Non-Environmental Cost-Benefit News

No business would invest pounds 675m in new technology and processes without a clear idea of how it would get the money back. Luckily for innovators in public services, e-government works by different rules. Until now, very little work has been done on putting a monetary value on the payback from setting up e-services.

This is changing. One reason to start counting e-government's benefits is that central funding is drying up. Subsidies for local councils to put services online end in April 2006. Another reason is that, under the Gershon efficiency review published last summer, all authorities have to show efficiency gains of 2.5% a year.

As part of an effort to persuade councils to take up centrally funded e-government developments rather than re-invent them locally, the Office of the Deputy Prime Minister has published a set of independent studies measuring their payback.

The headline figures are impressive. They show that six projects alone could be worth up to pounds 2.45bn if implemented across every council in England. The returns include:

* Cost savings worth between pounds 160m and pounds 480m.

* Increased revenue worth between pounds 30m and pounds 100m.

* Service improvements worth between pounds 760m and pounds 1.87bn.

The six schemes are among 22 national projects funded by the ODPM to develop e-solutions to problems faced by local authorities. The projects have received pounds 118m from the ODPM's pounds 675m local government online programme.

Putting cash values on the changes enabled by e-government is difficult. Often there's no baseline from which to start: staff often resist attempts to measure the cost of conventional ways of working.

Another problem is that creating new electronic channels can increase costs in the short term by making access to a service easier. And when savings appear, it may not belong to the organisation making the investment. For example, the biggest beneficiary of an IT system that enables a local authority to identify dumped cars more quickly may be the local fire service, not the council that paid for the technology.

To get around these difficulties, the ODPM hired IT firm Capgemini to study six of the most mature national projects and to add up their effects on the authorities carrying them out, whether or not hard cash was saved, and to extrapolate the figures nationally. In order of size of potential savings, the projects were:

* Customer relationship management (CRM). This would allow savings of between pounds 49m and pounds 146m from efficiencies and cost-cutting and between pounds 195m and pounds 650m in improved services.

* Planning and regulatory services (Parsol). Potential efficiency savings of between pounds 17m and pounds 56m, with service improvements from pounds 291m to pounds 513m. Fewer errors and greater customer satisfaction are among the service improvements.

* Enterprise workflow. Potential efficiency savings, such as in office space and paper, between pounds 48m and pounds 159m, with service improvements including fewer errors and reduced backlogs worth between pounds 166m and pounds 296m.

* Mobile working (Project Nomad). This would create between pounds 30m and pounds 81m in efficiency savings by using field officers' time more productively and speeding up transactions. It would bring in between pounds 5m and pounds 50m in increased revenue by collecting fees more effectively and between pounds 40m and pounds 205m in service improvements. These include improved data quality and rationalisation of assets.

* Council tax and rates (Valuebill). The biggest potential returns are in increased revenue: between pounds 24m and pounds 48m from better identification of households. Efficiency savings would be worth between pounds 14m and pounds 25m and service improvements, including "reduction in the number of valuation appeals" between pounds 51m and pounds 167m.

* Local authority websites (Laws). This project could save English councils between pounds 4m and pounds 9m in software licence fees and create service improvements of between pounds 17m and pounds 35m. These include reduction in web development costs and increased availability of online services.

As well as the quantified benefits, each of the six projects has strategic or intang- ible benefits. These generally include better public perception, happier staff and increased ability for reform.

The figures came with a couple of health warnings. One was that "baseline data is not available in most cases", so some efficiency gains are just estimates. Another is that e-government gains are not instant: "It takes three to five years to derive full benefits."

The studies' methodology would also raise eyebrows among academic researchers. The ODPM admits that it commissioned Capgemini to compile a list of paybacks rather than to carry out an impartial study of costs and benefits.

But the ODPM says that the studies prove e-government can pay. Martin Scarfe, in charge of communicating the national projects, says: "If anyone needed evidence that e-government can be a huge driver for service improvement and cost efficiencies, these studies provide it."

The ODPM also points out that the project outcomes were just the kind of gains being sought by the Gershon efficiency review and the new "comprehensive performance assessment" of local government. That, at least, may persuade some local council sceptics to take a second look at e-government.

Weblinks:
Local e-gov: www.localegovnp.org.uk/ benefits
Office of the Deputy Prime Minister: www.odpm.gov.uk

by Michael Cross. The Guardian. Manchester (UK): Jan 26, 2005. pg. 7
http://proquest.umi.com/pqdweb?did=784429581&sid=1&Fmt=3&clientId=13371&RQT=309&VName=PQD
The Guardian