"Don’t be afraid to say no” - that's Tony Darby’s advice to anyone negotiating an IT contract.
The Auckland Regional Council CIO has spent the past nine months battling with rating issues and last week announced that the council is to outsource its collection of rates.
EDS will act as “collection partner”, with GEAC supplying the Pathway software to run the system. EDS will also project-manage, supply print and mail functions and run an Auckland-based call centre to handle billing queries using GEAC Worksmart software.
The deal is worth $11 million to EDS, with the council facing additional administration costs to handle the maintenance of the contract and related administration.
The council claims the outsourcing project, which involves dealing solely with EDS, is a first for local government.
With the council also having to collect its own rates for the first time, project leader Nigel Bernie says it saw an opportunity to go to an outsource model.
“Rates collection is not our core business. Getting an invoice out is an entirely new experience.”
At present regional councils collect rates through the territorial authorities in their region. Typically the city and district councils add a one-line charge to a rates demand and pass the money on to the regional council.
New local government legislation means that from next July regional councils must make their billing transparent, providing extra details to ratepayers on what is spent where.
But Auckland Regional Council discovered that territorial authorities in the region would have to upgrade their systems to handle ARC’s billing element, which was likely to prove too costly and unfeasible.
The council worked out that by outsourcing the process to EDS, it would cost $2 million a year less to collect the $77 million rating revenue than if it did it itself.
ARC currently pays territorial authorities $2 million a year to collect its rates, and was facing annual costs of a million or so to cover matters like maintaining its rating database.
The $11 million deal with EDS covers three years of rates collection. After about five years the ARC believes the cost of the new billing process will have fallen to the level of the old — about $3 million.
Darby says EDS was chosen for its financial and IT skills and GEAC because its Pathway product is used by many councils across Australasia. A “benchmark scaling” process also led council staff to believe Pathway was the only system capable of handling 450,000 bills a year and an invoice run of up to 60,000 a week.
EDS already operates call centres, so it can easily take the “risk” in assessing telephone call needs.
Darby says the process to sort out the rating issue took nine months, including three months of negotiation.
“It’s been a tough process ... and taking it down to the wire with suppliers,” he says.
“We wrote the contract ourselves with our lawyers [Bell Gully]. A lot of organisations take what is given and modify it. But we wrote it from scratch with performance indicators, measurements and penalties,” he says.
“This isn’t about what system, it’s about end-to-end stuff. The contract goes through the processes [of bill collection] from systems to modelling to billing distribution and generation, through to collection and the call centre at the other end, handling questions. We haven’t done anything like this before. We had to be clear with council and performance specifications.”
Council officials spent three to six months evaluating the options, using Audit New Zealand to review criteria during each of three evaluation stages. An independent consultant was used to help decide on telecomms equipment while council staff chose the software.
“Do not be afraid to say no as a negotiating position,” Darby advises, “and win-win is not what it is cracked up to be. Don’t be afraid to take on the hard stuff. Just because it is industry-standard, you don’t have to accept it; you can argue for better.
“Organisations have to be clear as to their specifications and do the hard yards in defining requirements up front. It can cost you millions or you have to accept what your supplier says,” he says.
Darby says a contract is simply something that gets put in a bottom draw, and if it’s necessary to pull it out, then you have a problem.
“It’s a working relationship [with the supplier]. [The contract] is there as a safety net,” he says.