GG44 - Ensure Interagency Business Transactions are Re-engineered and Moved to the Internet

California government has not substantially improved its interagency paper-based business transactions for decades. Paper forms, paper processes and the associated tasks of document management must be changed. State agencies should re-engineer interagency paper-based forms and processes, moving them to electronic web-based software applications. These applications must be cost-effective, accessible from a main business center and inventoried to reduce unnecessary duplication.

There are hundreds of state agencies that make up California government, each of which need services provided by one or more other state agencies, departments, and commissions. The agency requesting the service generally completes a paper form or other paper documentation that is mailed to the agency that provides the service. This is a slow and expensive process.

Examples of the forms used for these interagency business transactions are easy to find:

• Forms associated with accounting, contracting and administration.[1]
• Forms associated with state employee personnel transactions.[2]
• Forms submitted to the Department of Finance (DOF) for the purpose of establishing or changing departments' or agencies' annual budget.[3]

Many of the paper forms must be ordered from the Department of General Services (DGS) and shipped statewide to the various departments. The completed forms must be mailed to an agency's headquarters office (usually Sacramento), adding time to the process and additional cost. If errors are significant, the process must start over at the point of origin. When complete, the forms are routed internally for final headquarters' signatures.

When received in the headquarters office, information contained on the forms is extracted manually and keyed by employees into a central database where it is used for future reporting purposes. At steps along this path, hard copies are made and filed, costing staff time and increased supply and storage costs. The completed forms are then routed by mail or courier to the "action" department, which duplicates many of the above steps within its own organization. This manual, paper-based process is inefficient and should be replaced with an electronic, web-based process.

Eighty-three percent of participants in a survey of nuclear research say electronic document management technology has provided significant value. The biggest productivity returns have occurred in accelerated document retrieval, faster filing and reduced staffing requirements. The biggest savings come from reduced printing, distribution and storage costs. Eighty-six percent of the participants say it has improved employee productivity. Using document management software, the average participant reduced document retrieval time by 52 percent.[4]

Many departments have created standard forms in an electronic format. These forms are typically created using Adobe Acrobat™ but still must be printed, processed and filed traditionally.[5] While this is an improvement over the paper format, further efficiencies using modern electronic document management systems and software would result in:

• A 75 percent reduction in time spent locating and retrieving documents;
• A 75 percent reduction in time spent filing ;
• A 50 percent reduction in copying costs;
• A 75 percent reduction in off-site storage costs;
• A 75 percent reduction in on-site storage costs;
• A 50 percent reduction in overnight shipping expenses; and
• A 50 percent reduction in filing supply expenses.[6]

Additionally, many departments have implemented electronic software payroll systems, procurement and facility maintenance applications. The cost effectiveness of these applications is unclear because they have not been analyzed for return on investment (ROI), which is the net benefit of a project after the costs have been determined. California state government requires no formal analysis for ROI.[7] Lastly, these electronic applications are not accessible through one central business site. These electronic software applications are, therefore, not readily accessible to other departments, thus encouraging expensive needless duplication.

In the next three to five years, 71,000 state employees could retire.[8] Both current and new personnel resources will need to be efficiently reallocated. As personnel resources are limited or realigned, providing the state workforce with modern document management tools will be a key to productivity. Listing these tools on a central registry would reduce duplication.

Document management is the first step towards establishing a knowledge base. A McKinsey study suggested that at least 40 percent of new project time is spent re-creating knowledge already possessed by the company. Administrative and information workers spend 30 percent of their time looking for information to complete their tasks. Information and knowledge management enables a smart, connected organization.[9]

Creating a web-based document management system could streamline the current paperbased process. For example, using current technologies, a state employee requiring a service from another department could access California's homepage.[10] The employee would select "Government" and a new selection would be available on that web page titled "Inter- Departmental Business Center" (IDBC).[11] A login procedure would allow the employee to access services, forms, links to frequently asked questions and online training manuals such as the Department of Finance's Budget Analyst's Guide.[12] The routing of all transactions would be electronic, and approval signatures on required forms would be electronic whenever appropriate.[13]

Many state documents require levels of security to protect names, addresses and social security numbers. In addition, the general business of the state, although subject to the Public Records Act, may still require distribution controls. This has been a significant obstacle in the past, but with today's software technology, signature and permission controls are well developed for routine transactions. Legal documents, documents related to proprietary projects and documents related to health care that require advanced security may be protected (at additional cost) by more robust "rights" management software.[14]

Effective electronic document management requires data routing to be completely electronic. Short of attaining this, severe inefficiencies will remain. For example, the Department of General Services (DGS) uses an electronic database application called the Activity Based Management System (ABMS). This application is used to track purchasing, projects and employee records. At the same time, DGS has developed effective web-based applications that allow its external customers to provide certain real estate related information electronically. These web-based applications do not link directly to the ABMS because of data contamination or data "ownership" issues; hence the data is re-keyed at DGS. There is no technical reason why they should not be linked and to eliminate this redundancy.[15]

To shift to electronic transactions for all state business processes across state agencies would be a massive undertaking. Accomplished incrementally, however, department by department, process by process, electronic form and content management becomes more manageable. A department may elect to automate its document management as its budget allows.

Some private and public enterprises are adapting quickly. They use many commercial off-theshelf software products (COTS).[16] They are powerful tools and an application may cost as little as $175,000.[17] A major factor in controlling the expense is to set clear goals detailing the application design and then maintaining adherence to the project scope.

In a recent Open Archive Inc. white paper, authors Sandy Schiele and Betsy Delfosse note impressive statistics and savings. BAE Systems conducted a study that discovered that 80 percent of employees waste an average of half an hour per day retrieving information, while 60 percent are spending an hour or more duplicating the work of others. More statistics supporting the need for document management include:

• Ninety percent of corporate memory exists on paper;
• Ninety percent of all the pages that get handled each day in the average office are merely shuffled;
• The average document gets copied 19 times;
• Companies spend $20 in labor to file a document, $120 in labor to find a misfiled document, and $220 in labor to reproduce a lost document;
• Seven and a half percent of all documents get lost;
• Three percent of the remainder get misfiled; and
• Professionals spend 5-15 percent of their time reading information, but up to 50 percent looking for it.[18]

As an alternative to COTS, California could develop its own software applications. The advantage to in-house applications is the control or elimination of annual COTS costs for server and user licenses. In-house software development, however, is becoming less viable as software companies create more targeted applications and the costs for COTS become more competitive. Because state departments vary greatly in size and subsequent application use, the one-time cost of development and any future upgrades or maintenance should be prorated across all the departments that use the system whether developed in-house or purchased from the marketplace.

E-document management is not new technology; it is simply proven technology that has not yet been widely engineered into California state government for agency to agency business transactions. A notable exception, however, is the California Public Employees' Retirement System (CalPERS) which used COTS software to successfully convert over 51 million documents in just over a year.[19] While no specific dollar savings are available, any business process that is reduced, as this one was, from days to minutes would have a positive economic benefit if the resources freed are well allocated. In another COTS software example, Scott County, one of the fastest growing counties in Minnesota will reap an $865,000 ROI by year-end 2003.[20] This was accomplished by transferring many of the county's operations to electronic document management.

Companies across the world are moving rapidly toward more use of electronic document management.[21] One of the largest commercial real estate organizations in the United States, Shorenstein Company, implemented a COTS real estate application "in only 12 weeks, which included scanning 8,400 property and (lease) documents (approximately 175,000 pages) into the system."[22]

The DGS' Real Estate Services Division manages 2,059 leases, which occupy a total of 21 million square feet.[23] In 12 weeks, a significant part of the state's lease portfolio could be properly recorded, reducing storage costs and processing time. On average, the investment could be returned in 3.75 months.[24]

Re-engineering state business processes through electronic document management is a key to improving efficiency. These business transactions could be completely re-engineered and once automated, used by all departments from a central business site similar to Pennsylvania's ImaginePA.[25] Further, new applications should be analyzed for ROI and listed on a central registry for other departments to review or build upon.[26]

Recommendations

The Governor should issue an Executive Order that requires the Department of General Services, or its successor, to design and maintain the "Inter-Departmental Business Center" (IDBC) Internet web selection on the California homepage. Interdepartmental business exchanges should be conducted from this site.
The Governor should work with the Legislature to secure an appropriation for Integrated Document Management (IDM) project(s) on an annual basis. The funds should be used for contracted IDM services to improve agency-agency electronic business exchange and not to perform studies. The funding for the appropriation should come from the budgets of future users of the services on a prorated basis.
A pilot department should be selected by the Department of General Services, or its successor, to transfer a business process to interagency electronic document management. Real estate leasing is a good candidate because it would be a project of moderate and manageable scope.

The McKinsey study noted earlier suggests administrative and information workers "spend 30 percent of their time looking for information to complete their tasks." There are about 12,300 state positions devoted to document handling.[27] If one in four positions (25 percent) could be saved or reallocated, a potential savings of 3,074 personnel years (PYs) is possible.

An investment in IDM might cost $750,000 to implement.[28] The investment would be returned, through salary savings, approximately six months from when the application is operable. A percentage maintenance and management fee of between 14 to 20 percent would be charged per year. This paper assumes a 20 percent fee, and a 10 percent reduction in PYs through efficiencies phased in over two years.

Note: The dollars and PYs for each year in the above chart reflect the total change for that year from 2003-2004 expenditures, revenues and PYs.

Note: The dollars and PYs for each year in the above chart reflect the total change for that year from 2003-2004 expenditures, revenues and PYs.