In 1999, San Diego County embarked upon what was then the
largest municipal IT outsourcing initiative in the world: a
seven-year deal worth $644 million with a group of companies known
as the Pennant Alliance (which included Computer Sciences Corp as
the prime contractor), meant to refurbish County government
operations for 21st century challenges.
Both sides faced real challenges. A June 2002 article in CIO
Magazine (www.cio.com) simply
declared the deal "a mess." CSC paid significant non-performance
penalties that year, key executives on both sides of the
arrangement were reassigned, and disgruntlement and cost overruns
with an ERP initiative had the County threatening litigation.
Yet, perseverance would soon begin to pay dividends. Constant
dialogue and a real and shared commitment to flexibility and
dispute settlement meant that both sides were showcasing success by
2005. San Diego County has recently been lauded as a local
e-government leader in the high-profile municipal survey of the
Centre for Digital Government, and County CIO Michael Moore insists
that his IT capacities are far better today than would have been
the case had the County opted to go it alone (as some critics would
have preferred), and at less cost.
Perhaps not surprisingly, then, San Diego County seems intent on
continuing down the outsourcing path. In its latest deal, the
sequel, the County's Board of Supervisors has approved a new
seven-year deal worth $667 million that extends the reliance on
private sector providers for most aspects of the government's IT
and telecommunications infrastructure (the deal also carries a
five-year extension option valued at roughly $500 million).
CSC is out, however, and Northrop Grumman Corp is in as the
prime contractor in this next phase. County CIO Moore underscores
that the change does not reflect disgruntlement with CSC (the only
other company that had been short-listed in the final round of the
selection process), but rather a better proposal by Northrop
Grumman. All sides appear confident of a smooth transition, despite
the inevitable complexities of disentanglement following seven
years of CSC management.
There is also one key source of optimism that this next
outsourcing phase will be successful, namely, the accumulated
experience and competencies of County management and political
leaders to effectively steer a partnership of such a large
magnitude.
When the County first opted for outsourcing in the late 1990s,
it did so in desperation. Antiquated computer systems and limited
funding meant that turning to the private sector became its last
and only option, hardly a recipe for a strong negotiating position.
Over the past seven years, however, while leaving operations to the
private consortium, the County has worked hard to expand its own
strategic capacity, based within the CIO's Office, in order to
collaborate with its partner companies.
The key lesson from Phase 1, and now a cornerstone of Phase 2,
is that outsourcing does not mean relinquishing strategic
leadership and total control to outside experts, however well
qualified they may be. Instead, the basis of a solid partnership is
a shared understanding on both sides of challenges, opportunities
and constraints. From this understanding flows an accumulation of
trust and flexibility that enables both sides to continuously adapt
to shifting circumstances, as well as the unavoidable disagreements
that emerge along the way.
This more balanced relationship also reassures San Diego's
elected officials, who are now more inclined to follow the advice
of County managers. With the novelty and constant media attention
of Phase 1, all stakeholders were nervous and under scrutiny (a
dynamic contributing to some of the early tensions that arose).
Today a more mature political setting pervades Phase 2, even as
politicians are likely to keep close tabs on such an important
financial commitment.
San Diego's experience also demonstrates that governments need
not fear long term commitments to public-private partnerships.
Sound preparation is one key, as is a governance structure that
facilitates trust and shared accountability through performance
metrics at regular intervals.
An important lesson for industry is the public scrutiny that
comes with large scale public sector outsourcing. CSC leaves behind
a laudable record in San Diego in this regard, as all eyes now turn
to Northrop Grummanb s consortium and what will be achieved in the
next few years.
Jeffrey Roy (jroy44@gmail.com) is associate
professor at the University of Ottawa and author of, E-Government
in Canada: Transformation for the Digital Age.
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