State and local government spending has experienced historic turbulence over the past three years. Fiscal year 2003 saw the largest gap between Gross Domestic Product (GDP) and tax revenues in over 30 years, indicating a disparity in available state funding. Despite
projected growth with the current economic recovery, states are being forced to rethink their organizations, tools, and policies in an attempt to maintain and initiate information technology (IT) projects that were squeezed out by past budget shortfalls.
The Commonwealth of Virginia has established itself at the forefront of state IT practices. In this analysis, INPUT reviews Virginia’s recent IT initiatives to consolidate their IT functions, establish e-procurement tools, and implement progressive policy changes.
Virginia Information Technologies Agency (VITA)
In May of 2003, Gov. Mark R. Warner signed two bills that together dissolved the Department of Technology Planning, the Department of Information Technology, the Virginia Information Providers Network Authority, the Board of the Virginia Information Providers Network Authority, and the Chief Information Officer Advisory Board. The signed legislation combined the roles and responsibilities of these agencies and boards into the Virginia Information Technologies Agency.
The signing of these bills was the culmination of well over a year of planning and legislation aimed at reducing redundancy and increasing cost savings within the planning, development and implementation of IT projects in the Commonwealth of Virginia. Virginia then began the move, joining Pennsylvania and Michigan, towards consolidating state IT resources into a single state agency.
The transition of Virginia’s IT organization is an undertaking that remains in progress. The task is divided into three phases:
• Consolidation of small-sized state agencies (fewer than 100 employees) first targeted and initiated on January 1, 2004.
• Consolidation of medium-sized agencies (100-400 employees) and the Virginia Department of Transportation (VDOT). Currently, a July 1, 2004 target is in
• Consolidation of large-sized state agencies (over 400 employees). Scheduled to consolidate on or before January 1, 2005.
All in all, the technology divisions of 92 executive branch agencies will take part in this consolidation initiative to transfer all IT functions, including infrastructure and human resources, from the individual executive agencies to VITA.
Through this process, the Commonwealth of Virginia can achieve several goals:
• Leverage its buying power with IT vendors by acting as a single large-scale buyer rather than as 92 piece-meal customers.
• Nurture partnerships with vendors to improve service levels and transfer the knowledge of best-in-business practices. These relationships are very important to VITA, as indicated by their preference to refer to vendors as ‘partners’ rather than vendors or sellers.
• Achieve an enterprise approach to IT projects where custom solutions are viewed as inefficient and undesirable. Instead, interoperability and shared solutions will be the focus.
• Establish standards and improve efficiencies across agencies while simultaneously improving security and reliability.
The consolidation within Virginia has already seen the tackling of statewide servers and is expected to continue its streamlining into storage devices, applications and operating systems. This undertaking is not viewed as a project with a start and finish, but rather an on-going process that demands the optimization of IT functions across the state level. VITA will continue to lead the state as the structural organization the Commonwealth relies upon to facilitate the growth of IT infrastructure and establish best-in-business IT management.
On March 1, 2001, the eVA government-to-business website, spawned by the Virginia Department of General Services and
Gov. James Gilmore’s e-government initiative, was launched. The website allows for on-line registration of vendors, electronic submission of bids and proposals, reverse auctions, posting of vendor catalogs and electronic order receipts. There are currently 17,391 vendors registered on eVA, 842 vendor catalogs, 171 using agencies and over $1.9 billion in total transactions performed through the website.
Benefits of eVA:
For Vendors: eVA allows for a single point to access all participating agencies. The site pushes information to vendors and allows for the posting of vendor catalogs for examination by state agencies.
For Buyers: State officials can electronically track the entire procurement process, reducing paper trails and bottlenecks. For purchases under $5,000, buyers only need one quote meaning they can potentially search vendor catalogs, order an item and pay entirely through the eVA system.
In addition, the Commonwealth has added reverse auction functionality to the system which has already proven its worth. It was used first to purchase IT media storage for all state agencies and returned a
30 percent reduction in the materials’ cost.
The eVA website is the result of a contract between the Commonwealth and American Management Systems (AMS). AMS helped in the design and implementation and now hosts the data and software on its hardware. AMS funded the project in exchange for a portion of registration and transaction fees incurred by vendors.
Virginia Partners in Procurement (VAPP)
Reverse auctioning is an aspect of eVA that is largely inspired by
Gov. Warner’s Virginia Partners in Procurement pilot project. This project is primarily focused on improving efficiencies and reducing purchasing costs that occur throughout the State enterprise. This is very similar to the thinking behind VITA. The Virginia state government has the purchasing power of a Fortune 500 company, but until recently has not fully leveraged that power.
Beyond reverse auctioning and bulk purchasing, the VAPP project will also:
• Utilize the data collected through eVA to exercise true spend management
• Re-engineer purchasing techniques to carry cost savings well into the future.
• Act as a vehicle for the dissemination of best-in-business practices through all state agencies and to state employees.
These strategies mirror what many are calling a push for entrepreneurial government, where business practices within the public sector more closely match those utilized in the private sector. These initiatives contribute intuitively for more substantial relationships between the public and private sector, where the public sector relies on the private for more than packaged goods and services. The public sector, including Virginia, seeks partnered relationships where private sector participants enable efficiency and best-in-business practices. This new dynamic between government and business will shape who government decision makers choose to work with and perhaps most clearly within technology projects.
Public / Private Education and Infrastructure Act of 2002 (PPEA)
PPEA is a policy that was passed in 2002 for the purpose of expanding funding options in public infrastructure projects such as the construction of schools through the encouragement of public-private partnerships. Specifically, the language allows private entities to “acquire, design, construct, improve, renovate, expand, equip, maintain or operate qualifying projects” when proper approval has been granted by the Commonwealth.
“Qualifying projects” were originally deemed as public school facilities, communications infrastructure, equipment or improvements to public buildings, or recreational facilities. The pressure of lean budgets expanded the need for creative funding and led to the expansion of PPEA’s qualifying projects list to include technology infrastructure in 2003.
The goal of the inclusion of technology infrastructure into PPEA was to bring private funding and private risk to public IT projects. Aspects of this dynamic are exhibited in the predating eVA project, in which AMS bore most of the start-up costs of the project. An additional advantage foreseen with the PPEA process is the potential to provide a faster mechanism for completing time sensitive projects, free of the constraints of the conventional competitive bid process.
PPEA represents the evolution of states’ methodology in attempting to bridge the gap between the technology and educational infrastructure needs of its organization and the ever present difficulty to fund those initiatives. The practice of similar funding or purchasing techniques exists in some states, but will undoubtedly see increased attention as states are forced to reconcile available funding and necessary spending to bring technology infrastructure to the realm of best practices and modern efficiency.
VITA recently solicited for consulting and sourcing advisory services to assist in implementing and managing relationships established through PPEA. The awardee has not yet been selected for this solicitation, but exhibited is the desire of the Commonwealth to move forward with this methodology.
IT consolidation is rendering itself to be the inevitable trend for state governments to follow. It is proving to be a philosophy that is either fully embraced or not even attempted. Vendors must be aware of this situation because as states decide to move towards this new structure, many new opportunities exist.
The Commonwealth of Virginia has proven progressive in its attempts to establish itself as a technologically advanced state in a time of comprised funding. Many states are closely observing the strategies and policies utilized by Virginia for success so that they may also apply similar techniques. While e-procurement needs no proof of legitimacy, the Commonwealth’s foray into alternative funding strategies, IT consolidation, and best-in-business goals provide a great example for state and local governments. In addition, vendors can look to Virginia as an environment representative of the future state and local
May 10, 2004