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Reinventing the Private and Public Service Relationship to Create More Value and Reduce Risk
As public service organizations face ongoing financial pressures, the need to deliver next-generation public service management at a lower cost has become a priority. In addition, managing demographic changes and responding to rising citizen expectations mean that public service organizations are seeking innovative and reliable ideas to improve programs. One approach is to develop new ways of working with service providers to not only effectively reduce costs and risk but also add value to the public service management arena.
By adopting value-based arrangements, agencies involved with public service management can focus on outcome delivery through a risk and reward-sharing approach. A value-based arrangement ties some portion of the service provider’s fees to the benefits achieved as a result of successfully delivering a project and achieving specific performance milestones. The arrangement demonstrates the service provider’s commitment to ensuring the public service agency realizes the benefits of the upfront investment and reduces the risk.
Value-based arrangements improve:
In short, value-based arrangements offer organizations around the world an opportunity to reinvent their public service management process flow and the way they do business.
Both public service organizations and private services organizations are under intense public scrutiny to deliver on their promises. Value-based arrangements help use budgets more effectively by closely aligning client success with supplier compensation. A variety of contracting arrangements can occur across the risk and reward spectrum, creating opportunities for public service organizations worldwide to deliver better business outcomes and enhance their public service management portfolio.
Value-based arrangements are being adopted more frequently across private and public services organizations. In part, this is due to a number of distinct advantages over the more traditional time and materials and fixed price contracting methods. Value-based arrangements are often considered in situations where governments or agencies involved in public service management have limited budget and therefore choose to pay for a program from the savings realized. In this way, the benefits of such programs can not only reduce costs but also reallocate funds to other areas that are critical or offer higher value.
Outcomes from a value-based approach include:
Critical success factors for value-based arrangements include elements such as clarity on project ownership and approval mechanisms. In addition, it is important to have performance measures aligned with public service management outcomes that are:
An example of an effective value-based arrangement is the Basque Regional Government, which selected Accenture to develop a strategic cost transformation program for the Department of Internal Affairs responsible for policing and public safety.
According to Nélida Santos, vice councillor of administration and services within the Basque Regional Government: “We believe this project will set the standard for future cost reduction programs across government as departments seek to reduce costs and drive efficiencies without compromising on citizen services. This new partnership model is innovative but also necessary, as we agree new ways of working with our suppliers at a time of reduced government spending.”
Download the PDF to read how public service management agencies such as the City of London, the Florida Department of Business and Professional Regulation and a global healthcare company have all benefitted from value-based arrangements.
September 13, 2012
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