By showing companies how e-government can improve their bottom line, CIOs can help business and themselves.
By William D. Eggers
Donna Klein is an
accountant at J. Cleo Thompson & James Cleo Thompson Jr., a small
Texas oil and gas producer with 20 full-time employees. As part of her
job, she has the unenviable task of filling out all the government
paperwork that allows the firm to conduct business without running
afoul of the law. To do her job well, Klein has learned something she
was never taught in accounting class: the art of navigating government
red tape. Each month she completes 11 different forms for four separate
state agencies -- and that doesn't include the federal paperwork. "I
spend about one week each month just doing government paperwork and
reporting," she said.
One report is for the West Texas
Operations of the University of Texas (UT) System's University Lands
Accounting Office. The reports are required of all oil companies that
operate oil and gas leases on Permanent University Fund lands in West
Texas. Under the old paper-based system, Klein spent three workdays
each month filing reports and amendments to the University Lands
office. Not anymore.
Thanks to two new Web-enabled systems --
the Electronic Reporting System (ERS) and Electronic Customer Accounts
Receivable (e-CARE) -- companies can submit reports and payments
online. Klein now spends only four hours per month completing the
reports. This translates to only 48 hours each year, compared to 288
hours before -- one-sixth the time. This saves J. Cleo Thompson about
$12,000 per year -- a significant sum for the small company.
The online system has also given Klein peace of mind. "I can anticipate
the next report and go on vacation without having to worry about
missing a payment," she said.
The UT's cost savings from Web-enablement amounts to just over $300,000
per year. While the University Lands office hasn't officially
calculated industry savings, an informal calculation clearly shows they
dwarf UT's savings. Extrapolating the $12,000 in savings realized by J.
Cleo Thompson to the other 225 oil and gas companies that now file
electronically yields $2.7 million. The actual savings is likely to be
much higher, because many companies have more leases than J. Cleo
Thompson and therefore would have to devote more effort to government
paperwork.
The UT Lands Office story illustrates two important points. First, the
cost benefits to citizens and businesses from e-government will often
be greater than the benefits to government itself. And second,
government rarely even tries to quantify such benefits.
Measuring Constituent Value
In the 1990s -- when government budgets were flush with cash and
e-government was in its formative years -- CIOs typically weren't
required to make the business case for IT in a rigorous, meticulous
way. Policy-makers launched e-government programs because they knew
viscerally that providing around-the-clock service to citizens was the
right thing to do.
Those days are long over.
With governments at all levels struggling with huge budget deficits, robust business cases have become
de rigueur
for all new IT outlays. While a few efforts have yielded impressive
results -- Iowa's ROI methodology, for example -- most government ROI
and business case methodologies suffer from at least one major flaw: a
failure to measure real and quantifiable benefits to citizens and
businesses from e-government investments. According to an Office of
Management and Budget official, for example, only a tiny fraction of
the hundreds of e-government business cases the agency reviewed this
year even attempted to calculate the potential benefits to businesses
and citizens.
This represents a significant hole in the business case analysis
because information technology's ROI can't just be measured by direct
return -- by doing things more efficiently for its own sake, or even to
generate cost efficiencies. Both should play a central role in
calculating the ROI, but neither is sufficient because government
competes not for its own benefit, but for the benefit of stakeholders
with different needs and priorities. The value of a government
investment must be measured not only by its direct return to
government, but also by its return to the citizens government
represents and the businesses citizens work for and invest in.
In addition to being the right thing to do, quantifying the value of
e-government to constituents can help politically because it helps IT
leaders build a more powerful, multi-faceted case for e-government.
Politicians' eyes tend to glaze over when discussions turn to the
internal benefits of technology projects. Demonstrating the value of
digitization as an economic development tool, on the other hand, would
resonate with them because it helps an important constituency: the
business community.
This gives CIOs an opportunity to enlist a new ally in the fight to
fund e-government projects. The business community has long fought to
prevent new regulations or eliminate existing ones. However, when it
comes to promoting e-government -- a potentially powerful means of
reducing compliance costs -- business has been absent from the debate.
Why? Because most companies don't have the slightest conception of how
e-government would affect their bottom line. No one in government has
ever tried to make this case to them. One federal agency is trying to
change that.
Reducing the Burden
Every year the federal government introduces 4,000 regulatory changes.
Lacking in-house lawyers to help them navigate the regulations, small
businesses are the hardest hit by the regulatory tsunami. They spend
about $500 billion a year, or $7,000 per employee complying with
federal government regulations, according to the Small Business
Administration (SBA). "The smaller the business, the greater the
relative time to comply," said Ron Miller, the SBA's assistant
administrator for e-government.
The SBA's main job is to advocate the interests of small businesses. A
big part of that mission is to reduce the compliance burden on small
businesses. The agency realizes e-government has a critical role to
play in achieving this objective. "We believe we can save small
businesses significant amounts of money that they are now devoting to
compliance by building tools to make the current regulatory burden less
onerous," Miller said.
Toward that end, the SBA built a Web site called BusinessLaw.gov (also
called the Business Compliance One Stop). The site helps small
businesses find, understand and comply with regulations by providing
resource guides on 39 business topics; answers to common questions;
links to over 20,000 state and local government sites; information on
the latest legal and regulatory changes; personalized compliance
assistance tools; and various online transactions, such as registering
for an employer identification number (EIN).
The site features 30 expert adviser programs, each of which provide customized compliance assistance for various Department of Labor and Occupational Safety and Health Administration (OSHA) regulations. Based on answers to dynamic questions, the expert advisers explain exactly what needs to be done to comply with a particular regulation. For example, in 10 to 15 minutes, the Hazard Awareness Advisor can interview a restaurant owner, analyze her workplace based on her answers, and write a customized, five- to 20-page report on probable hazards. Typically such a report would require a knowledgeable professional one-day to visit the business, and another day or two to write the report. Savings to small businesses from this adviser alone amount to between $40 million and $83 million per year, according to OSHA.
Overall, SBA estimates BusinessLaw.gov already saves businesses about $526 million per year by reducing time and money spent finding the applicable regulations, understanding their meaning and then complying with them.
The next phase of the SBA's electronic compliance assistance project
will go a step further by providing industry-specific compliance
capabilities. The test pilot is the heavily regulated trucking
industry. Today a trucker might have to fill out up to 38 forms from
federal and state agencies just to operate a rig. This costs the
average trucker about $500 in lost time, according to the
Owner-Operator Independent Drivers Association.
The SBA is working with the industry and the U.S. Department of
Transportation to streamline this process by standardizing federal and
state information collection requirements and using interactive
electronic forms, expert advisers or wizards. The goal is to allow
truckers to submit all necessary information once, which would reduce
the time each trucker spent on government paperwork by 40 percent,
according to the SBA, saving truckers approximately $335 million
annually. The trucking portal should be up in 2004. Other industry
portals -- including health care, chemicals, food and mining -- are
planned. Cumulative projected savings to industry, according to the
SBA: Between $1.5 billion and $2 billion.
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Speeding the Time to Market
Few areas better demonstrate the potentially powerful effects
e-government can have on reducing compliance costs than the U.S. Food
and Drug Administration's (FDA) drug and medical device approval
process. No manufacturer can market a drug or medical device, alter its
manufacturing processes, or propose a new use for it without FDA
approval. The current approval process averages more than 400 days,
over twice the statutory limit of 180 days (this is about a 100 percent
improvement from just a few years ago). This is important because every
day their products are kept off the market, medical device
manufacturers and pharmaceutical companies lose anywhere from $1
million to $4 million.
While IT alone can't fix this problem, it can greatly improve it. "A
standardized electronic reporting and submission process would increase
our efficiency, enhance our ability to review safety data, and help us
communicate better with drug and medical device companies," said Dr.
Randy Levin, associate director for information management in the FDA's
Center for Drug Evaluation and Research.
One way technology can do so is through e-submissions -- moving
application submissions and follow-up reporting into an electronic
framework. The FDA receives hundreds of applications for new drugs and
medical devices annually -- each containing about 500,000 pages of
information -- and thousands of phone-book-size post-marketing safety
reports. For paper applications, an FDA reviewer spends at least two
weeks just examining a single segment of the clinical trial data
portion of the submission because she has to manually wade through
volumes of statistics. Electronic filing cuts this process to two days
because the computer does most of the work (not to mention saving a
bundle on printing and mailing costs). The FDA has made some progress
in moving to e-filing: the average number of paper volumes has dropped
by half, and about three-fourths of drug applications now have at least
one electronic component. Only a small fraction of applications,
however, are submitted entirely electronically.
Also critical to a faster approval process is improving collaboration
and communications between the FDA, and drug and medical companies.
Getting the FDA and a manufacturer to agree on a label for a drug or
medical device can be extremely time consuming because each tiny label
is packed with scientific and intellectual content. Often the label
goes back and forth 100 times before both sides agree on its wording.
This process is typically conducted by mail, fax and phone. "Nothing
kills more time than getting a single question answered," said Jim
Benson, former vice president of AdvaMed, the trade association of
medical device manufacturers. "Days or weeks might pass as the FDA or
the company waits for an answer to a simple question." AdvaMed is
pushing for an access-protected secure chat room where a company could
submit part or all of the application online, allowing companies and
FDA reviewers to converse in real time. "It would save an enormous
amount of time," Benson said.
Better knowledge sharing could hasten the label approval process, and could help avoid many delays later in the process caused by a lack of shared understanding of protocols and review processes. Recognizing this, the FDA has begun several projects to speed and improve information exchange between industry and FDA reviewers, ranging from secure e-mail to creating a shared electronic repository where companies would submit their applications to a trusted third party who would host the secure site.
Some experts believe end-to-end digitization of all FDA processes could
cut the average new drug approval time by one-third to one-half.
According to Tuft University's Center for the Study of Drug
Development, a 25 percent reduction in application approval time would
reduce the average costs of developing each new drug by $100 million, which would mean billions for the entire pharmaceutical industry.
The Stealth Revolution
E-government isn't typically the first thing that comes to politicians'
minds when they're debating what government can do to promote economic
development and create a favorable business climate. It's never going
to grab headlines or engender fierce opposition (or defense) from
impassioned interest groups. But that doesn't make it any less potent
as an economic development weapon.
By minimizing time and effort to comply with government red tape and
complete government transactions, e-government can positively impact
private-sector productivity. This is good for business, and ultimately
good for the government treasury. "Savings to businesses can be
reinvested," Miller said. "Reinvestments can lead to productivity
enhancements and job creation which, in turn, can increase revenues to
government coffers." It's time for CIOs to communicate this message to
their bosses.
Jeannie Rhee contributed extensive research assistance to this article.
