Chapter 5 Implementation and Financing Strategy

Success in implementing the GISP hinges on sound organization and programming of implementation activities and resources within an indicative time-frame. For the GISP to be implemented effectively, the government must also properly identify, source and program the necessary funds. Very crucial here is the timing of the release of funds for the completion of critical activities.

The GISP will be implemented in accordance with the following implementation and financing strategy.

A. Implementation Strategy Activities will be organized according to the following major phases:

Phase 1 – Setting Up the Environment, which involves putting in place the appropriate institutional and policy mechanisms, as well as the generation of private sector investments and approval of the medium-term budgetary commitments for the GISP.

Phase 2 - Building the GISP Infrastructure, which will entail the required government networking infrastructure, including the reengineering of the various business processes within the identified building blocks for "Philippine Government Online," the building up of the priority data bases, and the design, installation and operation of the various systems networks.

Phase 3 - Sustaining the GISP, which involves the stabilization of the systems that have been implemented, clearly defining the ownership and the continuing operational relationships of the various participants, and the installation of a system of indicators and benchmarks with which to evaluate and monitor the continuing performance of the entire GISP effort

Table 5.1

Implementation Schedule

Phase I: Providing the Enabling Environment

C. Implementation Scenarios

Based on the above implementation schedule, the expected achievement scenarios of the GISP are as follows:

End of Year 1 Scenarios

Process

Inclusion of the GISP in the key results areas and performance reviews of the department secretaries;

Alignment of approved and ongoing development of sector and sectoral information systems and databases with GISP priorities;

Development of prototype systems for the following:

1. Government Electronic Procurement System

2. Government Human Resource Management Information System

3. Government Integrated Financial Management Information System

4. Government Integrated Records Management Information System

Standardization of data formats and conversion into electronic file of the following major databases for the design and development of the Government Integrated Records Management Information System —

Government Financial Records and Transactions

Government Records Database

Malacañang Records Database

Agency Records Databases

5. Public Services Information System — Ongoing integration under one access facility of all frontline services and regulatory activities of government agencies, owned and controlled corporations, LGUs and private banks and institutions offering public services and information

6. Public Order, Safety and Justice Information System in coordination with the development of the National Crime Information System

7. Office of the President Executive Information System — Integration of existing data from stand-alone applications fed into the data warehouse.

8. Trade, Industry and Tourism Information System — Start of networking of databases and coordination of data sharing among all participating agencies

9. Agriculture and Agrarian Reform Information System — Ongoing design and development of shareable databases of participating agencies; establishment of linkages of DA and DAR Central Offices with their respective regional and field offices and LGUs; establishment of linkages between the DA and the DTI with respect to agricultural trade, as well as among DA and DAR and the SUCs, DOST agencies and other academic and research institutions

10. Land and Environment/Land Use Information System —Generation and digital conversion of base maps and sharing of base maps by NAMRIA with other departments and agencies to help these agencies start mapping activities.

11. Statistical Information Systems Network side by side with the Civil Registry System (CRS) Improvement Project of the NSO — Building on National Statistics Database (Vital Statistics, Demographic Statistics, Household Statistics and Sectoral Statistics); ongoing integration of all government statistical databases

12. Health Information System — Firming up of the Health Accounts System including standardization and codification of data and data specifications; computerization of health regulation and linkage with public and private hospitals

13. Welfare, Security, Employment, Housing and Community Services Information System — Process reengineering, computerization, and networking of DSWD frontline business processes; networking of DSWD with other welfare, employment, housing, and community services institutions for holistic data on the social welfare sector; upgrading of the information systems of the DOLE, particularly the provision of information on employment and computerization of business processes involved in regulation

14. Education and Manpower Development Information System — Completion of the Education Accounts System, drawing up of the functional specifications and reengineering of the business processes of DECS, CHED and TESDA; development of the initial databases

15. LGU Business Regulation System (Developed in a continuing effort until all LGUs are covered) — Development and testing of prototype information systems and pilot implementation in selected LGUs

16. LGU Revenue Management System (Developed in a continuing effort until all LGUs are covered) — Development and testing of prototype information systems and pilot implementation in selected LGUs

Institution/Organization

NITC-NCC as GISP Coordinator/Implementor

The Civil Service Commission (CSC) — draws up a program to address the human resources needs of the GISP

The DBM (in coordination with agencies concerned) — draws up and recommends improved and simplified systems and procedures on procurement, accounting and auditing of GISP-related expenditures.

Technology

Connection of all government agencies to the Internet and the Web

Pervasive use of e-mail in sending reports from field offices or overseas offices to the central offices

Web homepages set up by all executive departments to allow electronic publishing

Pilot data warehouse set up in the area of trade, business registration

More active use of e-commerce in government securities auction and trading at the BTr

Full-scale implementation of e-commerce at the BOC, particularly electronic submission of required forms and documents like import declarations

Development and testing of Government Procurement System based on e-commerce technology

Conversion of official documents into electronic forms initiated in all government agencies for the implementation of electronic document management

Intensive use of GIS applications by the DOTC, DOH, DENR, DA, DAR, DPWH, DOT, NSO, HUDCC, DOLE, LRA, and DOST for the development of the Land Use Information System

Ongoing preparation and training for the extensive use of computer-aided drafting and design (CADD) at least at the DPWH and LGUs for urban planning and zoning

End of Year 2 Scenarios

Process

Office of the President Executive Information System operational at the Executive Secretary’s Office

Final rollout/operationalization of the Government Electronic Procurement System

Start of development of Government Physical Assets Management Information System

Legislation passed supporting the GISP implementation covering priority ICT funding, organizational strengthening, procurement reform and performance review for years 3, 4, and 5.

Institution/Organization

Ongoing CSC reorientation and retraining program for government ICT personnel to be more responsive to the human resource needs of the GISP

Unit for government ICT solutions established

Technology

All Central Offices of the executive departments connected via intranet

All Central Offices of the executive departments connected through VPNs

Homepages set up by all other government entities/agencies and highly urbanized LGUs

Ongoing data warehousing pilot projects in the area of trade, business registration, LTO, public order and security, and other sectoral information systems data warehouses, as well as in the area of budgeting, government manpower, government physical assets, and other public sector management systems data warehouses.

Ongoing conversion of government official documents into electronic files for electronic document management

Continuous maintenance and upgrading of all government homepages

Government Procurement System installed based on e-commerce

Widespread use of GIS applications by the DND, DILG, COMELEC

End of Year 3 Scenarios

Process

Rollout of the Public Services Information System (3)

Continuous development of the LGU Information System

Pilot implementation of new policies and procedures in the procurement of ICT solutions

Continuing development and installation of building block systems in sectoral information systems networks and public sector management information systems networks

Technology

Upgrading and maintenance of all ICT technological innovations and undertakings

DECS pilot project launched utilizing on-line learning through videoconferencing for teachers’ nationwide training

Regional offices of the executive departments connected to the VPN

LGUs in urban centers and with ISPs connected to the VPN

Central offices of the executive departments connected through extranets for more efficient implementation of the Government Electronic Procurement System.

Rollout of the following systems:

Land and Environment Information System

Welfare, Social Security, Employment, Housing and Community Service Information System

Government Physical Assets Management System

Government Integrated Financial Management Information System (16)

Statistical Information System

LGU Business Regulation System (For remote LGUs)

LGU Revenue Management System (For remote LGUs)

Years 4 and 5 Scenarios

Process

Rollout of the following information systems:

Public Sector

a. Government Human Resource Management Information System (4)

b. Government Integrated Records Management Information System (5)

Sectoral

c. Education and Manpower Development Information System (6)

d. Agriculture and Agrarian Reform Information System (7)

e. Public Order, Safety and Justice Information System (8)

f. Health Information System (9)

g. Trade, Industry and Tourism Information System (10)

LGU Common Mission-Critical System

h. LGU Business Regulation System (only for highly urbanized areas) (11)

i. LGU Revenue Management System (only for highly urbanized areas)(12)

Continuous monitoring, evaluation, enhancement and continuing maintenance of all information systems in place.

Hardware and software facilities upgraded.

Continuous learning and development of all participating agencies/institutions

Office of the President Executive Information System replicated in all executive departments

Technology

Biometrics technology implemented in conjunction with the development of Phase II of the National Crime Information Systems

National ID System utilizing token-type authentication system in place

Distributed databases evident in government line agencies

Government executives into wireless/mobile computing

D. Financing Strategy One key guiding principle of any economic program is the judicious and optimal use of public resources. This principle will apply as well in the implementation of the GISP; hence, the need to identify appropriate financing options and strategies for its implementation, given the limited resources of government.

1. Financing Framework and Options The financing strategy provides financing alternatives that allow public and private sector financing of GISP projects. In particular, the financing strategy of GISP (1) fosters the appropriate perspective or viewpoint on ICT-related expenditures on policy makers, and (2) provides a more rational way of considering funding options that are not just driven by cost considerations or fund availability but based on a firm grasp of how government services are envisioned to be delivered.

Conceptual Framework for Viewing

ICT Expenditures

The financing strategy for GISP essentially revolves around the concept of spending for public goods and for private goods. In the past, ICT-related budgets or expenses have been largely viewed as being no different from spending on typewriters. Hence, funding for ICT has been lumped with normal everyday considerations. Unfortunately, funding decisions of this nature just pass through the simple question of whether there is enough money to buy it this year or next. The thrust of GISP’s financing strategy is to get the government’s resource allocation managers to liken ICT spending to expenditures based on welfare theory. GISP tries to get policymakers to understand the basic difference between ICT projects that need to be funded by government and those that can realistically be sourced from the private sector.

"Public" ICT Goods

In this case, GISP defines public goods as those systems and projects the scope of which cuts across several departments or agencies. These systems or projects require extensive interface among several agencies and require access, consolidation or validation of da tabases of other agencies. Such a definition fits projects pertaining to the Sectoral Information Systems Networks and the LGU Common Mission-Critical Information Systems. If one looks closely at the type of government services under this definition, it will be seen that these are basically "public goods," i.e, "available for consumption by all members of a social group once it is provided. If one individual purchases a unit of this good, there is no feasible way to exclude nonpurchasers from enjoying the services provided by this unit." Examples of public goods pertaining to the Sectoral Information Systems Networks are health, social welfare, security and community services. The above definition then makes a compelling argument for this type of ICT-driven services to be funded by government (through appropriation).

"Private" ICT Goods

In the same manner, private ICT goods are defined as systems or projects that comprise the support functions of government as it does its internal housekeeping in order to serve the public better. These types of systems, which may or may not be networked, can usually run on a stand-alone basis in one agency. Its database is mostly in-house generated and mostly for in-house use also. Examples of these are internal document tracking systems and personnel administration systems, which are mainly under the category of the Public Sector Management Information Systems. Also falling under this category are projects under the Public Services Information Systems. Note that there may be some overlap in definition with respect to frontline business processes under the Sectoral Information Systems Network and the Public Services Information Systems, but this will be refined later when deciding on funding alternatives. Again, considering that nonpurchasers can be excluded from the provision of private ICT services and assuming that these types of services can be provided more cheaply and readily by the private sector, then there are sufficient incentives to ask the private sector to come in. In a way, the above contradiction between what are "public" and what are "private" types of information

systems defines the parameters where private sector participation is encouraged under GISP. This dichotomy is by no means exact or rigid — basically it will have to follow what policymakers will define as core ICT government services or not. This dichotomy will also be challenged later when we discuss the issues on managing private sector partnerships in relation to ICT. What is important to note is that these distinctions open up a lot of funding options and free the present cash reserves of government for use in other projects.

Guidelines for Establishing Financing Options

for Information Systems in the GISP

The choice of funding is further guided by the following:

1. "Public" ICT Goods

a. Priority systems in the GISP are to be funded under the General Appropriations Act. In particular, the provision of frontline service delivery processes of mainstream government agencies shall be given priority under the national budget.

b. If the national budget is unable to accommodate the same, then efforts shall be exerted to fund the project under some form of a deferred government expenditure or borrowing, especially if the project or technology being requested is considered a base technology that will make other applications possible. An example of a base technology is data warehousing. In this case, funding the project through the issuance of special series treasury bills or treasury bonds (T-bills/T-bonds) will be considered.

c. Public ICT projects that are income generating will, to the extent possible, be funded by ODA loans. Implementing agencies will undertake some form of cost recovery charging schemes that will ensure payment of the loan from such proceeds.

d. Public ICT projects that are not revenue generating and cannot be funded by the national budget nor by special series T-bills/bonds will be given priority for ODA grants that are not tied up to particular projects.

e. Second-priority income-generating ICT systems that do not qualify for ODA loans, but which nonetheless have well-established cash flows being generated for a couple of years, will be packaged for securitization. The funds raised via this method will be used to upgrade the same systems, with whatever excess allocated for use by other income-generating systems.

f. Systems that support essentially government functions that are potentially income generating (or higher-income generating), although still without clear and established cash flows, will to the extent possible be financed under a Build-Operate-and-Transfer (BOT). Only through investments in ICT will the said system truly reach its maximum income potential and, of course, for serving the public better. A BOT instead of a Build-Own-and-Operate (BOO) scheme is preferred because control over the said

function will eventually revert to government after being funded by the private sector.

g. LGU projects that cannot be funded under provincial, city or municipal budgets will be accommodated under some form of LGU indebtedness like municipal bonds. If the proposed LGU project is income generating, then it may be packaged for funding through bank loans.

2. "Private" ICT Goods

a. Noncore government service delivery functions that are probably best handled by the private sector, and which have well-defined histories of strong cash flows, may be financed through securitization of the said cash flows, thus providing the optimum way of funding further system upgrades or funding similar services.

b. Noncore government service delivery functions that are best handled by the private sector, but which still do not have clear and established cash flows, may be financed under a BOO scheme, thus permitting government to be immediately divested of the task and the fund responsibility to provide said service.

c. Areas where the private sector has well-defined competence, especially those where it has garnered ISO 9000 certifications, will, to the extent possible, be outsourced via long-term contracts. Candidates for outsourcing are areas that require the long-term commitment and continuous investment of capital and resources.

TABLE 5.2 Financing Alternatives for "Public" ICT Goods

TABLE 5.3

Financing Alternatives for "Private" ICT Goods

2 . Financing GISP Through

the National Budget Process

The following government funding for GISP projects will be adopted:

a. As a Percentage of Total Budget

An amount equivalent to 1.0% of the annual national budget over the medium-term will be allocated to the funding of priority GISP projects to be bankrolled by the government.

This amount may be provided for, allocated among and/or sourced from the General Appropriations Act through the following:

a.1 Articulation either in the general or special provisions of the use of a portion of mandatory reserves (if any) for ICT expenditures. For example, if the mandatory reserve is 1% of the total budget, the general provisions may be explicitly worded to say that the said reserves may be released provided that 1/10 of the 1% is allocated to ICT. This means that P650 million may be made available for ICT from the year 2000 budget.

a.2 Realignment of funds, which can be authorized provided that the same is used for ICT only.

a.3 Articulation in the agency special provisions or in the general provisions of the General Appropriations Act on the use of

income, to the effect that a certain percent of the income of a

department or departments arising from a computerized public service can be used to upgrade or acquire new technology for said service.

b. Through a Portion of the ODA

Lobbying with donor or lending governments will be pursued to benefit ICT. Loans or grants emanating from Official Development Assistance (ODA) can be structured to provide for at least a 10% investment in ICT. This means that based on the programmed P25.6 Billion ODA disbursement in year 2000, an additional P2.56 Billion can be tapped for ICT.

c. Through the Budget Call

In the Budget Call, greater emphasis will be given to ICT projects. For example, the DBCC may state that it is prepared to consider department ICT budgets up to 2% of total agency budget proposals. Or the DBCC may say that projects falling under Phase I of the GISP will be automatically funded.

d. Alternatives for GOCCs and LGUs

GISP projects of GOCCs and LGUs will be funded from their own financial resources. Funding from the national budget will consider

the public nature of the services being automated, the importance of such services nationwide, and the funding limitations of the proponent agencies.

Estimate of How Much Can Be Made Available from the Year 2000 General Appropriations Act

Overall, based on the national budget for 2000, an estimate of what can be potentially made available for ICT for the current year alone is as follows:

FROM:

1.0% of the National Budget P6.50

Use of 1/10 %, assuming Reserves = 1% 0.65

1% of yearly realignments estimated at 20%/year 1.30

10% of programmed ODA 2.56

———

Total P11.01 billion

The above estimate does not include those coming from a percentage of a department’s income from computerized public services, as may be authorized under the Special Provisions of the GAA. Also,

the estimate does not yet include possible private sector counterpart investments as a result of government’s expenditures on ICT.

3. GISP Five-Year Investment Requirements

Table 5.4 provides the indicative costs for the implementation of priority GISP development activities and projects over a five-year horizon.

The cost estimates were determined by considering the following

factors: (1) current cost of technology, (2) number of business processes supported, (3) number of agencies involved, and (4) estimated number of users.

Before any systems development activity begins, it is necessary to define first the functional and technical specifications for the development of the priority information systems and databases, the initial networking requirements at the policy and program implementation levels, and the database design and strategy. This first step involves extensive studies and consultations with various stakeholders, including key solution providers, technology experts, users and system owners, policymakers and planners, Congress, and the public as a whole. The major outputs of this phase are the (1) Technical and Functional Specifications (TFS) and (2) Requests for Proposals (RFPs), which should undergo rigid review and consultations.

After the initial project scoping and planning, systems development activities are to commence beginning Year 1. The key computing and network infrastructure should be in place within the first two years, hence the high funding requirement for years 1 and 2, of about P10.2 billion and P3.3 billion pesos, respectively. Rollout of individual systems range between years 3 to 5.

The first major type of information system is the Public Services Information System, providing frontline services with its one-stop virtual access point and gateway for all major government-to-business and government-to-general public transactions.

The next major group of information systems in the development pipeline are seven common oversight systems. These are intended to support business processes that are common to all government agencies. Each system will be developed once, with provisions for enhancements or modifications at the agency level. The resulting application can be deployed to every government agency.

There are also seven sectoral information systems to be developed and deployed to the agencies within the sector. The three top information systems in terms of cost are sectoral systems, namely those involving land use, public order and safety, and education and manpower development. This is due to the substantial investment requirement for implementing GIS, data warehousing

and distributed

database technologies. These systems also support basic and vital public services, and necessitate the deployment of ICT resources down to the local institutions, specially LGUs, but also including state universities and colleges (in the case of the education sector).

The two mission-critical application systems for local government units aim to enhance their revenue-generating capabilities and enhanced service delivery by streamlining business licensing and permitting processes.

Hardware Cost Estimates The estimated P21.161 billion total investment includes the cost of major ICT equipment, namely personal computers/workstations and servers, estimated at P2.816 billion. The estimated number of computers and servers required were multiplied by the respective unit cost per hardware type, based on prevailing market prices.

Type No. Unit Cost Total (MPesos)

PCs 35,828 70,000 2,508 Small servers 28 1,000,000 28 Medium servers 36 5,000,000 180 Large servers 10 10,000,000 100

TOTAL 2,816

Estimation Methodology

Various methods, combinations of proxy information and factors were used to arrive at the cost estimates. For the purpose of estimation, the technologies were classified into two major types: major technology cost drivers and other technologies.

Major Technology Cost Drivers

Major technologies that are those that require substantial capital outlay and other resources at the outset, not only in monetary terms but also in terms of scale of implementation and operation, as indicated by the number of business processes supported, number of users and agencies involved. These technologies are:

Data warehousing

Distributed databases

Electronic document management

E-commerce

Geographic information systems (GIS)

Other Technologies

The rest of the technologies identified are generally acquired as services whose costs are characterized as recurring monthly expenses (e.g., Internet connection, VPN and wireless computing). Scale factors are used as multipliers to take into account the cost of other technologies and are based on increasing scales of operations as indicated by the number of institutional users and the number of agencies involved.

Total Cost of Ownership Breakdown

One of the key assumptions used in the GISP cost estimation process involves the concept of total cost of ownership (TCO) of an information system. The following percentage values were used to arrive at indicative total cost of ownership figures: Cost Component % to Total Software 17% Hardware 14% Professional Services 46% Administrative costs 23% TOTAL 100% It was assumed that software makes up 17% of the total cost of ownership. The starting point for most estimates was to determine the cost of software associated with each technology. The resulting figure was then divided by 17% to get the estimated total cost for ownership of the information system using the technology. The percentage figures were derived from average TCO of ERM/ERP applications data published in Extract of Meta Group Survey >ERM Solutions and Their Value< , a document posted on the SAP web site (see www.sap.com/service/pdf.tco.pdf). It is worth noting that the independently derived computer hardware cost (P2.816 billion) is 13.31% of the total GISP investment requirement of P21.161 billion. This is consistent with and provides initial validation of the 14% Meta Group Survey figure for hardware. The following table presents an overview of each technology and the corresponding cost estimation procedure used.

TABLE 5.4

GISP Investment Estimates

Source: http://www.neda.gov.ph/ Accessed on 01/05/2005