5

Creating agile machinery

Government is expensive. The average spending by OECD governments is around 45 per cent of GDP.50 Add a mix of factors, such as growing populations, rising unemployment, low economic growth, diminishing tax receipts and the expense of funding an increasing debt burden, and the cost of providing public services over the long term begins to look highly challenging, and perhaps unsustainable in many countries. Many countries, even those with comparatively low levels of government spending, are under pressure to be more efficient and productive; doing more with less is the mantra of our governmental times. Organizational agility, networking, innovation and technology are the most persuasive solutions.

Of course, efforts to improve the efficiency of government and streamline administrative processes are hardly a recent phenomenon. Many governments pledge reforms to ensure that they deliver the best possible services with the least investment. But in recent years this challenge has become more pressing as the financial crisis forced governments around the world to increase spending dramatically, either to rescue banks or stimulate flagging economies.

Cutting government down to size is far from easy. Withdrawing services and benefits which populations have become accustomed to is difficult politically. Costly and labour-intensive services, such as education and health, can be remarkably resistant to productivity-enhancing techniques. And governments face continuing pressure to spend more on a variety of services and infrastructure.

The reality is that most governments – like any large organizations – still have considerable scope for improving their efficiency. This chapter investigates a range of measures that help governments become leaner and more efficient. These include:

• embracing a networked approach where central government delivers services through whichever mechanism is most appropriate, private or public, in-house or outsourced;
• placing innovation at the heart of government, developing best-practice innovation processes across government;
• and adopting long-term fiscal sustainability strategies.

At the same time, institutionalizing transparency and accountability is important, as it encourages stakeholder engagement and prevents desirable networked innovative behaviours from becoming mired in politics. At the same time, a more networked approach to service provision by governments may make them more vulnerable to breaches of security, whether through cybertage or physical loss of data. Security and reliability become even more important.

Networked government

Governments have traditionally taken a centralized approach to delivering public services: a single, hierarchical model, divided into different service areas. In the private sector, however, there is an ongoing revolution in complex service delivery, characterized by value sharing across an ecosystem of stakeholders and enabled by modern technology and a new attitude towards collaboration.

These technologies and approaches have also been adopted by governments. The conventional top-down bureaucratic approach of governments is being challenged by a new model of networked government. This is partly driven by the convergence of three major trends.

First is the willingness of government to outsource aspects of service delivery to the private sector and tertiary organizations, coupled with growth in specialist public sector outsourcing services. Based on contracts with an annual value of $5 million or more, the total annual value of public sector outsourced contracts from 2001 to the third quarter of 2013 was $135 billion, 56 per cent of the total global outsourcing market over that time.51 In the UK in 2012, for example, over £4 billion was paid to four outsourcing contractors – Serco, Capita, Atos and G4S – who provided services ranging from running prisons to the administration of Work Capability Assessment as part of the welfare system.52 53

Outsourcing may offer considerable benefits, but great care must be taken over the choice of providers, the specification and execution of the contract, and many other aspects of the process. Outsourcing is no automatic route to cost efficiency, as several private sector organizations have discovered.

A second factor is the increase in collaborative working. The importance of innovation to survival has encouraged organizations to rethink the ways in which they collaborate, both inside and outside the organization. Collaboration across functional silos, areas of expertise and business units is more common. Firms cross organizational boundaries to engage in open innovation with other stakeholders in their value system. Organizations may even link up with rivals in co-opetition relationships and alliances. Citizens are actively engaged in service creation and delivery.

This approach is being adopted by the public sector and government as they seek to create joined-up collaboration between government agencies, divisions and departments. So, for example, two public bodies may work together to achieve specific objectives, whether at a peer-to-peer level, or between cities, regions or departments. Equally, a new body may be created to fulfil a cross-jurisdiction objective.

A third factor driving networked governance is technological progress. New technologies and improvements in existing technologies have stimulated communication and collaboration, particularly across organizational barriers, and at minimal cost. When these trends coalesce, a government model will be considered truly networked.

Diagram 5. Delivering joined-up government

Source: A review of national and international experiences adapted from The Office of Government Commerce and the Management Advisory Committee in Victoria State)

The transition to a networked government means adopting elements of best practice in a number of areas, such as outsourcing and joined-up government. It means implementing new ways of working, new accountabilities and new ways of developing policies. Navigating the change to a more networked government may be a challenge, but the benefits available to governments suggest that the transition is worth it.

Networked organizational structures are less rigid, better able to tackle complexity, fast-paced change and increasingly diverse and mobile populations. Programmes become more focused, and the various levels of government agencies more interdependent and aligned in their goals. Technological networks extend the potential reach of programmes, policies and activities.

In a networked government, ownership of capabilities becomes less important as the emphasis is on cross-government collaboration. Instead, the ability to marshal and control resources effectively and efficiently becomes paramount. There is also greater focus on the core values at the heart of government. Values become one of the main ways to guide, inform and align actions and behaviours across the network.

A more networked approach to government also means that it is easier to disseminate and communicate best practice. Sharing information reduces the potential for misunderstandings and helps network participants to build trust and learn from each other’s successes and mistakes. Accessing new information and data enables governments to benchmark their resources and outcomes, facilitating better integration and alignment of objectives, measurement of network performance and setting of strategic objectives (see diagram opposite).

Transformation at work: extending the network

Networked government is much more than tactical outsourcing or cooperation in specific fields, as the more radical approach adopted by a number of governments demonstrates.

There are a number of policy programmes that cut across traditional organizational borders and affect various departments in the Netherlands’ government. The government creates financial incentives for cooperation, only releasing the budget for these programmes once the departments in question have arrived at an acceptable allocation. The Dutch government has even experimented with a ‘virtual’ department for youth and families. This has a minister, but draws on the resources of various departments rather than creating a separate one.

Support for departments running and evaluating cross-government initiatives in Canada is provided by Canada’s Treasury Board Secretariat, which is also responsible for the country’s joint service provision agency, Service Canada.

In the United States, the Wisconsin Works (W-2) welfare reform programme, set up in 1997, is a pioneering experiment in networked government which has been adapted in other countries.54 In the past, cash benefits were normally given to disadvantaged families. In the W-2 programme, however, the role of the state is to aid families in achieving economic self-sufficiency. Responsibility for operating the programme was given to seventy-two agencies. Each was paid a flat fee for administering the programme and given significant operational freedom; private companies were invited to bid.

W-2 was designed to use private as well as public resources, and established market mechanisms based on outcome-based performance standards rather than bureaucratic rules. By 2012, over 72 per cent of the workload of W-2 was handled by contractors; welfare caseloads had decreased by 89 per cent and the poverty rate for single-parent families dropped from 30 to 25 per cent.

The Singaporean government tackled the challenge of asymmetric and non-traditional security threats by using technology to create an integrated government network that could identify and detect early signs of potential threats. This approach provided agencies with relevant risk information, looking two to five years ahead, and prompting the development of prevention strategies.

Transformation at work: One Barnet

Faced with the need to make significant budget cuts, some local government bodies in the UK are resorting to highly innovative, and often controversial, strategies to cut costs while maintaining essential services.

Take Barnet Council, just north of London. Its One Barnet Programme aims to help the council ‘become a citizen-centred organization’ through the adoption of three key principles: a new relationship with citizens, a ‘one public sector’ approach and a relentless drive for efficiency. This transformation programme covered a wide range of council services from closed-circuit television to parking, to back-room administrative functions and actual council–citizen service interaction.

Much of the implementation of the programme involved the formation of public-private partnerships and the outsourcing or transference of services to the private sector. For example, in a ten-year, two-contract deal with service provider Capita, the Council handed over responsibility for providing both visible services – such as planning, environmental health, highways, transport and trading standards – and back-office customer and support services, including revenue and benefit administration.

The provisions of the contract were, unusually, published on Barnet Council’s website – all 2,084 pages, albeit partially redacted.

The radical One Barnet transformation programme was not without its critics. There was a court challenge, and various local protest groups were organized in opposition to the proposed measures. The programme is underway, nevertheless, with the Council predicting £165 million in total savings.55

Enterprise Resource Management

To enable networking of the public sector, and to avoid departmental or agency silos, governments must leverage advanced Enterprise Resource Planning (ERP) solutions that have the potential to integrate internal and cross-departmental processes; streamline financial and administrative systems; allow individual agencies to share information in a standardized way; and eliminate multiple systems and reduce duplication.

Enterprise Resource Management, a term introduced in 1990 by the Gartner Group, the global technology research firm, refers to business process management software that brings together the various departments and activities of an organization into a single software solution. It integrates data from a variety of different organizational activities – for example, to allow more effective analysis of information and, therefore, decision making. Those activities might include sales and marketing, payment and shipping, inventory management, manufacturing and product development.

ERP began with manufacturing and back-office functions such as accounting and HR, before encompassing most organizational activities. Business environments change, though. Today, data sources are more fragmented; there is much more data to store, process and disseminate. Cost pressures are greater. People and organizations are more mobile. Organizations have to be more agile and able to be proactive in an uncertain environment in order to survive.

The technologies driving ERP systems have evolved. Consider virtualization. It allows multiple applications to be run virtually on one server, rather than each requiring their own physical server. Virtualization can be used in conjunction with cloud services which allow access to ERP services via the Internet. Cost savings can be substantial.

Another technological innovation is the use of in-memory solutions, where data is no longer stored on physical disks but in units within rapid-access memory. This allows much faster handling of data. There is a move towards integrating ERP infrastructure across computing, storage networking and management, meaning that monitoring and maintenance can be handled in a more streamlined way.

Financial services and consulting firm Deloitte publishes a report each year, highlighting technology trends that are likely to impact business in the short- to midterm. In its 2013 report, the firm offers some interesting insights into how ERP systems are being overhauled and made fit for the twenty-first century.56

In the private sector, deploying these ERP innovations has allowed organizations to consolidate systems using an already engineered and integrated solution, the report notes. This avoids having to buy hardware from a range of vendors and then spend time and money on integration. The in-memory ERP technology also enables companies to get to grips with customer insights at a deep level and, most importantly, in real time.

Governments have been using ERP systems for some time, and the latest developments offer obvious benefits. Public servants can make the best use of the substantial amount of data available across government in order to support initiatives. They can identify trends and patterns, such as fraud and compliance issues, for example, which can lead to cost savings.

ERP systems in the public sector may be less easily updated and consolidated than in the private sector. For a start, there may be proliferation of different ERP systems across government from department to department, agency to agency. There may even be different ERP systems within departments. ERP systems may also be fragmented because officials want to maintain power bases and autonomy. These factors can make consolidation and integration problematic.

Governance can also be a challenge. ERP systems are usually mission critical for governments. Projects that update and extend ERP systems are potentially costly and risky. A number of questions must be asked before engaging in these projects: What are the current strategic objectives? What is the decision-making process that impacts on the development and implementation? What people and expertise are needed for implementation? Who has vested interests in preserving the status quo?

Deloitte’s take on ERP renewal notes that there are a number of steps the public sector needs to take in order to help public servants negotiate the renewal and reinvention of ERP systems. These include:

• Innovation opportunities. Update ERP systems where there are opportunities to innovate away from core activities – for example, using analytics with unstructured big data during evidence-based policymaking processes. Taking on core processes can come later, once people are persuaded by potential benefits.
• Outdated, upgraded. If the system has not been updated for some time, it may be an opportunity to upgrade, rather than do a version update. Get the advantages offered by the latest ERP engines – fast, flexible and freely available – and use them to deliver improved government.
• ERP buy-in. If public servants want to implement new ERP solutions, they will need to champion the technology within the organization. It needs to be a realistic sell, too. They must clearly communicate the benefits and use case studies to highlight the positives – but not underplay the challenges of implementation.

Remember, too, that solution providers favour different approaches and emphasize different benefits. In-house technical expertise is needed when the public sector is navigating its way through vendor and partner product and service offerings.

Embracing innovation

Robust and nimble governmental machinery also requires a capacity to innovate. By embracing and incentivizing innovation, the public sector will not only be more in touch with societal needs, but will deliver policies, services and products of a higher quality, and do so more efficiently and at lower cost.

When there is little or no competition within the public sector, costs tend to rise faster than in other parts of the economy. By helping to break down organizational frontiers, involving other members of the governance ecosystem and enhancing collaboration between government agencies, innovation fosters an element of competition which may improve cost efficiency.

There is also a morale-boosting benefit to innovation. Being involved in the process of innovation greatly improves the working environment of public sector employees, fostering a spirit of collaboration, information sharing and experiential learning. By promoting innovation and rewarding idea generation, government employees are incentivized to think in new and unconventional ways. A new mindset is developed, one that is solution oriented and outcome focused.

There are five main types of innovation in the public sector:

• Services innovation: a new service.
• Service delivery innovation: a new or improved way of providing a service.
• Process innovation: a new or improved process.
• Policy innovation: a new policy approach or a change to policy thinking and implementation.
• Systemic innovation: a new or improved operating model for parts or whole of the public sector and its key stakeholders.

As an example of process innovation, Her Majesty’s Revenue and Customs (HMRC), the UK tax administration, implemented a series of innovative improvements to the process of handling income tax returns in 2005. In the space of three months, the project reduced the amount of time it took to process a tax return by half and increased the proportion of returns that were ‘right first time’ from 55 per cent to 98 per cent.

Coupled with leadership development, the lean initiative was then branded PaceSetter, and by the end of 2013 had helped to deliver £600 million in additional tax revenues, a 30 per cent increase in productivity on average, and gross salary savings of over £300 million.57

Institutionalizing innovation

Better innovation within the public sector means adopting broader innovation processes and making them central to the core values and mission of government organizations. Merely creating a series of disparate initiatives and one-off changes will not be enough to make a real difference. Transforming innovation from an ad hoc activity to a constant and reliable contributor to improved performance means institutionalizing innovation. The ability to innovate and apply the outcomes of innovation must run throughout government.

This means establishing a successful innovation process. Many different approaches exist, but most are variations on a similar theme: idea generation, idea selection, idea implementation and idea diffusion.

For example, the US Transportation Security Administration (TSA) developed a structured innovation process by creating an online community for its 50,000 plus staff in 2007 called IdeaFactory. The aim was to engage the workforce and make sure that they had a say in the way that the agency and its operations were run, collect fresh input and perspectives aimed at continuous improvement, and disseminate information about new initiatives and policies to front-line workers. The online platform allows employees to post ideas at any time to one of seventeen programme-specific categories. The TSA receives about 300 ideas a month, with more than 85 being implemented – including, for example, a new queuing system for airport travellers which eases passenger frustration and increases satisfaction.58

In Germany, in 2010, the Bavarian State Government launched its innovation initiative, ‘Aufbruch Bayern’. The idea was to crowdsource suggestions for innovation projects from citizens. The State Government set up an online innovation contest running from 15 June to 15 August 2010. Over 100,000 citizens participated, producing 10,931 votes, 6,342 comments and 740 suggestions. The Bavarian state council of ministers selected the most promising ideas in each of three categories – family, education and innovation.59

All four elements of the innovation process must be equally attended to. What often happens is that the focus is primarily on idea generation rather than on implementation and diffusion. Brainstorming and other creative tools linked to idea generation have received a lot of publicity, and more attention is often spent on this aspect of innovation.

But successful innovation is not just about creative idea generation. Selection, implementation and diffusion are equally important. Otherwise there is a risk of wasting time and effort through idea replication – and also of high failure rates, slow diffusion of ideas and internal resistance to innovative change.

Innovation enablers

It is possible to outline and integrate clearly articulated strategies that enable innovation in the public sector. Such strategies would, for example, include reproducing existing innovations, providing incentives for innovative behaviour, leveraging collaboration and harnessing technology.

A particularly effective innovation route for the public sector is adapting and reproducing existing innovations in a new context. This reduces discovery costs while inspiring greater confidence among stakeholders that an innovation exercise will work.

Employees should be fully engaged in the innovation process at all levels. A good way of achieving this is by providing targeted incentives and rewarding innovative behaviour. Some governments provide financial rewards linked to innovation such as bonuses, performance pay and awards.

Collaboration can fuel innovation. By developing partnerships with other public agencies, the private sector and citizen innovators, the public sector can share and transform resources. Partnerships offer many innovation benefits, including accessing novel business models and technologies, tackling bureaucratic and financial constraints, strengthening efficiency, and creating governments that are more customer-centric. Cultivating networks within various departments is as important as maintaining those outside. Networks enable the filtering and diffusion of innovation assets, break down organizational boundaries, help to create shared goals and values, and erode complexity.

Also, technology is key to eliminating knowledge monopolies and encouraging information and knowledge flows that strengthen idea generation and diffusion across the public sector. By building idea repositories – through tools such as Wiki or open innovation platforms –mechanisms for feedback can be established and the creation of customized solutions encouraged while broadening the ownership of innovation to a wider group of stakeholders.

None of this can happen without the appropriate organizational culture and identity. One of the biggest barriers to innovation within the public sector is where political leaders fail to set the right tone for employees. Creating a culture of risk taking and innovation can be challenging, especially in organizations that are by nature conservative and hierarchical.

Clear lines of responsibility and accountability, with shared goals within teams to reinforce the sense of belonging, will make people more forgiving of failure and willing to accept different perspectives, thus encouraging risk taking. Ultimately, though, it is leadership and championing from senior policymakers that is central to managing the resistance to change, and to establishing a clear organizational culture and an identity conducive to innovation.

Getting political buy-in is essential. This can be done in a number of ways. For example, publicizing successful innovation initiatives and projects is one way of acquiring political buy-in, as well as a gradual change in mindset. Good communication with employees about the changes that are to be introduced, as well as regular training, capacity building and workshops, will reduce resistance to change.

What gets measured gets managed. This is certainly true of innovation. Creating innovation metrics and indicators allows governments to be selective about innovation implementation – to assess the risks, successes and trade-offs – so that resources can be allocated more efficiently.

For example, the diffusion of innovation is one useful measure of innovation success. Innovation diffusion needs support from stakeholders, as well as political commitment. A successful implementation and diffusion effort will require feedback mechanisms, the launch and analysis of small pilot projects, and effective monitoring and reporting.

Strategic fiscal sustainability

The backdrop to governmental interest in innovation and creating networked government is clear. Government finances suffered significantly during the global financial and economic crisis. Fiscal deficits have plumbed new depths, and public debt climbed to unsustainable levels. The crisis has caused solvency concerns, interest-rate hikes on public debt and the downgrading of the creditworthiness of many countries.

In OECD countries, the deficit went up by an average of 4.3 per cent between 2007 and 2010, with increased debt levels standing at an average 74.2 per cent of GDP across the OECD area. Revenue decreased sharply. Economic growth was negligible.

The continuing reality is that many developed countries need to make lasting cuts to social entitlements to put current public finances in order over the long term, as economic growth alone is not sufficient to halt mounting debts.

Sound public finances are essential to tackling the difficult economic conditions and returning to sustainable economic growth. Recognizing this, many countries have started to implement much-needed fiscal consolidation measures, putting in place policies aimed at reducing government deficits and capping rising debt levels.

Fiscal consolidation is a set of policies for reducing government deficits and overall debt. These policies are quantified, in general, as a percentage of nominal GDP and aim to identify areas of savings in government spending that can make a substantial contribution to revitalizing the financial sector and stabilizing public debt.

Controlling public debt levels can mitigate long-term spillover effects on the wider economy by preventing the diversion of public resources away from social and economic programmes. A lower sovereign risk profile can also maintain interest rates at levels conducive to future economic growth and can enhance spending capacity.

While the reforms needed to address the downturn are focused on short-term goals, they may help to raise growth and productivity over the longer term, reducing the severity of similar crises in the future. Implementing fiscal consolidation allows governments to attain fiscal sustainability and set the stage for economic recovery.

But while one aim of fiscal consolidation is to ensure future growth, its focus in general is on cutting expenditure rather than increasing revenue. Studies suggest that spending controls are more likely to be effective than revenue measures such as tax increases.60 According to the OECD Fiscal Consolidation Survey, fiscal consolidation is weighted on average two-thirds towards spending cuts and one-third towards increasing revenue.61

To address rising debt levels, OECD countries have explored consolidating spending in two main areas: programmes, notably social welfare programmes such as pensions, healthcare and education; and operational spending, including wage reduction and benefit cuts.

On the programmes side, several OECD countries have targeted pensions for cutting spending and increasing fiscal sustainability. Reforms include pension reductions for future retirees and raising the retirement age.

With fiscal consolidation, the mechanisms and institutions through which these measures are implemented are as important as the measures themselves. For example, the way governments communicate their intended fiscal consolidation plans to stakeholders is key to the success of those plans. Markets will take a view on those measures, positively or negatively, partly based on their strategic impact, the level of transparency and how realistically they can be implemented in the timeframe given.

A strong institutional framework is a prerequisite for sustainable fiscal reform, especially in a multi-year fiscal consolidation plan. The creation of independent institutional fiscal bodies such as fiscal councils and offices to scrutinize budget-related forecasts and speculation can provide the necessary oversight and vitalize a government’s role in generating fiscal revenue.

Realizing the importance of creating budget councils and offices, OECD governments have steadily increased the number of independent bodies ensuring fiscal discipline. In 2010, US president Barack Obama created the bipartisan National Commission on Fiscal Responsibility and Reform, an institution aimed at reinforcing fiscal discipline by identifying policies aimed at improving the fiscal situation in the short term and achieving fiscal sustainability in the long term. ‘Our nation is on an unsustainable fiscal path’, concluded the Commission, proposing a six-part plan to ‘put our nation back on a path to fiscal health, promote economic growth, and protect the most vulnerable among us’.62

Cutbacks are unlikely to be universally popular with citizens or businesses. Openness and transparency add greater legitimacy to the difficult yet necessary reforms that many governments must undertake to restore public finances. Good accessibility to relevant information allows citizens to monitor the effectiveness and fairness of these measures, and hold governments accountable for the success of their implementation. In doing so, it builds public trust in the planned fiscal consolidation measures.

Fiscal sustainability reforms extend over several years, beyond the average term of elected governments in developed countries. Consequently, reforms developed by a coalition of political parties, involving many stakeholders, are likely to last longer and achieve a higher level of success than those primarily backed by a single party. Governments that engage all key stakeholders in implementing fiscal and pension reforms experience more sustainable reforms over time and become more agile and better prepared to respond to future crises.

Transformation at work: fiscal management in Japan

The example of Japan shows how easily fiscal consolidation plans can be sidetracked by the short tenure of elected governments. Before the election of Prime Minister Shinzō Abe, the Japanese government had embarked on a Fiscal Management Strategy in 2010 that aimed to halve the primary budget deficit by 2015.

The measures included freezing spending (exclusive of debt repayment and interest coverage) in 2011–13 and avoiding exceeding 2010 budget levels. In addition, the government planned to maintain 2008 bond issuance levels in 2011, and reduce public works and transfers to local government. To gain public support for fiscal consolidation, the government initiated Internet-streamed and televised public budget hearings. The hearings scrutinized both spending ministries and the Minister of Finance, who had to defend all aspects of the budget to a committee of examiners made up of members of parliament and academics.

After his election in 2012, however, Shinzō Abe implemented a set of economic measures popularly known as Abenomics, which involved increasing government spending – on infrastructure projects, for example. This was likely to increase the budget deficit in the short term, at least, although a rise in consumption tax was introduced in 2014.

Transformation at work: contracting Canada

In 2009, Canada’s economy contracted by 2.5 per cent, compared with the OECD average of 3.4 per cent. The budget surpluses that Canada recorded in previous years meant it had a relatively stable economic position with a healthy fiscal record, yet it still suffered from a growing deficit, a downturn in public finances and a burgeoning debt ratio marginally below the OECD average.

In order to address these issues the Canadian government focused on three main areas of fiscal consolidation through expenditure constraint: limiting expenditure by ending temporary stimulus measures; enforcing a package of defined spending limits to take effect in 2011; and undertaking continuous revisions of potential savings by revisiting low-priority and low-performing programmes.

All of these measures were part of the government’s fiscal consolidation strategy, a strategy that aimed to attain fiscal balance by 2015 by declaring around one per cent of Canada’s GDP (equal to C$17.6 billion or US$17.1 billion) as consolidation measures for a five-year period.

Furthermore, several expenditure-restraint measures were undertaken, including the freezing of departmental operating budgets until 2013, capping future international assistance levels and the refusal to reallocate savings from previous strategic review programmes. As of early 2014, Canada appeared to be on track to produce a budget surplus in 2015, possibly in excess of $4.5 billion, nearly $1 billion more than original estimates.63

Institutionalizing transparency and accountability

A vital lubricant in creating more networked, innovative and efficient government machinery is transparency and accountability. Transparency helps governments to encourage people to act efficiently. There is very little cost attached to improving transparency, yet it offers benefits that include a reduction in corruption, improvements in quality and better-shared best practice.

Increased transparency and accountability can reduce corrupt practices, favouritism and the mismanagement of public resources. Greater transparency in procurement also offers significant cost-saving benefits by enabling different government agencies to compare purchasing policies and facilitate their consolidation. A study by the UK’s National Audit Office, for example, concluded that the country’s National Health Service could save more than £500 million (around US$800 million) a year by consolidating its purchasing.64

Transparency at an international level can also be a force for change. In education, the OECD’s Programme for International Student Assessment (PISA) ranking, which assesses the performance of education systems, is widely believed to be an important driver of reform at a national level.

Among those taking a lead is the UAE, which announced a new government initiative to increase the transparency and accountability of government performance early in 2014.65 Under the UAE Standards for Government Services Excellence Programme, each government department has its performance rated annually on a scale of two to seven stars as part of a new standards and rating system introduced to measure services. Achieving a seven-star rating means openly sharing knowledge about service delivery practice and the consistent attainment of high satisfaction scores in user and employee surveys.

The annual process provides a timeline for the departments to adjust to the requirements of standards in the event of unsatisfactory results, with the final stage being the announcing of the grades. Once a department is rated, continued compliance is tested by ‘mystery shoppers’ at random intervals. A repeat assessment is scheduled three years from the initial rating, or sooner if required.

Recent efforts to improve transparency and accountability across government fall into two broad categories.

Social accountability allows citizens to participate directly or indirectly in exacting accountability from government. Examples include enabling citizens to engage in policymaking, monitoring delivery of public services, tracking public expenditure and monitoring the delivery of business plans.

The other category is access to information. Many governments have allowed access to information and data that would usually be unavailable. These freedom of information (FOI) initiatives might involve legislative change, ‘right to know’ campaigns, voluntary disclosure schemes and other mechanisms.

In most OECD countries, FOI laws extend vertically to all levels of government and, for about half of them, horizontally to all branches of central government. (There are often FOI exemptions, however. Some information may be excluded from release because of its classification, such as national security, or because it risks causing prejudice or harm.) One common driver towards greater transparency and accountability is corruption reduction. Here, benchmarking public procurement using standards recognized by international bodies, such as the World Trade Organization (WTO) and the Asian Development Bank, is a solution.

Transparency International’s Integrity Pact, a written agreement between the government and bidders to refrain from bribery and corruption, has been widely used to increase transparency in public procurement. Germany, India, Indonesia, Italy and Mexico have all used integrity pacts to improve access to information and provide greater confidence in public decision making.

It is also commonplace across the OECD for governments to publish conflict of interest disclosures by key decision makers. This is normally a legal requirement, but in some cases, officials voluntarily list outside interests. In over 80 per cent of OECD countries, senior civil servants must disclose their assets, and in over half, they must declare any paid outside employment. Officials in at-risk areas where they are susceptible to influence – such as customs, procurement and tax – are increasingly being asked to disclose gifts and outside positions. Publication only occurs in a handful of countries, however.

FOI schemes have proliferated in recent years. In 1990, only thirteen countries had adopted national right-to-information laws. Today, more than eighty-five countries have adopted such laws. Government websites providing information from a central portal are more common. According to a report from the World Economic Forum, at least ten countries currently have open data portals that make government information accessible in a form that may be used by citizens.

Because increased transparency so often relies on technology, it is important for governments to ensure that there is sufficient focus on education, broadband access and digital literacy, so that citizens have the skills to access online data.

As more information migrates onto public portals, the technology infrastructure must be able to keep pace with storage needs and demand from citizens. In addition, if transparency is going to drive efficiency, accurate and reliable statistics are needed. What differentiates the OECD countries from many developing nations, for example, is the ability to generate accurate statistics that prompt demands for increased efficiency and change. The prospects of greater transparency are also likely to be affected by the political context.

Reinforcing security and reliability

Governments are under pressure to be more open and transparent, providing greater access to data, and to engage with citizens and business in networked activities such as open innovation. A more networked approach to government means that reliability and security become even more important. The flip side of governmental agility is that security challenges are increasingly manifest.

Cyber attacks against corporations and government institutions are commonplace. As governments continue to make more effective use of new technology in areas such as networked government, they become more vulnerable.

In 2007, Estonia was possibly the first nation to fall victim to cyber warfare, suffering a three-week barrage of DDoS (Distributed Denial of Service) attacks. The cyber attack was directed at the country’s presidential office and parliament, the nation’s ministries, communications forms, banks, news agencies and political parties. It paralysed websites and made it difficult for the government to communicate with its citizens.

There have been numerous other instances of cyber attacks at a national level. Government agencies of Pakistan and India were attacked in 2010. The Canadian government isolated its main economic agencies from the Internet after a cyber intrusion of its systems in 2011. More recently, computers in South Korea were affected by the malware programme DarkSeoul.

Cyber security is now a core element of national security. If governments are to encourage interaction with contractors and citizens, they must be able to guarantee the security of cyberspace.

Diagram 6. Types and frequency of cyber attacks over a twelve-month period (2009/2010) for a sample of 45 US organizations. Note: the percentage frequency defines a type of attack categories experience

Source: Ponemon Institute

In a world increasingly reliant on digital and networked technology, the benefits of improving cyber security are broadly the same as those of traditional security. Cyber attacks can impose large costs. While at a certain level, cyber attacks can be mitigated, the inability to defend a country’s cyberspace can be directly detrimental to national security.66

To defend against cyber attacks and develop effective cyber security capabilities, governments need to have better tools than their attackers have, notably access to cutting-edge technology and expertise. Experts who are able to respond to ongoing threats and monitor and prepare for new and emerging threats are not easy to find.

In 2010, for example, Jim Gosler, the founding director of the CIA’s Clandestine Information Technology Office, estimated that the US required 20,000 to 30,000 experts with front-line cyber defence skills, but only had 1,000 available.67

To obtain the expertise they need, national bodies tasked with cyber security require strong links to the private sector, academia and other areas in order to work together on security issues. An education programme to raise public awareness of the issues involved can be beneficial. Governments should also be able to look at a range of threats, while at the same time not unduly restricting the benefits of new technology.

Countries have developed two types of institution – in practice they may overlap and interact – that enhance their cyber defence. Dedicated departments or units within the military or intelligence services are used to defend military assets and critical national infrastructure; civilian institutions enhance the security of domestic assets and of businesses and citizens online. Given the nature of modern digital networks, they also frequently play a coordinating role for public and private actors and engage in education and awareness raising rather than having a purely policing function.

Transformation at work: Spain’s Plan Avanza

Plan Avanza, a Spanish government initiative which ran from 2006 until 2010, aimed to advance Spain’s use of Information and Communications Technology (ICT) and increase confidence in online security. Measures introduced to achieve the e-confidence objectives included awareness campaigns; a network of security centres and a computer-security incidents response team; the promotion of improvements in security technology; providing stimulus for the use of digital identity and electronic signature technology; creating an Information Security Committee with the participation of national and local government and the private sector to discuss and coordinate efforts; development of metrics and methodologies for the evaluation of e-confidence indicators; and research into the use of security technology by the various segments of society.

According to the OECD, Plan Avanza was a success overall and contributed to improving cyber security in Spain. Spain has since embarked on Plan Avanza II, which includes further security aims, such as spreading trustworthy technology among citizens, protection of privacy and children, and fraud prevention.

In a nutshell: creating agile machinery

With excessive public debt and public sector budgets being squeezed ever tighter, governments around the world face expectations to do more with less and be more agile and responsive to the emerging needs of society.

Governments aspire to – and increasingly must have – the ability to respond fast, no matter what the challenge or issue they face. They must adapt to changes and respond to emerging needs with relative ease. Agile governments constantly scan the external and internal environments and evaluate needs and whether they are being met. They move resources between different priorities and are able to identify when particular existing structures and processes are no longer needed.

Agility is enabled through flexible and networked structures, accountable and transparent governance, lean processes and fiscal efficiency. Agile government is also characterized by an holistic approach to innovation that aims to identify, assess, experiment, scale up and reward innovative ideas which may be crowdsourced or generated from civil servants, businesses, NGOs and academia.

A collaborative and networked culture where innovation is shared is also critical, at both agency and inter-agency level. The transparency and accountability that must accompany networked and open government will demand exceptional cyber security – one of several competencies that governments will be competing for in the future.