IIMB Management Review (2017) 29, 90–108 a v a i l a b l e a t w w w. s c i e n c e d i r e c t . c o m ScienceDirect j o u r n a l h o m e p a g e : w w w. e l s e v i e r. c o m / l o c a t e / i i m b Production and hosting by Elsevier Management and financing of e-Government projects in India: Does financing strategy add value? Shashank Ojha a, I.M. Pandey b,c,* a ICT & e-Governance Global Practice, World Bank, New Delhi, India b Delhi School of Business, India c IIM, Ahmedabad, India Received 11 September 2014; revised 28 May 2016; accepted 25 April 2017; available online 7 June 2017 KEYWORDS Abstract How do managers structure e-government projects and address challenges of risks, lack Project finance; of technical expertise, and mitigation of strategic error for preventing loss of investments? Our aim Public–private was to compare the traditional finance approach and the strategy-driven, innovative financing ap- partnership; proaches under the PPP model, to examine their managerial value-addition. We found that e-government e-Government; projects require a carefully crafted structuring strategy and that innovative financing is more suit- Financial structuring; able in facilitating flexible decision making, building core capabilities, managing and sharing project PPP for e-Services; risks, providing funds needed for growth and innovation, and customising tailor-made project gov- Financing of e-Services ernance strategy. Based on our findings, we develop five theoretical propositions. © 2017 Production and hosting by Elsevier Ltd on behalf of Indian Institute of Management Bangalore. This is an open access article under the CC BY-NC-ND license (http:// creativecommons.org/licenses/by-nc-nd/4.0/). Introduction competiveness and digital readiness, and has emphasised the positive relationship between per capita GDP with informa- The adoption of information and communication technolo- tion technology (IT) readiness of the economy. Innovative ap- gies (ICT) in government over the last decade has grown sig- plication of ICT in government (e-Government) over the last nificantly across the globe. The Global Information Technology decade has resulted in new solutions and ideas to address Report (GITR) 2009–10 (World Economic Forum and INSEAD, the complex challenges that governments face. These ICT- 2010–2011)1 has shown a positive relationship between global enabled solutions have helped governments to improve efficiency and transparency, reduce the high costs of delivery of public services, and improve government’s reach to the under-served segments of society. Investments in * Corresponding author. Fax: +91 11 27343401. E-mail address: impandey@dsb.edu.in (I.M. Pandey). e-Government projects across the globe are therefore growing Peer-review under responsibility of Indian Institute of Management significantly. The Lisbon Summit (2000) set the goal for making Bangalore. Europe the world’s most competitive and dynamic knowledge- 1 Global Information Technology Report, World Economic Forum, IMF based economy. In 2003, the Russian Federation launched a (GITR, 2009–10). federal budget of 1.43 billion rubles for financing the e-Russia http://dx.doi.org/10.1016/j.iimb.2017.04.002 0970-3896 © 2017 Production and hosting by Elsevier Ltd on behalf of Indian Institute of Management Bangalore. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Management and financing of e-Government projects in India: Does financing strategy add value? 91 programme (Mimicopoulos, 2004). In Asia, Singapore has been Lab4 defines a PPP as “a long-term contract between a private leading in e-Government initiatives with its e-Government party and governance entity, for providing a public asset or Action Plan I and II (eGAP I & II) to bring as many services service, in which the private party bears significant risk and online as possible.2 In 2003, Singapore approved a US$ 1.3 management responsibility, and remuneration is linked to billion plan to upgrade its government services resulting in performance”. Public–private partnership models provide the about 1600 public services being provided online. Similarly, flexibility of innovatively structuring financing of projects, the e-Taiwan project launched in China earmarked NT$ 36.2 which may involve complex transactions and arrangements. billion (US$ 1.04 billion) for its e-Government initiative to build Governments across the world, including the Government of a fully computerised society. In future, it is expected that India, have policies to promote PPPs in the infrastructure India and China will drive the growth in IT spending in the Asia sectors. In e-Government projects, the National e-Governance Pacific region (Mimicopoulos, 2004). Plan (NeGP) approved in 2006 specified that the PPP model However, as investments in e-Government projects are in- is to be adopted wherever feasible—mainly to enlarge the re- creasing across the globe, there are growing concerns on source pool without compromising on the security aspects. account of the large number of project failures, which has These guidelines have been based on some initial successes resulted in significant loss of major investments. The global experienced by PPPs in e-Government projects in India, mainly experience shows that these investments have proved to be by state government projects, for example AP Online, the of- major challenges even in developed countries. According to ficial portal of the Government of Andhra Pradesh, Kerala’s the Standish Group Report (2009),3 “…32% of all projects community technology centres—Akshaya e-Kendras, Karna- succeeding … delivered on time, on budget, with required taka e-Procurement, and so on. However, PPP projects in India features and functions”. Similarly, as per Heeks (2001), one- are still at their initial phase and it is not clear if PPP initia- fifth to one-quarter fall into the total failure category; one- tives provide any real value add in addressing the challenges third to three-fifths fall into the partial failure category; and discussed above. only a minority falls into the success category. The large scale Does the source of financing (government/PPP) and the failure of these projects indicates fundamental manage- method of financing traditional/structured) help in improv- ment challenges in managing business and financial risks in- ing investment decision making, reducing risk, facilitating herent in these large and complex projects. optimum structure of resources and solving the funding In such a situation, the main concerns for e-Governance problem of e-Governance projects? This study explores this project managers are: question and is based on an evaluation of four case studies (two with PPP approach and two with traditional financing) a) How to take better investment decisions for large with the objective of examining the comparative sources of e-Government projects with complex and multi dimen- value-addition in the better management of e-Government sion risks so as to mitigate the risks of strategic error in projects, which are complex and risky, and to prevent loss preventing loss of investments of investments. b) How to improve the structuring of these projects so as to have an optimum mix of resources (including human, tech- Literature review nical and financial) to maximise value derived from these investments, and The literature review was carried out to address three main c) How to access and secure continued project funding over questions through the existing body of management re- a multiple year time-frame in an environment of increas- search and studies: ing constraints on public resources. a) What are the main objectives of and key drivers for imple- Most of the e-Government projects across the globe menting e-Government projects? Can investment and fi- (including India) adopt the traditional project financing nancing decisions help organisations in seeking these approach where the entire project is funded through gov- objectives? ernment budgetary resources and operated by the govern- b) What are the main challenges, complexities, and con- ment. However, as public financial resources become scarce, straints that make e-Government projects risky and prone other options need to be explored. Full privatisation or out- to high levels of failure? sourcing of public services to the private sector is an option. c) Given the high risk–high return character of these proj- This option can help in getting full project funding from the ects, can a better approach to investment and financing private sector service provider; however, control over the decisions make a significant impact on the management services provided, the tariff charged, and of assets moves into of these complex and high risk projects? the hands of the private vendor which may not be in the in- terests of the public. In order to understand the main drivers and underlying Another option of operating and funding large projects is objectives of implementing the e-Government concept, it is the public–private partnership (PPP) model. The PPP Knowledge important to study the underlying theories of public sector management that aim to achieve effective governance or good governance. The viewpoint is in consonance with the public policy strategies promoted by the World Bank and other 2 “Singapore announces 1.3 bln sgd plan to boost e-government” Bretton Wood institutions where “governance is basically The Edge Malaysia, July 7, 2003. http://www.europarl.europa.eu/ summits/lis1_en.htm. 3 4 https://www.projectsmart.co.uk/white-papers/chaos-report.pdf. https://pppknowledgelab.org/guide/sections/1-introduction. 92 S. Ojha, I.M. Pandey perceived as a cooperative steering approach that should allow of ICT in an organisation is an evolutionary process. In the man- for participation, transparency, efficiency and responsibility, agement literature there are five main theories on technol- quite in accordance with rule-guided procedures in a well- ogy adoption which aim to analyse and understand the dynamic established constitutional framework” (Grindle, 1997, p. 28). nature of technology adoption—these are 1) Technology These views are also supported by new public management adoption model (TAM) developed by Davis (1989); 2) Theory (NPM)—a new philosophy since the 1980s to revolutionise the of planned behaviour (TPB) from Ajzen (2011); 3) Unified theory public sector. The NPM approach encourages more market of acceptance and use of technology (UTAUT) (Venkatesh, orientation in the public sector, greater cost-efficiency, focus Morris, Davis, & Davis, 2003); 4) Theory of diffusion of inno- on outcomes, improved outputs, and improved efficiency vation (DOI) (Rogers, 1995); and 5) Technology, organisation through improved management of public resources (Hood, and environment framework (TOE) (Tornatzky & Fleischer, 1991). e-Government initiatives have therefore slowly gained 1990). These theories bring out two main perspectives—the significance as important aspects of the national development technology adoption life cycle and the key dimensions which strategies in both the developed and the developing world. impact the acceptance and adoption of new technologies. In India many e-Government initiatives have successfully Boehm’s (1981) original waterfall model for IT systems de- improved public services such as access to land titles, cer- velopment is the most widely accepted approach for infor- tificates, social pensions, and so on. For example, a marked mation system development. It follows sequential steps starting improvement in time efficiency in land registration in Andhra with conceptualisation, followed by design, implementa- Pradesh (Bikshapathi, Rama Raju, & Bhatnagar, 2006) and ob- tion, operations, and maintenance of the final system. taining land titles in Karnataka (Bhatnagar & Chawla, 2007) Information and communication technologies are one of has been noted. Central government projects such as MCA21 the most fast changing technologies in the world. Most gov- from the Ministry of Corporate Affairs (MCA)5 has enabled 100% ernment agencies find it difficult to understand the latest electronic filing, electronic payment mechanisms, use of digital changes in these technologies and are exposed to high risk of signature certificates for all transactions, delivery of more obsolescence of their IT assets. Upfront investments in IT assets than 90% of services by MCA offices within the charter defined expose projects to high level of risks due to delays in proj- by the Ministry, significant increase in rate of compliance i.e. ects or obsolescence. These investments are sunk costs and more than 90% of e-filing being done by stakeholders (as against cannot be reversed in the short term. Under the current tax the target of 25%), total transparency for service delivery, rules and also due to high level of asset specificity, IT assets more than 40% electronic on-line payments, and very high level acquire a depreciated value of zero or close to zero within a of stakeholder satisfaction. Projects like Aadhaar for Citizen few years. In order to meet these challenges, even the biggest e-ID, Passport Sewa, MyGov, e-Office, e-District etc. are central multinationals prefer to outsource operations connected to government initiatives that have been successfully imple- IT solutions to specialised IT industry organisations. Most of mented across India. Similarly projects in transport and driving the government agencies do not have the expertise or the ex- license, eSewa in AP, e-Gram in Gujarat, eMitra in Rajasthan, perience to develop, operate and maintain these specialised Friends in Kerala, Lokvani in UP, Bhoomi for Land Records in systems. But in most of the projects, the government agen- Karnataka, Mobile Sewa and many other projects have been cies take on the ownership as well as the responsibility to run successfully implemented in states across the country. and maintain these systems (Sapru & Sapru, 2014). The second question relates to the main challenges, complexities, and constraints inherent in these projects. e-Government projects are not mere technology adoption proj- Organisation related challenges ects; they involve challenges that relate to organisational transformation i.e. significant process re-engineering and Strong leadership and top management support is consid- organisational change management that result in new ways ered a critical success factor in project management (Young of working for the implementing organisations. Inadequate & Jordan, 2008). Wastell (1999) notes that information systems understanding of the risks and complexities involved in these development (ISD) is a process of organisational change in which projects has resulted in failure of hundreds of projects across IT systems are designed and deployed to enable more effec- the country. Some experts have referred to the India expe- tive operational practices. One of the major criticisms of the rience as the graveyard of e-Governance pilots,6 to refer to traditional theoretical models is their over-simplification of the situation where a large number of initial successes have real-world constructs (Kaplan, 1964). The STOPE model (Bakry, failed to scale up or have not survived after initial years. 2004) recognises strategy, technology, organisations, people, The review of management literature confirms the complex and environment as the core constituents for ICT system nature of these challenges as discussed below. implementations. Pardo and Scholl (2002) have built in two additional dimensions outside of the STOPE framework: op- erational and services. They warn that not addressing these Asset related issues essentials can result in “shortcuts to failure”. The use of ICTs in an organisation presents challenges relating to develop- Technical design and development ment and implementation of the new technology-enabled Many e-Government projects assume that the project is a “tech- systems. Managing the technical risks and organisational nical problem”. Research in this area confirms that adoption challenges requires expert core capabilities within the organisation. Most government agencies do not have in- 5 Source: The Department of Information Technology, Ministry of house capability and experience to manage these multiple Communications and Information Technology, Government of India. dimensions and associated risks, and these capabilities cannot 6 http://arc.gov.in/11threp/ARC_11thReport_Ch5.pdf. be created overnight in any organisation (Sapru & Sapru, 2014). Management and financing of e-Government projects in India: Does financing strategy add value? 93 Table 1 Challenges in managing e-Government projects. ICT asset management Organisation management Process management Technical risks Strategic leadership Procurement management Asset ownership and management Change management Economic evaluation Operations and maintenance Technical project management and overall governance Risk management This may explain why large scale failures of IT projects have structure, direction, and focus to an organisation, stating that been a chronic problem. “structure follows strategy”. Later Barney (1991) emphasised the use of strategy as assembling the optimum mix of re- sources, including human resources, technology, and suppli- Process related challenges ers, and then configuring them in unique and sustainable ways. Given their inherent complexities and the unique chal- Risks in e-Governance projects are complex and multi- lenges of organisational transformation, e-Government proj- dimensional. Risk management and mitigation is therefore ects require a suitable strategic approach that can support: one of the most critical requirements for e-Government a) better risk-management to address multiple and complex projects. Many governments have recognised this and pro- risks, b) better access to multiyear project finance over the vided policy and standards for risk assessment of strategic project period, and c) assembling an optimum mix of re- risk, financial risk, project management risk, technology risk, sources (including technological, organisational, financial, and change management, and operational risk. Although risks in human resources), and configuring them in unique and sus- e-Government projects are recognised, most government tainable ways to maximise the project’s value. agencies are unable to address these as they do not have the The project structuring challenge is directly related to the capability and experience to manage these risks. New tech- objective of value maximisation from the project invest- nologies and innovations in services require improvement ment. It is therefore important to identify the key sources of skills and professionalism of the work force, collaborative of value addition and how these sources provide value addi- interaction with customers, suppliers, and so on. The big-bang tion in e-Government projects to the implementing agency. approach to technology implementation without building As per a study conducted by Mckinsey & Company and CIGREF organisational capability and technical maturity within the (2009),7 use of ICT generates value at two complementary organisations may prove to be a costly mistake. It is there- levels. The value in any e-Governance project is derived from: fore important for the management to recognise the tech- nology gaps and capability gaps and invest in both to acquire 1) Value from IT asset: The core ICT asset value includes tan- and improve upon the existing technology levels within the gible items such as hardware and software, as well as softer organisation. benefits such as the new processes and skills of the project e-Government projects are driven by public policy objec- implementing organisation. tives and therefore cannot be evaluated only on financial cri- 2) Value in use: Is linked to the organisation’s core priori- teria like revenues, cost savings, net present value (NPV) etc. ties, and capability to extract benefit from use of new ICT However, the new public management literature argues asset and technologies. that the scale and nature of problems in public services deliv- ery has moved beyond the situation where the challenge can The value from the ICT asset is the amount invested in be addressed only through focus on policies and internal ad- the capital asset and its depreciated cost over time. The ministrative rules. Historically, most of the e-governance proj- value in use is derived from successful operation of the ICT ects were approved based on perception and anecdotal evidence asset, the efficiency and cost effectiveness of the opera- of use of IT for better services, improved efficiency, and in- tions, increased user and customer satisfaction, quality and creased transparency. However, GoI (through Indian Institute reliability of services and products, increase in revenues/ of Management, Ahmedabad (IIMA) and the National Institute profits, financial/cost savings, improved use of resources, etc. of Smart Governance) has developed the e-Governance Assess- The project structuring components as mentioned above ment Framework (EAF) with the specific objective to evaluate i.e. risk management, optimum resource mix and access to the critical aspects of these projects. The EAF has identified finance, therefore require to be addressed carefully through five main assessment attribute classes, these being service ori- an approach that strengthens both the sources of the proj- entation, technology, sustainability, cost effectiveness, and ect’s value-addition, namely i) high level of value from the replicability. Table 1 summarises the managerial challenges of ICT asset (good design, reliable hardware and software, com- e-Government projects. pliance with industry standards etc.) and ii) high level of op- erations and maintenance of the ICT asset to deliver high quality, efficient, and cost effective electronic delivery of The management challenge—Project structuring services. The project’s structuring approach therefore should help manage and strengthen the key components of The third question relates to the management challenge in structuring an e-Government project. In his ground break- ing work Strategy and Structure, Chandler (1962) showed 7 http://www.mckinsey.com/business-functions/digital-mckinsey/our that a long-term coordinated strategy was necessary to give -insights/how-cios-should-think-about-business-value. 94 S. Ojha, I.M. Pandey risk management, optimum resource mix, and access to organisational issues, and the key processes—are impacted finance projects for the following: a) asset construction differently under different financing approaches. In manage- phase—to improve the value from the ICT asset, and b) op- ment literature, three main project financing approaches are erations and maintenance phase, to improve value in use. available to project managers of e-Government projects—1) traditional financing, 2) privatisation and 3) PPP based fi- nancing approaches. Fig. 1 summarises the different ways in Do alternative strategies result in different which the financing approaches change the structuring project structuring? of the main components of an e-Government project i.e. the ICT asset, the organisation and its people, the process Review of the management literature shows that the adopted in implementing the project, and operations of the three main challenges identified above—the ICT asset, the project. Figure 1 Alternative financing strategies and their impact on project components. Management and financing of e-Government projects in India: Does financing strategy add value? 95 Traditionally, large government projects in developing & Yarrow, 1988). Our focus in this study is on public–private countries are often financed primarily through public sector partnerships rather than on full privatisation. resources (Benoit, 1996). India is no exception. Most of the The third financing approach presents a new set of options e-Government projects in India have been financed using by the PPP based approaches that potentially may offer new the traditional financing approach. In India the traditional ap- partnership models and innovative financing methods. This proach under government budgetary financing is governed by approach offers well established financing tools for devel- the Ministry of Finance’s General Finance Rules (GFR) of 1965 oping customised solutions for risk management, capital and revisions in 2005.8 The GFR provides for traditional ap- optimisation and creation of project specific governance struc- proach to financial management using budgetary control tures. These approaches include PPPs, public finance initia- process as a tool for overall financial planning and control. tives (PFIs) and project finance (PF). The primary drivers of Funds availability, in general, is authorised by financial these innovative financing approaches have emerged from lack sanction and the budget lapses in a period of twelve months. of financial resources and low levels of skills and capacity The GFR also defines a clear set of rules for procurement of within government agencies. The main benefits that PPPs are works, goods, and services. The GFR also defines the respon- expected to generate are on-time and on-budget delivery of sibilities for contract management powers of various authori- infrastructure assets and cost savings over their life cycles. ties, the conditions under which such powers should be The theoretical literature on PPPs (e.g., Bentz, Grout, & exercised, and the general procedure prescribed with regard Halonen, 2001; Hart, 1995, 2003) and practitioner’s guides to various classes of contracts and assurances of govern- (Ghobadian, Gallear, O’Regan, & Viney, 2004; Grimsey & ment property. The GFR’s Rule 160 on transparency, com- Lewis, 2004; Paul, 2003) see two main sources for value- petition, and fairness of the procurement process mandates addition: one is the bundling of responsibility for building and that all government purchases should be made in a transpar- operating infrastructure assets and the other is private in lieu ent, competitive, and fair manner, to secure best value for of public ownership of assets. Benington (2009) has argued money. As per the clause (xiv) of Rule 160, the contract should that public value is not created by the public sector alone be awarded to the lowest evaluated bidder who is eligible and has emphasised that the role of government is to harness and qualified. the powers and resources of all three sectors (the state, the However, as the pressure on public finances has increased market and civil society) behind a common purpose and stra- and the need for funds for infrastructure financing is moving tegic priorities in the pursuit of public value goals. beyond the government’s resources, the Government of India The GoI has issued Guidelines for Financial Support for PPPs is encouraging use of private sector funds using PPPs in in- in Infrastructure (vide OMs No. 1/5/2005 dated Jan 2006). frastructure. This is in line with the global experience. Benoit e-Governance projects however were not included in these (1996, p. 9) has also argued that “a varying array of financ- guidelines. In the year 2006, GoI approved the National ing techniques needs to be developed and exploited to mo- e-Governance Plan (NeGP) 9 that specified that the PPP bilize the private capital resources required for large model may be adopted wherever feasible. The PPP guide- infrastructure and other projects in developing countries”. lines are seen as special approaches with more flexibility, The second option i.e. privatisation has been supported as with a new set of rules and requirements, increased fidu- an approach to increase efficiency, greater specialisation and ciary oversight, and special approval mechanisms. Simi- for greater incentive to produce more goods and services so larly, in the UK, special guidelines have been approved for as to increase customer base and hence profits. The advan- PPP, PFI, and PF initiatives. It is an empirical question to find tage from the consumers’ perspective is that much needed out if PPP based projects result in the stated benefits. infrastructure assets that are beyond the fiscal capability The GoI’s PPP guidelines support innovative PPP based of governmental bodies can be created with private re- implementation structure, typically with the intent of sys- sources. Other benefits include improved quality, faster imple- tematic project development with funding support seeking mentation, and greater flexibility to institute, discontinue or private sector investment and management skills so that the modify a service (Khalid, Raymond, & Moreland, 2013). A gov- sponsoring authority can structure performance based service ernment agency would face pressures due to the lack of fi- delivery, while allowing the private sector to recover the in- nancing allocated under government’s budget, political vestment with appropriate returns. For example, in case of sensitivity, and conflicting interests. Therefore as an alter- greenfield projects, options such as build, own, operate, and native, “privatisation” has been advocated as an approach transfer (BOOT), BOT and the variants, concession, or lease to address infrastructure related challenges in several sectors contracts are possible. The guidelines recognise and support like road, power, water utilities etc. However, e-Government all three types of projects: a) revenue generating commer- projects often have multiple objectives and entail the addi- cial projects (concession/BOOT or its variants/lease con- tional requirement of generating the balance between a) tracts); b) efficiency enhancement/cost savings projects allocative efficiency i.e. the allocation of public resources with (management or service contracts, or engineering, procure- equity and fairness; and b) productive efficiency i.e. adding ment and construction (EPC) contracts with limited period value by improving the productive, or technical, efficiency. performance based O&M contracts) and c) non-revenue gen- Studies have shown that “full privatisation” has not served erating projects with high economic returns (e.g. sewerage this public policy function (Megginson & Netter, 2001; Vickers system) for project undertaken in PPP formats based on eco- nomic returns considerations. 8 http://finmin.nic.in/the_ministry/dept_expenditure/gfrs/ 9 GFR2005.pdf. http://meity.gov.in/divisions/national-e-governance-plan. 96 S. Ojha, I.M. Pandey However, the uptake of PPP projects in the e-Government care and flexibility to address their unique requirements. It sector in India has been slow and there have not been a large is important to identify and understand the different types number of implementations. If the policy objectives are to of risk and to study how these are addressed in project design seek private sector funds and management skills, then it is under different financial structuring approaches studied not clear if for projects where project-funding is fully avail- through the selected case studies. able and therefore technical skills can be procured from the market, whether PPP approaches would really matter. Another argument in the management literature regarding these fi- Data collection nancing approaches is that they merely convert the current “investment burden” to a “contingent liability” in future (as A uniform and standard data collection methodology under these projects the government has to provide a sov- was adopted in each case which included a standard ques- ereign guarantee to the private investors). tionnaire, review of project documents (to confirm and This study is focussed on unravelling the role of financing complete gaps) and key staff interviews (three or four key strategy (via the government traditional funding vs. the in- personnel per project). The standard questionnaire devel- novative funding under the PPP model) as a strategic tool for oped was based on assessment of six key dimensions that assembling the optimum mix of resources, including human, were identified from the literature review (these included the technology, and suppliers, and then configuring them in unique STOPE model for technology and organisational risks; the and sustainable ways. The ensuing questions that this study “third wave of thinking”10 for value for money (vfm); core com- aims to address are—Do alternative financing strategies only petency theory; risk management frameworks; PPP, PFI and provide an alternative source of finance, skills and exper- PF frameworks). For each of these six dimensions, important tise? Or do they actually impact the key factors which define factors were identified to prepare questions on the key issues the success (or failure) of e-Government projects? and how they were addressed by the managers as they moved ahead on major decisions at each stage of the project. For each of the six dimensions these factors and issues were iden- Method tified and suitable questions built into the questionnaire for keys aspects in each dimension. Before going into the spe- Research design cific questions, background information on the project was collected and a project profile was developed. This helped This study is based on the case research approach. Yin (1981, in understanding the context of the project and the key people 1984) has defined case study as a research strategy that fo- who could provide the relevant information for further de- cusses on understanding the current environment within a tailed interviews and analysis. The project write-ups were single case study setting. Yin has emphasised two key dimen- shared with the key official interviewed to confirm that data sions in case study research—embedded research and repli- collected reflected correct facts and also to re-confirm our cation logic. Using the embedded design concept (Yin, 1984), understanding of the key issues identified. this study aims to study a single case study at multiple levels for an in-depth analysis of key issues. Accordingly, we have examined the key dimensions at three stages of the proj- Data analysis ect’s life cycle—i) planning phase, ii) construction phase, and iii) operations phase. This allows us to understand how the The first step in data analysis for this study was based on project financing strategies impact the key managerial di- within-case analyses. Detailed case write-ups were pre- mensions at different stages of the project to affect its success pared through the data collection exercise described above. (or failure). This helped in putting together all the data/information col- The study also uses the “within-case analysis” and “paired lected from various sources in one standard format. Using case analysis” tools for strengthening replication logic for its these write-ups, tables were prepared for the paired case to findings, using multiple case analyses. For both the financ- identify any similarities and differences emerging within and ing strategies studied (traditional finance and PPP based struc- across the two groups. The idea was to identify any clear pat- tured finance), two cases each (pairs) were selected to assess terns in decisions or solutions emerging under the projects. the reliability of findings from one with another using a similar Tables and graphs advocated under case study methodology pattern. The pairs studied for each approach were also com- allowed us to understand the similarities in decisions and ap- pared with the other for a cross-case analysis to confirm/ proaches that are driven by process, policy and constraints reject similarities between the two approaches. The multi- in a particular financing approach adopted. Some dimen- case analysis and multi-stage embedded design have added sions occurred across all the cases irrespective of the ap- significant depth and rigour and have helped identify the mul- proach followed; for example technical complexity of the ICT tiple perspectives in understanding how value addition occurs solution, high level of risks, large state or nationwide imple- under the two widely different approaches in the financing mentation scope, and lack of in-house skills and expertise was and structuring of these complexes, high risk technology a common thread across all the four projects. However, the adoption projects. Most of the e-Government projects are re- main differences emerged in terms of how these challenges garded as high risk-high return projects. Using financial man- were addressed and constraints were removed/mitigated agement analytical tools the e-Government project manager across the three life cycle phases (i.e. planning, construction should use a risk-adjusted rate for calculating the NPV for risky projects. Therefore, e-Government projects with their high 10 Alvin Toffler, Previews & Premises: An Interview with the Author risks are required to be evaluated and designed with more of Future Shock and The Third Wave, Black Rose books, 1987, p. 50. Management and financing of e-Government projects in India: Does financing strategy add value? 97 and operations). The management of these dimensions has comprehensive programme of reforms in the management of been assessed based on a three point scale, that is, scores the state’s water resources. The project has adopted tradi- of 1 for satisfactory, 0.5 for partially satisfactory and 0 for tional project financing approach using government budget- unsatisfactory, during each of the three phases. ary funds. It has been under implementation over the last five The key issue therefore is not the confirmation of the con- years but has not yet been successfully completed. The po- cepts and problems identified through literature review, but tential benefits of the use of effective IT infrastructure how these are resolved using innovative approaches. This study were seen as: a) effectiveness in management of the state’s is not about proving any approach right or wrong, but to assess water resources, b) better dissemination of inter- and intra- the fit, relevance and workability of the approach in the spe- departmental information, and c) improved efficiency of cific context of e-Government projects. Replication of similar administration, such as improved revenue collection. patterns within the same paired group has helped us iden- The ID management was keen to tap the potential of IT tify some additional dimensions emerging out of these case for improving operational efficiency and its benefits to dif- study findings, these being for example the incentives for in- ferent stakeholders. However, no attempt was made to iden- novation, increased flexibility/options in decision making, and tify and quantify any targets, both financial and non-financial. leveraging alternative financing sources to scale up using a The project experienced high levels of pressure and the in- much smaller public fund base. To begin with, the case studies ternal political pressure resulted in including 26 sub-systems were undertaken based on six key dimensions identified from in the scope of its IT project. The project had an approved the existing management literature. However, emerging in- budget allocation for IT systems under the overall reforms ini- sights helped us to identify five additional dimensions from tiative. The size and period of budget availability became the case studies. The final case analysis is therefore based the main drivers of project design and implementation on 11 key dimensions—strategic, technical, organisational, approach. The objectives, benefits, and outcomes were not asset ownership and control, risk management, economic, expressed in measurable terms and were used mainly as a project management, procurement, growth, innovation, and justification for the investment decision. real options. The project’s scope and complexity resulted in the need to address a wide range of services and procedures. With mul- tiple stakeholders and pressure groups, the project experi- Case studies11 enced problems of continuously increasing scope. Within a very short time the IT project estimates went over-budget, Two case studies each have been selected from traditional increased in complexity and became unmanageable over time. and innovative PPP financing approaches. The full privatisation The ID project managers decided that its requirements were option has not been considered as e-Government Projects pri- unique and they would need to develop their own customised marily deal with delivery of public services to citizens, busi- application software. The ID’s systems required develop- nesses, and other government agencies and therefore active ment of new software for 26 separate functional modules cov- involvement of the concerned government agency is critical. ering organisation wide requirements for the computerised The cases have been selected based on three main crite- information system. The consultants developed a very com- ria : a) the project should have completed all the three key prehensive and complex technical solution with integrated stages, i.e. project planning and development, project con- systems for all the functions of the ID. struction, and project operations and maintenance, to study Inadequate skills and knowledge limited the capacity of the impact on the full life cycle of the project; b) the project the ID management and staff to understand and implement should have commenced after 2006, when GoI formally ap- such complex projects. Failure to recruit staff and develop proved the PPP approach under the NeGP programme; and expertise also contributed to lack of adequate capacity within finally c) the projects should be able to provide all the docu- the organisation. The computer training for staff continues ments and information as required in the project question- to be unsatisfactory and there are issues in terms of quality naire. Availability of project information and documents was and content of the training programme. Lack of senior man- one of the major limitations in this study and it would be useful agement support created new issues and coordination chal- to extend this study to a larger number of projects as they lenges between many units as they failed to agree and become available. However, selecting projects that have implement new computer-enabled procedures and stan- reached operations stage helped this study identify addi- dards. The ID’s administrative traditions, rules and pro- tional important features and their impact, e.g., impact of cesses are based on decade old rules and policies which have innovations and growth during operations phase and man- not been amended over the last 50 years. agement options for project management as the project The primary focus of the project team in the ID was on performance stabilises. asset ownership and control. The IT assets were purchased upfront to ensure ownership and to demonstrate quick utili- sation of budgetary allocations as an indicator of project prog- Case study 1: Computerisation of ress. However, the ID team had neither the technical capacity irrigation department nor the experience to operate and maintain these assets. The project acquired and installed highly expensive and state of This case study is about a state-wide12 computerisation project the art technical equipment and infrastructure. But this could of the irrigation department (ID) and was part of a larger not be used as the application software to run these systems was not ready even after five years. 11 Four case studies were undertaken as part of this research study. The financing structure of the entire project was based on 12 Name of the Indian state not mentioned to maintain confidentiality. traditional budget based sources of fund allocation. The total 98 S. Ojha, I.M. Pandey cost estimated for the project was INR 1470 million (USD 30 government’s public reform programme, became opera- million), including the capital expenditure of INR 1090 million tional in late 2007. It is a fully computerised system avail- (USD 22 million) and operational costs for two years esti- able round the clock. mated at INR 380 million (USD 8 million). The ID manage- Clear strategic direction and ownership from the top man- ment believed that the benefits from IT were both tangible agement helped address the goals, enhanced transparency, and intangible but it was not sure how to get a true fix on accountability, reliability and responsiveness in all govern- the “value” expected from this investment. The project was ment procurement activities. The traditional manual pro- decided based on key problems which the IT system was ex- curement methods resulted in large numbers of files, records pected to solve. and documents stored in isolation in many office locations, The ID decided to procure each component under the making it impossible to carry out a comparative study of con- project as a separate procurement package. The technical tracted prices. Different procurement methodologies were complexity of IT procurement and the large number of pro- followed in departments creating problems and complexi- curement packages became a major problem for the project. ties such as increased chance of errors, lack of transpar- The ID had limited internal capabilities and the procure- ency, reliance on individual discretion, unhealthy bidding ment process had to be re-advertised and repeated several environment, escalation of bid prices, and non-judicious se- times in many procurement packages. Instead of focussing on lection of supplier. The total annual procurement by the State project implementation requirements, the project team was of Karnataka was in the range of INR 70,000 million (USD 1400 fighting problems on the procurement front. million) at the start of this project. Thus, procurement ef- Technical project management was inadequate. The ID ficiency and effectiveness has strategic importance for eco- hired a reputed IT firm as project management consultant. nomic growth and development of the state. The project management consultant reported to the ID project After the implementation of the project, the GoK has been team that was headed by an irrigation engineer. The ID treated able to achieve significant reduction (about 40%) in transac- the project as a purely technical initiative to be planned and tion time, unsuccessful bidders are getting their dues back, managed by technical officials/staff. There was a lack of fit smaller bidders (for low value bids) are also participating, and in the IT consultant’s reporting levels and the IT consultant all records of transactions are now maintained online. One was also not part of the overall steering committee that of the main objectives of implementing the e-Procurement made major project decisions. The size and scope of the ID’s system was to eliminate bidders’ cartels and to promote a computerisation project lends itself to very high levels of risk healthy competitive bidding environment. The e-Procurement that range from inability to manage such a large IT project, system supports national and international bidding wherein inability to plan for and grasp the complexities involved in suppliers/contractors can bid from any corner of the world. complex IT projects, lack of skill for experimentation with The project has a private partner and the project’s finan- new emerging technologies, lack of IT skills within the cial structure is unique. The private partner has funded the organisation, lack of effective leadership, inability to manage entire project cost, both capital and operational, without any external suppliers, and lack of involvement of end-users of funding from the state government. The GoK established a the organisation. No analysis was undertaken to assess the dedicated team in the project cell from its own resources, risks related to operational risk, contractual risks for equip- but no upfront investments were made by the government ment and services, assessment of management capability, risks for capital or operational expenditure. The private partner related to management of organisational change, and so on. raised finance from the market on the strength of different This project was an exceptional case of failure and was not sources of revenue which formed part of the innovative able to provide any value addition even after five years in the revenue model. In addition to making the full project invest- implementation phase. ment, the private partner was responsible for customising the system to suit the requirements of the government and for maintaining the system for a period of five years. The GoK project team identified the following main chal- Case study 2: Computerisation of lenges right at the planning stage: a) complex set of require- public procurement13 ments, b) lack of standardisation in processes and document formats, c) complex technical design, and d) organisational This case study relates to the computerisation of public pro- resistance. The e-Procurement system is large and complex curement (CPP) in the State of Karnataka (GoK) with the with many modules/sub-systems which were required to be objective of supporting state wide reforms to achieve effi- fully integrated and coordinated to ensure that they worked ciency, cost effectiveness, and transparency in public pro- together as a single integrated system. Changing the atti- curement. These reforms were supported by a new legislation tude and mindset of the government officials proved to be called the Karnataka Transparency in Public Procurement Act, the biggest obstacle. Senior government officials were deputed 1999. The project also benefitted from the state’s experi- to oversee the implementation of e-Procurement. The GoK ence of many years and the lessons emerging from various established an e-Procurement cell with well-qualified and ex- e-Governance initiatives over the last decade, e.g. Bhoomi perienced resources from the market. To address the train- project for the computerisation of over 20 million land records ing needs of government officials and suppliers, two dedicated and Khajane, the online treasury computerisation project. The training facilities were established and a total of 5000 gov- e-procurement project of GoK, which supports the state ernment officials and 3500 suppliers were trained. A project specific governance structure was implemented with its own set of formal and informal processes for managing the new 13 Vikalpa, Volume 39, No. 4, October, 2014. relationship. It was decided to document the structures agreed Management and financing of e-Government projects in India: Does financing strategy add value? 99 upon in a procedures manual. The project had support from Case study 3: Computerisation of public the highest level within the state government. works department The private partner is engaged on a build-own-operate (BOO) basis with transfer (BOOT) as an option. The project The third case study relates to the computerisation of the is an example of collaboration and resource sharing. The Public Works Department (PWD) in a smaller and lagging state14 e-Procurement system is hosted in the GoK’s State Data in India. In this case the state government had planned for Centre and the private partner holds the rights to the intel- implementation of major reforms and investments in infra- lectual property (IPR) of the standard software product. structure to strengthen the state’s road network. The project The state government is the owner of all the processes, was aimed at development of computerised platform for man- applications, and components developed in pursuance of agement decisions thereby paving the way forward for new this specific project. The project team manages the PPP capabilities and management tools to achieve quantum im- contract based on pre-defined service levels agreed upon in provement in the functioning of the state’s PWD depart- the service levels agreement (SLAs) decided upfront as part ment. The main objective of the PWD’s management was to of the contract. enhance management capacities through improved informa- The e-procurement system has brought about the much- tion and informed decision-making and build efficient func- needed standardisation as more than 65 departments have tional systems to drastically scale-up its capacity to take on adopted the new systems. The GoK has reported significant new infrastructure projects and improve its performance. The savings (ranging from 20 to 40%), reduced travel costs, con- PWD commissioner emphasised to his management team that venience in submitting bids anywhere/anytime, and strict con- computerising the PWD’s functioning in a modern way would fidentiality of price bids submitted by various bidders. The enable public works to be delivered in a most cost and time e-Procurement system has eliminated bidder cartels, reduced effective manner ensuring optimum utilisation of resources. procurement cycle time, facilitated a healthy competitive In terms of technical solution, the PWD management team bidding environment, enhanced bidder participation and decided to have a single common platform for the function- standardised procurement methodologies. The revenue based ing of all field staff as well as headquarters (HQ) staff working business model has benefitted significantly with impressive on the same system. This required many functional areas to growth on two counts, i.e. firstly, the number of tenders has be covered and the computerised system needed to cater to increased from 15 in 2007–08 to 4883 in 2009–10, and sec- the functional requirements of about 325 office locations ondly, the value of the tenders handled through the system with 3000 general users and over 1300 technical staff. In ad- has increased from INR 430 million (USD 9 million) in 2007– dition to the PWD’s own functional modules, integration needs 08 to INR 192,220 million (USD 3880 million) in 2009–10. This were identified with many other systems, e.g. the State’s required proactive planning by the private partner and the treasury, budget and HR systems. The project, therefore, re- government to continuously upgrade the systems to meet the quired complex technical solution architecture. The scope of special requirements of the new agencies. The number of gov- the proposed computerisation project lends itself to a number ernment departments has increased from 7 to 65 in the current of risks including the management of such a complex project, year and the number of suppliers has grown from 130 to a total the ability to plan and grasp the complex technology in- of 9533 until August 2010. volved in such projects, lack of IT skills within the organisation, The project has implemented technical innovation through and the inability to manage technical vendors of software, use of “virtualisation”. During our discussions with the private hardware, and networking equipment. partner, the technical team explained that—“in the tradi- Since the PWD had a limited in-house capacity to manage tional manner, the vertical scalability model was bound to a complex IT project, the PWD management set up a project consume multiple CPUs and would have ended up using at least implementation cell within the PWD, staffed with external 70 servers to get the same performance”. The system cur- experts. Another important initiative was the business process rently uses eight servers in all. Virtualisation has added flex- re-engineering in the PWD department to ensure that the new ibility, ease of use, and scalability and helped in containing computer based systems did not operate like manual systems, costs. Flexibility in decision-making has been built through and inefficiencies in the manual systems could be identified a unique set of options in the project, which allows the man- and removed in the computerised systems, and redundant agement to decide to i) purchase the e-Procurement soft- processes and steps could be eliminated to achieve higher ware for the sale price quoted by the partner, or ii) decide efficiency and effectiveness. The PWD decided that training not to purchase the e-Procurement system. In addition, the of PWD staff for creating internal capacity was a very impor- GoK has built in the right to purchase the e-Procurement so- tant activity and the training programme included special- lution on an outright basis, at any time during the course of ised training courses for different target groups, including user the agreement. training, IT technical training, and advanced training for IT This case illustrates the management and structuring of managers. a government project under the PPP model using private funds. The project’s financial structure is based on the tradi- The partnership seems to have ensured smooth sailing in tional government budgetary funding for both capital and op- spite of deep-rooted institutional challenges, far reaching legal erational expenditure. The first phase of the project funding and policy reforms, inadequacies in IT infrastructure, chal- included only expenditure for setting up computer systems lenges in skill-enhancing and capacity building. The PPP ini- in 11 office locations and included costs for a central data tiative allowed development of a unique business model centre, hardware and software modules for sub-systems for where the project assumed a financially independent and free-standing initiative on the strength of its own future rev- 14 enues potential. Name of the state is not mentioned to maintain confidentiality. 100 S. Ojha, I.M. Pandey project management, project accounting, resource manage- village level. At the national level the CSC project is managed ment, roads information management system (RIMS) and roads by the department of IT, at the second level is an entity maintenance system (RMS). It was planned that during Phase termed the Service Centre Agency (SCA) that is the state level II of the project the rest of the divisional offices would be com- operator and at the village level, each SCA has appointed a puterised exactly on the lines of the first phase implemen- Village Level Entrepreneur (VLE). The VLEs are indepen- tation. The total project cost included the cost of the pilot dent entrepreneurs who are willing to invest and operate the phase of Rs 86 million (US$ 1.8 million) and scale up costs were centres. estimated at Rs 779 million (US$ 17.32 million). As a risk miti- The CSC project has developed a complex centralised de- gation strategy, initially, a pilot phase was implemented to ployment architecture. This technical solution adopted by the ensure a proof of concept before investment in scale-up was SCA ensures that it is able to undertake centralised infra- made. The systems were to be designed with modular capa- structure management and full control over all the CSCs under bilities to scale up to a full-scale state level system in future, its control. The technical solution for CSCs is based on an as required. No financial and organisational risk assessment overall integrated approach where the CSC in a village is con- was carried out. Risks arising from lack of internal technical nected with the main SCA in the state, which in turn has link- capacity were addressed by hiring the best external experts ages with the relevant government agencies, corporates, and from the market for the entire project period. content providers at the back-end. This required a complex Post implementation of a successful pilot project, the PWD approach using a centralised portal which allows multiple ser- is “stuck in the middle” as it has no funds available for vices to be delivered through Internet-based transactions, state wide roll out of the new systems. The pilot project has multi-language support, transaction routing, payment gateway demonstrated that an efficient management information etc. system has the potential to enhance the PWD’s capacity and The financial structure of the CSC project is based on provide easy access to information to all the stakeholders, private investments for the establishment of 100,000 CSCs leading to increased efficiency and accountability. The PWD across the country and repayment of interest and returns on currently has two systems running in parallel (computerised investments through revenues generated by the CSC project. systems in 12 pilot locations and the existing manual systems), The cost of capital for establishment of CSCs was financed and does not have the funding to renew the consultant from a mix of debt and equity. Under the PPP model for the contracts for continued technical support. The PWD man- project, the government supports the CSCs with a guaran- agement team has made requests for additional funds to teed minimum support of Rs 3300 per month for the initial support the scale-up of the project but the state govern- three years of operations. Field study carried out by the ment is unable to support the request due to its own finan- Department of Information Technology, Government of India cial situation. For the last four years, the PWD management (2006) has shown that almost 46% of the CSC centres are open team has failed to receive any budgetary support from the seven days a week. However, electricity supply remains a state government. This case, thus, underlines the serious con- problem. Although 85% of the villages are electrified, the straints of the traditional financing approach. supply of electricity in villages is poor and irregular and many CSC have not invested in power backup. In terms of invest- ments in assets, a CSC entrepreneur has invested in an average Case study 4: Common service centres project floor area of about 146 sq. ft., and in desktops, laptops and printers. Risks in the project have been systematically studied, The common service centres (CSC) project is a strategic na- identified, and managed. At the beginning of the project de- tional initiative of Government of India to establish internet- tailed studies were carried out by professional agencies to enabled common service centres through which government assess the demand for government (G2C) and other private services can be made available to citizens in rural and remote sector services (B2C) in the rural areas. The studies identi- areas. Under the NeGP formulated by the GoI, the main vision fied the following six revenue streams: subscription ser- is to provide government services in an integrated manner vices, government services for citizens, business services for at the doorstep of the citizens at an affordable cost. The CSC citizens, business to business services, non-network rev- project’s main objective is to establish 100,000 rural kiosks enues (photos, forms, documents, printing etc.), and train- across India. These service centres would be equipped with ing and vocational courses. computers, printers and Internet connectivity with the aim As the revenues from the six revenue streams increase, of providing high quality and cost-effective government the surplus available for appropriation between the three services. agencies (namely VLE, SCA and SPV) is estimated to grow sig- Implementation of a nation-wide project of this size, nificantly. The appropriation of operating surplus was assumed scope, and complexity has significant challenges. The CSC to be shared between the VLE, SCA and SPV in the ratio of project decided to use the PPP approach to bring together 55:40:5. The returns against these investments are at ac- a partnership-based approach between the government, the ceptable levels as the operating incomes can range from INR private sector, and the social sector non-government agen- 3000 to INR 10,000 per month. Many services are being offered cies. The main objectives were to a) save the huge cost to to citizens at their doorstep. As the services through CSCs in- the government by leveraging the government’s limited funds, crease, VLEs are likely to make higher incomes from the CSC b) integrate scale to achieve efficiency and reduce cost of business. The PPP model adopted for the project shows that delivery of services, and c) harness the best practices and the concept is correct and the project can develop finan- limited resources. By January 2012, the CSC project had es- cially viable e-services mechanisms. tablished 97,159 centres across all states in the country. The The CSC project has not been able to achieve its full growth project has the following three levels: national, state, and potential due to non-availability of G2C services. Government Management and financing of e-Government projects in India: Does financing strategy add value? 101 agencies that are supposed to provide these services have not The cross-case-analysis shows how some of the main fea- yet computerised their back-end systems and processes. In- tures and incentives are different under the two approaches. novations are the key to the success of the CSC operations. For example, the innovative financing under the PPP model The CSC concept is dependent on the VLE’s entrepreneurial has built-in incentives for growth and innovation for the IT ability and acceptability in society. The PPP model to provide solution provider which directly help the project to improve financial support to the government is quite innovative revenues and recover costs. However, these incentives are but has some limitations, namely it is input-based and not missing in the government traditional system of financing, output based. Although the government support is termed as where the IT solution provider is paid in full for the IT solu- “minimum revenue guarantee support”, it is not based on tion after construction is complete. Once he is paid in full, output delivered. This fails to provide any push to increase there are no incentives for new ideas and innovations in the the number and types of additional services to be delivered operations phase as he is not involved or does not benefit from by CSCs. Another flaw in the PPP model envisaged for the CSCs more effective and efficient operations. is ineffective sharing of roles and responsibilities. The within-case analysis shows how the same phases and In conclusion, the CSC’s PPP approach looks promising pro- project activities are implemented differently under the two vided corrective action is taken to improve the deficiencies approaches. For example, common dimensions like top man- of the business model. A recent study of the VLEs has con- agement commitment and leadership exist under both the ap- firmed that they are upbeat about the CSC scheme and over proaches; however, under the traditional financing approach 90% of the VLEs are planning to expand their CSCs. The CSC the level of commitment and support is reduced signifi- project has shown that use of structured financing ap- cantly after the initial stages. This happened due to several proach in e-Government projects has helped the govern- reasons—lack of funding allocation in later stages, or trans- ment leverage on several objectives including raising finance fers of original “champions”, or when large procurements were from the market for large national level scale-up. completed. As project fund allocations were reduced or when funds were already committed, the interest in implement- ing the contractual commitments was considerably low. Analysis and discussion Our findings show that in the PPP based strategic financ- ing of projects, the key dimensions for the project’s success The comparative analysis of the case studies brings out the have been addressed more effectively showing much higher strengths and drawbacks of the two main alternatives of fi- achievement in each of the 11 key dimensions. The financ- nancing (and managing) e-Government projects—traditional ing strategy adopted was therefore important, as it had financing by the government and innovative financing under significant impact on strategic management, senior level the PPP model. The findings from this analysis bring insights commitment, and eventual success of the projects. The find- from two main perspectives ings for Pair I—traditional financing cases (Table 2)—show that in this approach several dimensions like strategic focus and 1) cross-case-analysis—overall differences between the two commitment, asset management, and project management financial structuring approaches, and performed well. As these projects were large and high risk, 2) within-case analysis within project phases/activities across attention from the senior level ensured close strategic focus. the life cycle phases in e-Government projects (embed- The government rules ensure a high level of control over the ded design). procurement of inputs and also physical control over assets. Table 2 Paired case analysis. S. No. Key features Pair I: Traditional Pair II: PPP based financing financing Case 1 Case 3 Case 2 Case 4 1 Project leadership at top level No Partly Yes Yes 2 Technical upgrades for HW and SW No No Yes Yes 3 Sharing of technical and project risks No No Yes Yes 4 Technical innovations during project operations period No No Yes Yes 5 Upfront sunk investment Yes Yes No No 6 Payments for outputs only No No Yes Partly 7 Legal commitment for full project period No No Yes Yes 8 Tariff and revenues to support financial viability of the project No No Yes Yes (full/partly) 9 Payment for “outputs based” deliverables No No Yes Yes 10 Financial viability, project revenues, cash flows etc. planned No No Yes Yes upfront for full project period 11 Option “to buy or not to buy the assets” after project period No No Yes No 12 Project management by technical experts/professionals No Partly Yes Yes 13 Independent project governance structure No No Yes Yes 102 S. Ojha, I.M. Pandey In both cases, due to lack of project management capacity, adopted and therefore have little or limited flexibility to re- project management consultants were hired from the market. structure the project features even if they seek to make This ensured high level of project management in both the changes in the project design. projects. However, major problems were encountered in tech- On the other hand, projects under the PPP based strategic nical procurement in the ID case study as the professional financing approach (Figs. 4 and 5) ensured financial viability for consultants were side-lined by the government staff on pro- the entire project period, involved contractual arrangements curement issues. for sharing of technical and project risks, legal commitment for the entire project period, and developed new and indepen- dent governance structure as essential requirements of the Replication logic project development guidelines. This analysis reveals that ad- ditional features i.e. technical innovation during the project The within-case analysis adopted as part of this study helped period and upgrading the HW and SW by the IT vendor on its us identify the key features of each case individually through own decision would not take place in the government adopted a detailed project questionnaire. The paired case analysis in traditional financing because the procurement of HW and SW Table 2 helped us identify the resemblance in features between was completed upfront. Similarly, the options to buy or not to the project cases with the same financing approaches. The buy the HW and SW later at the end of the project period were key features emerging from the paired case study analysis result not possible under the government’s traditional financing option. from the essential requirements of the concerned financial In the PPP financing option this is possible because the trans- strategy option adopted. For example, Pair I projects (Figs. 2 action structuring allows flexibility for the IT service provider and 3) that adopted the traditional financing approach to own the assets and to be paid for according to SLA based had the following features: upfront sunk investments, own- services/outputs, and the innovations as well as upgraded assets ership of hardware (HW) and software (SW) assets, contract to directly benefit the IT vendor/partner. It is important to note management responsibilities of the implementing agencies, that these features are possible in the PPP option, but only in funds availability based on financial approval by budget year, case these unique features are invoked as part of the project and fiduciary rules based on GFR and procurement rules. It structuring at project development stage. For example, the is important to note that under the traditional financing e-Procurement case has incorporated this option in the project approach, the project managers are governed by a set of design; however, the CSC project has not opted to use this feature policies, rules and procedures under the financing strategy in their project. Figure 2 ID case study (Case 1—Government’s traditional financing). Figure 3 PWD case study (Case 3—Government’s traditional financing). Management and financing of e-Government projects in India: Does financing strategy add value? 103 Figure 4 E-Procurement case study (Case 2—PPP innovative financing). Figure 5 CSC case study (Case 4—PPP innovative financing). We can, therefore, argue that these rule based features In Pair II, PPP approach based cases (Figs. 4 and 5), the will be replicated in other projects as these have to be key dimensions for assessment have been addressed more ef- complied with, as part of the policy and rules. In addition, fectively, showing much higher achievement in each of the the PPP based approach will provide optional flexibility based 11 key dimensions. The assessment of the e-Procurement features for PPP projects and they will also have a higher project case study (Fig. 4) shows that all the 11 dimensions chance of being replicated because they a) provide addi- have been addressed fairly well. The technical project man- tional flexibility for project structuring to meet any special agement by the private partners enabled the government requirements, and b) contribute to underlying business in- agency to focus on issues of organisational change, training terests of the private partner through growth, cost reduc- and capacity building. The focus on payment by deliverables/ tion, improved profitability, and so on. outputs provides in-built incentives to growth by depart- Both cases however experienced serious challenges in ments, by users, and by number of transactions. As the fees managing the organisational change and risk management per transaction are fixed, the private partner has incentives issues. The traditional approach focusses on procurement of to bring in innovations to improve efficiency and reduce costs inputs at the expense of addressing the issues of how the both capital and operational. The joint project manage- completed assets will be operated successfully without ad- ment model adopted in PPPs has helped both overall project equate technical skills and capabilities. The technical capa- management and technical project management issues. The bilities required are diverse and different at each stage of the risks in both the projects continue to be at high levels but project life cycle i.e. design, construction and operations. have been managed well through risk-sharing and risk miti- This capability and experience cannot be built overnight by gation strategies devised jointly between the two partners. any organisation. In both the projects, it was observed that The flexibility in decision-making for the government agency the project teams continued fighting the complex technical reduced the risk of failed investments in both these projects. procurement and design issues and therefore failed in focus- sing on issues relating to innovation and growth. Both proj- ects allowed zero flexibility in decision making and were bound Theoretical perspective and propositions by complex contractual and technical problems. In both the projects, the entire risk of the project was borne by the gov- The analysis of the main findings from the case studies dem- ernment agency which had little prior experience of manag- onstrates that the financing strategy adopted was of critical ing or operating such projects. importance, as it had significant impact on the strategic 104 S. Ojha, I.M. Pandey management in terms of the success of the projects. The pat- observe that the project risk is borne entirely by the gov- terns that emerged from these strategies enabled us to draw ernment agency, the total cost of the IT solution is paid inferences regarding the conditions for the success of upfront, and the responsibility for operations falls entirely e-Government projects. We derived four propositions from on the implementing agency. All the four case studies confirm the inferences drawn from the analysis of the four case studies. the existence of “technical complexity” and that the “risks are real” and that they cannot be eliminated. But they can be identified and managed effectively with the right techni- Proposition 1 cal expertise. The PPP based models help the government organisations acquire this technical expertise through part- Each e-Government project has unique requirements in terms nerships and the risks can be shared with the private partner of governance, risk management, and sharing of resources. who has the right expertise and experience. For example, in A one size fits all approach cannot be successfully adopted the CPP project, the main principle was that the risks should in all the projects. Our Proposition 1 is as follows: be allocated to the entity that is best suited to manage the same. The sharing of risks was formally defined in the con- The PPP based financing approach, in contrast to the tra- tract as it requires careful structuring. The case studies un- ditional financing approach, facilitates customised project derline that the right skills required for these projects cannot structuring, and includes tailor-made governance model, be built overnight, they are high cost resources and even when risk management mechanism, and sharing of resources. acquired they can be difficult to retain. The third aspect highlighted by the case studies is that the e-Government projects are complex technology adop- IT asset is complex, has high specificity, and experiences high tion projects which require understanding of the technol- level of obsolescence. These characteristics make these proj- ogy issues as well as organisational changes. Both the PPP ects high-risk implementations. Therefore, excessive focus projects (CPP and CSC) created an independent project man- on procuring and owning these assets is counter-productive. agement structure that was specifically designed to manage Successful projects have shown that the real value from the the challenges relating to technology, policies, process, and e-Government project’s assets is derived from their long term human resource management, and to the governance needs and effective use and not from their ownership. Under the of these projects. In both the cases, full time high-level of- CPP project, the systems are owned by the private partner ficials were designated along with the team leader from the but the e-Procurement software is hosted in the GoK’s State private sector IT solution provider, as members of the gov- Data Centre that is owned and administered by the Govern- ernance team. Both the parties worked together on basic prin- ment of Karnataka. The PPP models help to structure proj- ciples of the partnership arrangement. In contrast to this ects where the government agency can have access to these approach, in the traditional financing cases (ID and PWD) a assets, derive value from the assets, and have the “real option” regular IT project committee was established with members to acquire them when it is most suitable for the project owners. from the implementing department, finance, and other gov- ernment departments. The private sector IT solution pro- vider reported to the committee and had little say in the Proposition 2 decision-making process. Strong leadership is one critical pattern required in all four Successful implementation of e-Government requires a trans- cases, according to cross case analysis. In project manage- formed organisation which has adequate core capability for ment research, top management support is considered a overall project management. Our Proposition 2 is as follows: critical success factor (Young & Jordan, 2008). However, in government departments, transfer of senior officials every The PPP based financing approach, as compared to the three years creates serious challenges. In our case studies, traditional financing approach, is better suited for all the projects had support from the highest levels within managing organisational change, building and enhancing the government in the beginning. After some time, both the managerial capacities, and technical capabilities. traditional financing projects (ID and PWD) gradually expe- rienced loss of top-level support. This resulted from the lack The case studies have highlighted the most critical factors of funding allocation in later stages, transfer of original cham- for success of e-Government projects, i.e., the ability of an pions of these projects, lack of top management interest after organisation to change and to learn new skills. Many of the completion of large procurements, and lack of contractual/ new skills required do not exist in the government agencies legal commitment binding the organisation. In contrast, under and the failure to build particular capabilities is the biggest a PPP arrangement, both partners continued to have top level problem in implementing the e-Government project. In the support mainly due to external investor pressures, funding ID case, the project was not able to deliver staff training suc- pressures during the operational phase, sharing of large cessfully and in the PWD case the training remained limited payments/revenues over operations phase, and continued con- for the pilot locations only. Although in the e-Procurement tractual commitments over the project life. case the private partner held multiple training programmes In the traditional financing approach, both the case studies for staff in 65 departments and for 3500 suppliers. Simi- (ID and PWD) have shown that the risks are neither system- larly, in the CSC project, training was provided to staff in over atically identified nor managed adequately. However, in PPP 95,000 centres. Benefits from IT enabled systems will result based projects (CPP and CSC), risk identification and its man- only when the process re-engineering identifies old, redun- agement are the most critical aspects for ensuring the proj- dant, and inefficient processes and designs new IT-enabled ect’s risk-adjusted returns. In traditional financing cases, we processes to improve efficiency, reduce errors, and ensure Management and financing of e-Government projects in India: Does financing strategy add value? 105 faster processing and transfer of information for quicker and efficiency and productive efficiency that is superior to tra- more efficient decisions. ditional public provision. (HM Treasury, 2000). The project The analysis shows that e-Government project manage- therefore must strive to complete successful asset construc- ment capacities do not exist within the organisation and that tion and also its effective and efficient use. In PPP model based the critical capabilities cannot be outsourced fully. The biggest projects, this is supported through the transaction fee models. challenge for any government agency is to build these core For example, as in the CPP project, two types of transaction capacities in-house. All the four case studies have opted for fees are included: a) fixed fee per bid, and b) percentage of creation of a project management cell staffed through ex- estimated contract value (ECV). Similarly in the CSC project, ternal professionals and experts as well as internal experi- the payments by government are contingent on the achieve- enced staff. Both technical and management capabilities ment of agreed-upon service levels. The findings show that are required for addressing the internal integration require- under a PPP project, the cash-flow pattern undergoes sig- ments. Any organisation attempting to achieve these capa- nificant changes and most of the payments are made during bilities will be presented with serious challenges. Therefore, the operational phase. these projects require project management support through- In PPPs, the improvement in efficiency is derived from three out the project life cycle. specific sources, namely: i) specific ownership structure of The case studies have shown that the e-Government proj- the assets; ii) bundling together of the construction and service ects have multiple procurement packages with highly tech- provision, and iii) sharing of risks and associated rewards nical requirements such as hardware, system software, (Ghobadian et al., 2004). In our findings, both the PPP cases databases, application software, storage, data centre, net- (CPP and CSC) established project specific governance struc- working, specialised consultancies, and so on. These are tures, bundled the asset construction and operations respon- specialised procurements for which the government agency sibilities at least for the first few years, and have formally normally does not have any in-house experience or exper- agreed to sharing arrangement of risks and returns from the tise. The ID project experienced serious contractual de- project. The traditional financing approach tried to address faults which demonstrate that the contractual arrangements the first aspect partially, but not the other two. work well as first line of defence, but they are incomplete to Another significant pattern in the PPP based approach address the dozens of unspecified situations, unforeseen prob- relates to built-in incentives for growth. In these projects, lems, limited asymmetric information and the many enforce- growth is a primary objective where the private partner has ment issues. All these challenges leave the government agencies to recover the project costs and his profits from transaction- vulnerable to agency conflicts and interpretation of legal based fees. In the traditional procurement approach, the documents. capital cost and operational costs are incurred through budget resources, and there is no pressure or incentive for the IT supplier to push for growth. In the CPP project, e-Procurement Proposition 3 started initially with only 7 departments, but by the end of year 2010, the system was operational in 63 state depart- The successful implementation of e-Government projects re- ments, the number of users of suppliers increased from an quires provisions for incentives for innovation, cost savings initial 130 to over 4800 in the first three years. Similarly, in and growth. Our Proposition 3 is as follows: the CSC project the centres have grown to 97,159 across the country, and over 46% are open seven days a week and the The PPP based financing approach, in comparison to the services being provided are growing steadily. In compari- traditional financing approach, is more amenable to build- son, the ID systems failed to take off to stable operational ing incentives for innovations, cost effectiveness, and stage and the PWD project remained at the pilot stage itself. growth. There is no incentive for the private partner to build in- Proposition 4 novations in projects under the traditional financing ap- proach. In a PPP approach, the private partner is committed The e-Government projects involve high investment costs to provide the services agreed upon and the cost savings and and are unique and one project may differ significantly from additional revenues from the innovations benefit the private another. Therefore, it is not possible to develop a standard partner fully (or are shared). This provides the private partner structured approach for decision making. A flexible deci- with strong incentives to control the capital and opera- sion making structure is needed for the success of the tional costs and to improve the revenues of the systems e-Government projects. through new ideas and innovations. In the CPP project, the private partner used “virtualisation” for added flexibility and The PPP based financing approach, as compared to the tra- scalability (by using 8 servers in place of at least 70 servers), ditional financing approach, adds value to a project by cre- resulting in huge cost savings. ating options for certain investment decisions and risk The value from the e-Government projects is derived from management. “IT asset value” and from “value in use” (Bloch & Hoyos-Gomez, 2009). However, we find that in the projects adopting the gov- In the e-Procurement case study, we can see a unique ernment’s traditional financing approach, the main focus is source of value-addition through building “options” for gov- on the IT asset value. To make sense economically, the UK ernment’s decision-making in the PPP contract. Pandey (2009, government has defined its policy on PPP initiatives and re- p. 303) defines real options as “those strategic elements in quires that a PPP has to generate a combination of allocative the investment that help creating flexibility in operations, or 106 S. Ojha, I.M. Pandey that have the potential of generating profitable opportuni- an alternative source of finance, skills and expertise, or do ties in future”. Real options provide discretion to take certain they actually impact the key factors which define the success investment decisions, without any obligation, for a given (or failure) of e-Government projects? The analysis of the find- price. Under the e-Procurement project, the government has ings confirms that the financing strategy adopted in the project the right to purchase or not to purchase option of applica- was of critical importance and in addition to the additional tion software and/or of the hardware from the private partner. source of project funding and technical expertise, the PPP Risks in a project relate to uncertain outcomes which have approach had a significant impact on strategic management a direct effect either on the provision of the services (e.g. and the success of the projects. Under Proposition 1, the PPP because the IT systems are not built on time), or the finan- based approaches have helped develop customised structur- cial viability of the project (e.g. loss of revenue due to limited ing through project specific governance models, strategies for demand or increased costs). In either case the result is a loss risk identification and risk-sharing. The second proposition or cost that has to be borne by someone and one of the main emphasises the building of unique partnerships to build core elements of innovative PPP model is to determine where this capabilities required to make the organisational change and loss or cost will lie. The PPP arrangement helps shift (or at build capacities to successfully construct and operate these least share) this loss with the private partner who is better projects. Proposition 3 helps us address the challenges through qualified and equipped to take on this risk. building innovations for technical solutions, output based fi- nancing (using transaction fee based models), and adding ad- Proposition 5 ditional sources of value from growth. Finally, Proposition 4 helps us to address the question relating to mitigation of stra- tegic errors resulting in loss of investments through building The PPP based financing transactions are, however, more “real options” in a project’s decision-making. These options costly when compared to the traditional financing approach, add to flexibility in making key decisions and provide man- and the financial structuring requires professionals with ex- agers the right to decide without taking on any obligation. pertise and experience in developing the legal and financial And finally, the fifth proposition acknowledges that the structures to augment the financial leverage, while manag- innovative PPP led approaches are more complex, are based ing the project risks and addressing other specific require- on the existence of a sustainable business model, require high ments of the project. level of expertise, and are more expensive to implement. Therefore these approaches may be suitable where the project The PPP based financing approach, compared to the meets these specific requirements. traditional financing approach, is more complex, re- This study underlines the importance of financial struc- quires a sustainable business model, needs high level turing to build a PPP model that provides flexibility to address experts, and involves significantly high transaction the multiple dimensions and unique requirements of each in- costs. It is therefore suitable for projects that meet dividual project. The overall perspective setting out the re- these specific requirements. search propositions, the main dimensions for the analysis, key findings and the resulting implications are presented in Fig. 6. Similar to the government’s traditional financing ap- The initial 11 dimensions evaluated have been re-grouped in proach, the PPP based approach may not be suitable under 13 areas under 5 main areas. Asset management has two sub- all circumstances. The application of the PPP model may components—asset ownership and asset’s operation and main- require some basic pre-requisites, for example, existence tenance, and the organisational area also has two important of a sustainable business model and feasibility of clear sub-components—core capabilities and change manage- segregation of responsibilities between the two partners. In ment. With this evaluation of 13 key features, the study brings the absence of a fully financially sustainable model, other vari- out some exceptional value-additions which can be pro- ants like PFI may be used where the government steps in vided by the innovative PPP based approaches in success- with funding to support the financial feasibility gap. The main fully implementing e-Government projects. Projects adopting objective therefore is not to apply a one size fits all ap- the traditional financing approach will experience higher proach but to carefully select the most suitable approach levels of risks, inflexibilities in procurement and structuring that is “fit for purpose”. Therefore, mainstreaming of PPPs of project, and lack of innovative options, and would there- in e-Government projects would require professional exper- fore require exceptional expertise in project managers who tise and would require a clear set of guidelines and pro- could address all these challenges. cesses that address the complexities in structuring and The main argument from this study against the tradi- execution of PPPs, and provide detailed guidance on steps tional financing approach adopted in e-government proj- and best practices in implementing PPPs in e-government ects is that it fails to take into consideration the project risks projects. The guidelines should also address the critical issues and revenues and their optimal allocation to support prudent and challenges relating to policy and legal frameworks, pro- investment decision-making. The traditional financing ap- curement rules in government, issues in assessment of costs proach causes excessive risk taking by the government, as the and benefits, specialised expertise, and additional transac- risks are not shared with the technical service provider who tion costs in implementing the PPP approach. is more qualified and experienced to manage the project risks. Even when these risks are identified and evaluated, the tra- Conclusions ditional financing approach provides little flexibility to build some of these critical components (partnerships, project spe- Our analysis has helped us answer the questions which we had cific governance models, real options, growth, innovation etc.) raised in the beginning. Do the PPP approaches only provide as the options to structure the project transaction are limited. Management and financing of e-Government projects in India: Does financing strategy add value? 107 Figure 6 Overall perspective. Figure 7 Propositions and sources of value-addition. 108 S. Ojha, I.M. Pandey In the context of high risk and complex technology adoption Ghobadian, A., Gallear, D., O’Regan, N., & Viney, H. (Eds.), (2004). projects, the PPP based innovative financing approach is con- Public-private partnerships—policy and experience. Chippenham sidered more valuable than traditional financing. and Eastbourne, UK: Palgrave-Macmillan. Our analysis indicates that the PPP based approach helps Grimsey, D., & Lewis, M. K. (2004). Public private partnerships— The worldwide revolution in infrastructure provision and project build PPP models for e-Government projects and therefore finance. UK and Northampton, MA, USA. has the potential to deliver significant real benefits from several Grindle, M. S. (1997). The good government imperative: Human re- sources of value addition. The key propositions and how they sources, organizations, and institutions. In M. S. Grindle (Ed.), are supported by sources of value addition are summarised Getting good government: Capacity building in the public sector in Fig. 7. This research study has identified important in- of developing countries. Cambridge, MA: Harvard University Press. sights on additional sources of value-addition from the PPP Hart, O. (1995). Firms, contacts, and financial structure. Oxford, UK: based approach from opportunities for growth, innovation, Oxford University Press. and options in decision-making in complex high-risk environ- Hart, O. (2003). Incomplete contracts and public ownership: Remarks, ments. However, not all e-Government projects would meet and an application to Public private partnerships. 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