Reform or Politics as Usual?

New Jerseyans have the highest tax burden in the nation. To balance the budget, Governor Christie has to close a $10.7 billion deficit. His goal is to end New Jersey's "addiction to spending" and to find ways to reduce the taxpayers' burden.

How will he accomplish this task?

Slash state education spending by more than $1 billion
Skip $3 billion in pension payments - NJ pension plan is currently underfunded by $46 billion
Cut property tax rebates
Cut $445 million in aid to towns
Lay off approximately 1,300 state workers in 2011.

Will this plan really help taxpayers? Cutting spending at the state level doesn't mean that taxes won't rise at the local level. Somehow, local governments find a way to keep the status quo and pass the burden on to the taxpayer.

Isn't cutting the property tax rebate really a tax increase? The pension plan hasn't been fully funded in years. It's an accident waiting to happen. Couldn't we cut 13,000 state workers rather than 1,300? True reform would be reducing spending and taxes by 10% and 10% more next year like many private sector companies have. After all, NJ government payrolls swelled in 2009 by 11,300 workers as private sector payrolls fell by 121,000.

I guess I see the Governor's plan as politics as usual. Is he changing the tide? Yes. He could be raising taxes and avoid making any decisions as NJ lawmakers have done 115 times in the last 8 years. True reform to me would be a tax decrease. I guess he has 3 more years to convince me that he is the reformer that he says he is.

Celebrate All That’s Green Today!

On a day sunny day like today, who would think about solar power not working enough for green energy? However, it was a different story if you think back a few days ago. After Irish-jigging my way through the monsoon-like rain this past weekend I came across another article which explores even further into alternative energy.

Thanks to government subsidies, wind and solar projects are abound. According to Bloomberg New Energy Finance (NEF) nearly 8,000 megawatts of new wind capacity was installed in the U.S. in 2009. But thanks to further government backing, geothermal and other technologies are being brought to light. The NEF states geothermal power (extracting heat deep inside the earth) will increase more than 40% by 2013. They also expect “power from biomass – organic material such as wood chips, farm waste, and grass clippings that is burned to produce electricity – to jump by nearly a third over the same period.” And according to market researcher Frost & Sullivan, output from systems that harness ocean waves will rise from nearly nothing to more than 3,000 megawatts which is equivalent to four coal power plants by 2020.

I can just imagine the expense in getting these programs off the ground (or in the ground, in the water, etc) but a positive to these emerging technologies is that they are not dependent on the weather like wind and solar. This helps drive negotiations and financing with a steadier guarantee of electricity supply that utilities will pay a premium for. There are still some cons to these upcoming alternative energy technologies. The Business Week article mentions “newer geothermal plants in California and Switzerland that drill deeper than traditional setups are believe to have caused small earthquakes, leading to questions about the technology’s safety and viability.” Not to mention the rules of supply and demand we all learned in Economics class that investment in biomass may slow if prices for wood chips and plant waste rise as demand increases. Regardless of some shaky ground (I couldn’t resist) private capital investors are surfacing as state and government backing increase.

So as you raise your preferred green beverage of choice today let’s toast to the growing green alternative energy abound! Slàinte!

WTF - Health Care Reform?

I've been hearing about how important health care reform is. Our leaders can't seem to agree on what exactly needs to be reformed...but something has to be done and done quickly. Now, no one wants their name attached to reform, but they still want it done. Today, Erica Werner of the Associated Press, writes that "Democrats defended plans to push massive health care legislation through the house without a direct vote". If health care reform is so urgent and important, then why doesn't anyone want their name attached to it?

The article goes on to say"House Speaker Nancy Pelosi wants to shield lawmakers from having to vote directly on the Senate passed health care bill because it's unpopular with House Democrats". All I can say is WTF! Health care represents 16% of our GDP and our government is going to pass a reform bill that is unpopular and no one wants their name on it. Can you explain to me why we are in this fiscal and economic mess? Sounds like a sourcing project that is politically based with no specification. Have you ever been involved in one of those? Do they even know what is in the bill? Has anyone read it? How much will it cost? Why bother. You and your future generations will kick in for the tab.

Defense IT Acquisition Reform

Information Week posted an interesting article titled "Congress Targeting Defense IT Acquisition Reform" The article is a summary of an interim report issued by the House armed services committee panel on defense acquisition reform. The report specifically says that IT acquisition programs are "managed in such a document-intensive, process-bound way that defense IT system deployments typically take about 3 to 5 times longer than deployments in the private sector, and can be outdated several times over once they are delivered." The report (warning pdf link) itself states "Last year, the Government Accountability Office (GAO) reported that on the then 96 Major Defense Acquisition Programs (MDAPs) the Department had experienced $296 billion in total cost growth and an average of 22 months schedule delay."

The article continues to explain that Defense Department officials are urging reforms in the Department of Defense's process of IT acquisition. After doing a quick scan through the interim report, I noticed a common theme that comes out of all of these congressional reports....

• The metrics we have in place are ineffective at measuring success,
• & We need to hire more people.

Unfortunately, it seems that variations of these reports are produced multiple times every year, with the same identified problems, yet no resolution ever takes place. In fact, just last June I blogged about a different government study that said they had poor metrics in place and needed to hire more staff.

One important aspect that is missing from this latest report, and every report monitoring government procurement effectiveness, is that the government continues to follow the poor practices of allowing their suppliers to write the RFP (or in this case, the actual procurement process) for them. As we blogged before, allowing the suppliers to have too much control in the procurement process will absolutely lead to higher costs and confusing specifications that limit the buyer to a single solution. The report does identify a need to move to more open architecture, but does not address specific examples of how to get there. Having spent some time consulting for the government in IT procurement, I can tell you with absolute certainty that the government is more guilty of this practice than any private company I have ever seen. In fact, most of the "consulting" firms that they have in IT procurement are in fact suppliers, such as SAP, or resellers/agents of those suppliers, which of course will always help write "best practices" that conveniently put them in the front-runner position of any technology acquisition.

We will have to follow this report as it develops more, however it seems like another expensive study that identifies major problems (that translate to wasted tax payer money), and the end resolution will be to hire more consultants and staff without producing any results.

Isn’t Everything Negotiable? Part 2

Alright, so I have officially completed my bridesmaid’s gown shopping fiasco. Here is a tip from an experienced shopper, be careful when negotiating with certain retailers. They are not all very keen on those extra-thrifty shoppers. You need to get a good feel for the type of business owner you are dealing with before launching into negotiations. Needless to say, I tried to negotiate the price of the gown I selected for my bridesmaids and was not as successful as I had hoped. It turns out that they already had the lowest cost around and the only reason the other shop was so eager to bid lower was because their markups were much greater. This is where you need to do your research and know what you are working with. But I would not deter you cost savers out there to always try, it can’t hurt to ask!

I think consumers need to be comfortable with the purchase on all different levels. Not only should you be getting the best price but you should be concerned with the brand and business itself. Doing business these days is about building relationships. Of course this does not apply to all types of businesses. I do not expect to build a relationship with my checkout person at the local grocery store or the person I ordered my coffee from at Dunkin Donuts. However I would expect to build a relationship with the place where I get my car serviced or where I do my banking. These types of businesses require a relationship in which the consumer is entrusting the business with something of importance. This goes the same for business to business relationships. Building a solid relationship with a supplier is very important when it comes to conducting future business relations with them. Many businesses offer the same types of products and services for similar prices. What makes the difference in many cases is the relationship that the business can offer and what benefits the two parties can achieve from that relationship. As a business you can benefit from a strong relationship with your supplier(s) through receiving discounts or deals and they can benefit by you ensuring your business is with them in any future dealings, among other reasons.

As a consumer I had dealt with the dress shop that I am working with currently in the past and was satisfied with the level of service and pricing. And just as an added note, they did end up taking the price of the gown down even more than they had originally offered from a 10% discount to 15% so I think it worked out well in the end. The business may also receive business from the bridesmaids I have when it comes time for their weddings if they appreciate the relationship they build while dealing with the shop. Word of mouth can be one of the most powerful tools in business so to all those who deal with customers who might be a little grumpy that day or difficult in general, keep in mind that even they have friends and you can be sure they will pass along their opinions, both good and bad.

Will the Cloud Reign or Evaporate?

You may not have heard about cloud computing but it has been stirring a lot of buzz this past year within the telecommunications industry. For those of you that are wondering what I’m talking about, the term cloud is used as a metaphor for the Internet, in network diagrams we use a cloud to abstractly represent the internet since the technical infrastructure behind the actual internet can become very complicated. Essentially, cloud computing allows a user to provision applications via the Internet using software and data stored on virtual servers.

Some basic examples of cloud computing are your everyday search engines and email sites such as http://www.google.com/, http://www.yahoo.com/, & http://www.hotmail.com/. These companies allow you to access your e-mail and search the entire web through their virtual applications. You don’t need to purchase any software, hardware, or have technicians come to your home to use these sites and all of your emails and documents are saved virtually not on your machines hardware.

Now that we have a good understanding of what cloud computing is let’s look at a couple advantages and disadvantages of utilizing this technology.

Some Key Advantages:

• Less physical on site infrastructure offers a couple of advantages of it’s own. The first being the most obvious; more room! Infrastructure is being offered as a service with cloud computing, so you won’t have to worry about capital expenditure on equipment. Usage is normally billed on a consumption or subscription basis versus a monthly recurring spend for the actual hardware.
• The second advantage of less on site infrastructure is lower management overhead. Since none of the working infrastructure is on premise its not necessary to have a management team/person in charge of everyday operations of this equiptment.
• Another advantage of cloud computing is time. There’s virtually no lead time on access to the cloud applications. Users don’t have to install and run the applications on their computers instead with just a click of a button they can conveniently access it through a site.
• The next advantage is that cloud computing allows users to access resources from any computing device. Since the infrastructure is virtual and can be accessed through the internet a user can connect from a phone, laptop, or home desktop- any device that has web browsing capabilities. If you forget documents at the office you can access them from your home desktop or if you switch machines at work you can easily access all documents and applications via the web from your new computer. You can also give access to colleagues so that you can collaborate on projects and not have to worry if your applications are compatible with their machine's applications.
• The final advantage I’m going to discuss is data reliability. With cloud computing you do not have to worry about your computer crashing and losing all of your valuable documents because everything is safely secured in the cloud! You also don’t have to worry about your computer’s performance because you will not be storing programs or processes in it’s memory.

Some Key Disadvantages:

• The basic fundamental element of cloud computing is the Internet. So if you don’t have the Internet or have a slow connection, cloud computing can be miserable for you. Most applications will require a significant amount of bandwidth so if you have dial up this may not be up your alley.
• The second disadvantage I would like to point out is that features may be limited. Some cloud applications may not offer as many features as it’s desktop based versions. I have a feeling that this may change relatively soon though. Once the cloud computing name ventures into mainstream I think providers will step up their game and develop more
  feature rich applications.
• The last disadvantage to cloud computing is security. Of course cloud computing suppliers/companies are promising our data is secure in the cloud but how secure is the cloud? Also, with cloud computing you have NO BACKUP! Your data could be lost or stolen for one reason or another and you have no physical backup (unless of course you save the documents to a safe place as well).

At any rate, relying on the cloud this early in the game may not be for you or your business. In my humble opinion, I do believe we will see some of these disadvantages evaporate (pun intended) in the near future with the impending popularity of less infrastructure and lower costs.

What is the Government doing to save your tax dollars?

We have all heard a lot in the news recently about the stimulus packages, bailouts, government spending, etc. Not too long ago the $787 billion American Recovery Act, aka stimulus law, went into effect. That number seems so ridiculous and surreal it’s difficult to wrap your head around it. Where does that money go in terms of Philadelphia and the surrounding areas? After everything was said and done, $16 billion of that is expected to flow into Pennsylvania and $17.5 billion into New Jersey. I started to think about how the city and state governments are spending this money. On an everyday basis, where are our tax dollars going? I have friends that are “civil servants” for the city, state, and federal governments so I decided to do a blog series on government spending, looking at some of these questions:
· What does the government spend all this money on?
· What products and services are they sourcing and how?
· What is the government doing to try and save our tax dollars?

I decided to start with an overview of local government spending and move up from there. The following is an overview of some of the things I discussed with a high city official that has worked for Philadelphia for over 37 years.

The City of Philadelphia provides public services to the 1.5 million residents of the city. There well over 30,000 employees (police, fire, doctors, lawyers, engineers, accountants, etc.) that work full time to provide these services. These employees determine and request the supplies and services (both professional and general services) to fulfill their daily job responsibilities.

The local government has sub-divided into around 80 departments (police, fire, water, streets, etc.) to perform the required public services. Each department is assigned specific duties and responsibilities. Some supplies are specific to certain departments, like road salt for the Streets Dept. or chlorine for the Water Dept. while many supplies are generic (office supplies). At some point, the city realized it was economically sound to establish the Procurement Department to take advantage of the discounts that would be available from ordering in large quantities.

The Procurement Department has established rigid procedures to establish an ethical and fair arena so that no vendors would have an unfair advantage over any other. All supplies and service requests are advertised in newspapers and professional trade journals to encourage competition. The award of a bid is always given to the lowest responsible bidder of the requested supplies or services.

The Procurement Department always accepts the lowest responsible bidder except in the case of professional services, i.e. engineering services. When engineering services are required, an RFP is prepared and may be publicly advertised. For services that may be very specialized, several appropriate firms may be invited to submit a proposal which would include information on their past experience, references, and current staff credentials. They would also submit hourly rates for the individuals that may be working on the project and how many hours and cost to complete the project. A departmental committee is assigned to review the various submissions and make recommendations to the commissioner of the department who then makes a final recommendation to the Procurement Commissioner for the final decision.

When the Procurement Department receives a request for a quantity of items, they may be asked to get quotes on a per unit basis or a lump sum. If the product needed has a definable quantity (500 bullet proof vests), bids may be solicited on a lump sum basis. If the quantity needed of an item (a few tons of road salt, which has been in quite high demand recently) is indefinable, a price per ton may be solicited with an approx. quantity provided with no guarantee of amount to be purchased. Often the Procurement Department runs into issues on items like this due to lack of planning and poor communication between city departments. They often do not have the time to effectively source these products and services which of course translates into wasting our tax dollars.

One of the pitfalls the Procurement Department has run into with product ordering has been computers and software. Every department was ordering what they thought they needed and the Procurement Department was slow in responding. The industry has been changing so fast, that equipment was obsolete by the time it was delivered. At some point, an IS&T (information services & technology) unit was established to review and determine computer and software needs for the entire city.



I will discuss some of these issues further as well as specifics on the city’s sourcing process and how it can be improved in later posts.


Hopefully the city can identify these issues and improve on them so our tax dollars are spent a little more wisely in the future