The Commonwealth of Virginia and VITA have put out three new RFPS that will heavily impact how e-government works in Virginia. And it may not be in a good way.
First a little history. In 1997 the Commonwealth awarded Virginia Interactive, a subsidiary of NIC Inc (called the National Information Consortium at the time), the contract to maintain the state portal and enhance citizen’s access to government information. The business model was new and creative, involving no new tax dollars be spent. It was a revenue sharing model pioneered by NIC where Virginia Interactive (called VIPNet in the day, and later VI) would create enhanced access to DMV motor vehicle records, and take a portion of the revenue created by that enhancement. For every $3 record sold, VI received $1, and in exchange for that money they would maintain Virginia.gov, create Web applications for the state, and design Web sites. It made VI around $6 million a year, but costs the state no money other than revenue it wouldn’t have really gotten in the first place.
I worked for Virginia Interactive from the early creation of the company through 2005. Fair disclosure, VI management and I are not on good terms. They hate me and anyone who knows me, and I’m not fond of them either.
So what’s the story with the RFPs? Well, VI has had the contract renewed since it began. Sometimes there was an open bid for the RFP, but it was a formality. No one could really compete with VI, and no one really expected them to. But over the life of the last contract extension, VITA seems to have had issue with something. Word on the street, often wholly unreliable, was that the state was annoyed with VI’s lack of customer service. That, coupled with budget cuts and the amount of money the state could make up by taking away VI’s revenue share, and they decided that when the current VI contract expired, they would split up the services into three RFPs, and let the dogs fight over the scraps.
I can see the reasons for these feelings. VI’s management came into the gig in its heyday. It was a cash cow requiring very little effort. $6 million plus a year, just for maintaining the status quo. They’ve never had to sing for their supper, they just had to show up and eat. And $70 million over the life of the contract is a lot of money to exchange for bad service and an air of entitlement. It didn’t help that while agencies were slashing budgets, VI was hosting lavish parties.
The new RFPs appear to be trying to get the same services or better, for less. Revenue sharing – although technically still allowed – look to be taken off the table in any effective way. VITA wants to switch from a partnership to a vendor relationship.
Seriously?
The revenue sharing model is still a great idea, especially in government. It’s really the only way to ensure innovation and success. The Time and Materials method just doesn’t work. Without the revenue sharing model, more than half of the Web services available in Virginia today wouldn’t exist. Even the enhanced access to DMV records wouldn’t be around, or at least not in 1998. Possibly five years later and at a much higher cost. Possibly.
Revenue sharing is what created the entrepreneurial and inventive approach that allowed Scott Fowler, the Director of development at the time for VI, to come up with a solution that worked with Virginia’s unique data situation. Without the carrot, it just wouldn’t have happened. And if people didn’t use it, VI wouldn’t have made any money. And if VI made money, so would the state. That was the foundation of the model. In order for VI to make money, the customer had to make money. Time and Materials models just don’t work that way. A vendor may bill for a lot of time, but once the finished product is turned over, they don’t care how well it works. They certainly don’t help market it. Under the revenue sharing model, the partner needs for it to work, work well, and be used often. Otherwise they don’t make up their loses, much less a profit. And the state doesn’t have to have cash hanging around to get online services, they just need to have the promise of money.
In addition, the RFPs aren’t terribly competitive. VI still maintains an unfair advantage, even though they have less reason to want to win. The applications VI has written for the Commonwealth remain the intellectual property of NIC Inc. Even though Virginia can continue to use them as they want, they will remain hosted on VI’s servers. The occasional free hosting that VI provided will be gone, and agencies will be paying a vendor (or VITA) directly for hosting. So whoever wins the Hosting contract will only be hosting content that agencies feel like having them host. The application contract won’t involve creating new applications, migrating old applications, or any coding. And the portal maintenance contract will be a typical vendor relationship instead of a partnership, and revenue sharing is off the table.
So why would anyone do any of it? VI might, since their parent company NIC Inc doesn’t want to “lose” a state. But it will require stripping down to bare bones and doing only the least they can get away with, like most vendors. Say goodbye to innovation and hello to the parasitic vendor relationship. The Commonwealth will be able to take back that DMV revenue that they crave, which will be a short-term win for them, but what about the citizens? A few million for a portal that no one can use. A few million for a licensing application that no one knows exists. Websites that set the state of e-government back to the early nineties. Thanks, but I’ve seen that movie.
Now, I’m not saying that we should continue business as usual. VI clearly has been smoking too much of their hype and ego. Maybe if they hadn’t been such obtuse blowhards for years, VITA wouldn’t be knocking the legs out from under them. But abandoning a business model that works doesn’t make any sense. If the Commonwealth is tired of VI, then put a real RFP out on the streets, not these watered down wastes of everyone’s time.
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