How governments can safely barter services with other agencies

There are three steps that governments should take to protect themselves when seeking to share assets, writes Neville Cannon.

Government agencies are under continual pressure to cut costs, particularly at the local government level. Interagency asset-sharing agreements, and occasionally ones with other entities, are routinely entered into to reduce costs. Council amalgamations aside, a lot of these sharing arrangements make sense.

Neville Cannon

Senior executives may wish to share physical infrastructure, software or human assets to make use of any overcapacity or headroom carried by one organisation. These opportunities offer a tangible cost saving as a prize, but they are often ad hoc and as such, carry greater risks.

Some forward-thinking agencies take a different approach. They optimise the use of public assets from a more collective standpoint, creating opportunities to support wider digital initiatives, as well as the sharing of data to facilitate the delivery of new or improved services. The key is to think beyond what you might get in return.

Constructing this collaborative ecosystem brings parties together, and elevates the many ad hoc arrangements into a strategic approach. If conducted openly and transparently, it benefits all from a risk management perspective.

There are four types of asset-sharing models employed by local and state governments:

  • Barter: an exchange of services, access rights or staff resources with no monetary exchange.
  • Share: shared services implies central coordination and governance by the customer and a chargeback mechanism.
  • Quasi-commercial: political leadership decision to provide use of agency assets in return for economic development activity, not a public private initiative (private finance investment leased back to government agency).
  • Commercial: fully considered commercial arrangement to use government-owned assets to provide an open facility for all vendors to use in the provision of citizen services.

The latter categories are likely to emanate from policy decisions within the economic development domain to intervene in a market-failure situation, such as the provision of local telecommunications within a locality.

Making shared ecosystems work

Economic development strategies, such as making data centre space or dark-fibre rings available to commercial companies, are aspirational for many. The building of ecosystems often emanates from humbler beginnings, such as the ad hoc sharing of assets. This collaboration may even provide a sense of quid pro quo within the understanding, bartering one service off against another.

Assumptions are made that the parties sharing the ecosystem can self-organise, share the same values, are equally supportive and that nothing will go wrong. There’s a belief that somehow common sense will prevail in any given shared arrangement.

Typically the sharing of physical infrastructure takes the form of mutual pacts to share, for example, data storage rack space for backup or disaster recovery facilities; cable ducts with other public sector bodies to avoid disruption to the roads; or a centre of excellence, sharing spare capacity from a human resource perspective, such as cyber security specialists, database administrators or data scientists.

Very often, existing relationships are prevailed upon to agree the collaboration in good faith between the various participating entities. These relationships are often personal and leadership-driven. However, how will the relationship fare if either party was to leave?

Safeguard your agency

There are three steps you should take to protect your agency when seeking to share assets:

1. Adopt simple formal agreements

Adopt simple formal agreements to govern any asset-sharing arrangements with an agreed document, such as a Memorandum of Understanding (MOU). This will avoid conflict when unexpected changes occur. Unfortunately, accidents and bad timing can happen, and the consequences can be significant.

Agreeing on a mechanism to deal with the liabilities before they hit will go a long way in helping to maintain good working relationships when calamity occurs and tensions run high among those adversely impacted.

2. Make an exit plan available

Protect future operations by ensuring that an exit plan is available for any shared asset and that its value is understood and recorded for the sake of transparency. The sharing or bartering of services and mutually sharing some spare capacity can be both tremendously valuable and sensible. However, CIOs on both sides of any sharing arrangement should contemplate the impact of an agreement ending under any set of circumstances.

A suitable exit plan should be developed in conjunction with the business users. The exit plan may, in the simplest form, be a list of alternatives for the sourcing of that asset’s capability. This latter action helps secure their buy-in and cooperation if it needs enactment.

3. Safeguard against unfair claims

Protect your agency from claims of unfair or preferential commercial treatment of vendors by carefully considering any requests from vendors to have access to agency infrastructure and agreeing on basic contractual terms. Cable companies, for example, may wish to extend their fibre-optic networks in the most cost-effective manner by using existing cable ducts rather than embarking on expensive, disruptive road digs.

To address these quasi-commercial arrangements effectively, involve the senior leadership, relevant departments (such as the highway department) and the legal team. While it may still be sensible at the start of the process to draft an MOA, it’s highly likely that a formal contract will be required. Ensure the risks are identified and understood by all.

Neville Cannon is a public sector research director at research and advisory firm Gartner. He will be speaking about shared services at the Gartner IT Infrastructure, Operations and Data Centre Summit in Sydney on 30 April and 1 May 2018.

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