Outsourcing the burdens -- and benefits -- of eProcurement

New User Fees Fund Pennsylvania's No-Bid Website Contract   By Melissa Daniels | PA Independent Read more at the link.

Pennsylvania teamed up with a private company to revamp and manage its official websites, promising the latest and greatest advances over its own old technology. Last fall, Pennsylvania entered a sole source contract with NIC USA, an “eGovernment” services firm. It will operate Pennsylvania’s entire online system, from page design to online transactions, and from customer support to hardware upgrades.

The state pays NIC nothing out of its own budget. Instead, the site work gets funded by adding “convenience fees” to certain online transactions residents or businesses might complete, like a license renewal. This self-funded model spares the state from spending up front on expensive redesigns, system upgrades or app development.

But the contract does not have a cap on what fees might be for users, meaning there’s no limit to how much could be assessed. It was a sole source contract, meaning there was no competitive bid process.

NIC provides all website design, development, services and maintenance, managed through a Harrisburg-based subsidiary called Pennsylvania Interactive, LLC. Because there is no other company that provides all these services under one umbrella, the state deemed a competitive bid process unnecessary, according to the contract summary.

But NIC’s own filings with the Securities and Exchange Commission seem to dispute that point, as they attest to “intense competition” in their industry. The filing, from late February, says NIC faces competition from government-managed services, system integrators like CGI and Unisys and developers like Microsoft and Oracle.

Dan Egan, spokesman for the Office of Administration, said the NIC contract was precipitated by multiple issues with the current system. The state was faced with a need to upgrade its server by 2015. “No one company does everything that NIC does and can do in a way that isn’t going to cost us tens of millions of dollars,” Egan said.

The state researched NIC with an outside research firm and contacted other states who use its services. “None of those states who’ve ever contracted with them have left,” Egan said. “It’s because they like the service and they like what they get from the company.

”Before the contract was signed, the state put the procurement on its website, and offered a 10-day comment period where no other vendors reached out to the state, Egan said. It was also approved by the Office of the Attorney General, like any other state contract.

Angela Skinner, director of communications for NIC, said NIC is “comfortable with the sole source procurement,” given the commonwealth’s research, legal justification and the public comment period. And a majority of the services, she said, are “free.” Any fees are set and approved by state officials.

Egan said the state expects to keep about two-thirds of transactions free, while a third may have some kind of “convenience charge.”

Egan compared the fee to what a consumer might pay for having express delivery to their home – the charge is there for the extra convenience.

“There will still be a choice,” he said. “If you still want to walk into a government office or lick a stamp or do what the old process was, it will remain available to you without the convenience charge. But if you want to get online, get it faster, get it more conveniently, that’s what it’s there for.”