Governments struggle with e-gov savings
- By Daniel Keegan
- Nov 05, 2000
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
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
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
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
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
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.