisor, said the county's

residents enjoy being in a "leading-edge" county and understand how technology

can save money.

"When you take the burden from the counter person or the person on the

phone, you gain efficiencies. The majority of people understand this," Tavaglione

said. "Time will prove the success."

Boston officials took a slightly different route to handle the possibility

of cost savings when they launched a parking ticket payment application

last year. They set up the application in-house, which allowed them to save

startup costs and pay only the 1.7 percent transaction fee to credit card

companies.

Instead of speculating about savings, IT personnel focused their pitch

on the benefits to the consumer, said Jennifer Latchford, deputy CIO for

the city. "You have no evidence that it will save money, although you suspect

that it will," she said. "And, in the political environment, it's hard to

discuss information technology savings because a lot of it affects jobs,

which politicians don't like to talk about."

Instead, they focused on how 24-hour real-time access to parking ticket

payments would help residents such as mothers at home with small children.

"We didn't have to prove that; it's easy to see and it's an easy sell,"

Latchford said. "It's much more easy to understand for both politicians

and residents."

That sell — cutting red tape — has hit home with city residents. Since

the application launched last July, Latchford has seen participation increase

2,500 percent. The site takes in an average of $100,000 per month, Latchford

said.

The benefits are obviously there, but Latchford said it's still too

early to tell how much the application is saving. However, she's sharing

the increased traffic numbers with other organizations so that they can

better pitch their own projects. The more traffic, she said, the more money

is saved.

Meanwhile, companies and governments are trying to compare a single

paper transaction with an online one, like Tennessee did. The idea is to

eliminate the uncertainty of traffic — and factor in expected increases

over time — and break the traffic down into individual transactions.

EzGov did that for Riverside County. A single traditional property tax

payment costs the county anywhere from $2.50 to $5.50; an electronic one

costs 22 cents. The majority of the savings, said EzGov officials, is in

"float loss," the lost income on interest because of a longer transaction

time.

And although those numbers are based on one county and during a short

period of time, company officials say they speak volumes about what is to

come with e-government.

"A lot of early adopters put services online in the name of citizen

convenience," said Ed Trimble, the president of EzGov. "But what will drive

e-government are the efficiency and savings."Keegan is a writer based in Boston.