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Shared Service Agreements Bring Pricey Tech within Reach

Technologies both mainstream and emerging promise to improve government service delivery. To reduce costs and increase efficiency, jurisdictions are working together to get what they need.

In 2019, state and local governments are expected to spend $107.6 billion on technology. The size of this figure reflects a growth in revenue streams to support new investments, according to the Center for Digital Government.* But IT costs are growing too, along with the need for cybersecurity and updating legacy systems. 

More importantly, expensive new technologies promise to improve how governments deliver services, and some agencies, especially smaller municipalities, are struggling to afford them. In turn, many state and local governments have shown a growing willingness to split this burden. 

Shared-service agreements between public agencies today are commonplace, and the idea of consolidating EMS or fire departments is familiar to city councils across the country. For new and evolving IT services, however, the concept can be a little more novel, and has taken many forms.

Depending on how they’re defined, agreements for shared IT services have been around since governments and law enforcement agencies were using mainframe technologies in the 1960s. Today, with computer systems and telecommunications infrastructure in virtually every office of government, these agreements touch everything from consulting and cybersecurity services to shared radio systems, fiber and software. 

The terms of shared IT service agreements vary widely, but the benefits are fairly consistent: improved access to new technologies and expertise, shared costs, and better deals on bulk equipment and contracts. In talking to more than half a dozen offices across the U.S., Government Technology found some of the most visible examples of shared IT service agreements fall into three categories. 

Individual Interlocal Agreements

You have to start somewhere. For small to mid-sized city, county or school agencies considering shared IT services, especially without an urban tech hub nearby, one place to start is a short-term, individual interlocal agreement. These typically involve a small city or agency receiving services from a more-equipped one of equal or greater size nearby. 

When municipalities initiate these contracts, they usually depend on proximity for logistical reasons and the elimination of redundant services, with cost savings passed to the taxpayer. One such agreement, past its halfway point, exists between the cities of Tyler and Whitehouse, Texas. 

Initiated in October 2018, the agreement stipulates that Tyler, a city of roughly 105,000 people, will administer end-to-end IT services for Whitehouse, a city of 8,000 people about 10 miles away. It’s a one-year, $75,000 contract, with the option to renew. Services administered by Tyler employees include everything from installing software upgrades to troubleshooting, data backups, system administration and network monitoring. 

Whitehouse City Manager Aaron Smith said the agreement made sense because of proximity, Tyler’s staffing level and the changing landscape of IT. He’d seen firsthand the expectations of digital government outpace the budgets and capabilities of small towns, and he knew Whitehouse’s single in-house IT person, prior to the contract with Tyler, was no longer sufficient. 

“We have a smaller budget,” Smith said. “In my opinion, the time of having one individual in total control of your IT is past. I don’t think that’s appropriate anymore. To protect that information and protect the system, you need to have backup. For us, that would mean literally doubling our IT budget.” 

Although Whitehouse no longer has an in-house IT person, Smith said requests for service or repairs from Tyler haven’t been a problem, and he estimated that Whitehouse would spend $40,000 more per year for the same level of service if they were providing those services themselves. 

For Tyler, the prospect of shared IT services started 18 years ago with an agreement with Smith County, which they managed for five years before it was undone by “politics,” according to Tyler CIO Benny Yazdanpanahi. 

Three years ago, Tyler also started offering basic IT consulting to the nearby city of Jacksonville. This experience gave Yazdanpanahi the confidence to reach out to Whitehouse for a full-blown, end-to-end service agreement. For Whitehouse, he said, the benefits were many and obvious: a dozen IT staff instead of one, stronger and cloud-enabled infrastructure, no need to contract outside consultants, and the ability to borrow, share or inherit better equipment instead of buying new. 

For Tyler, the agreement’s short-term benefits include cost-splitting alongside greater purchasing and negotiating power of a combined entity, which reduces the need to raise taxes to buy new technology. 

“If I need to hire someone to manage something that is using the revenue that I bring in, then I can add additional staff without putting a burden on our general fund for the city,” Yazdanpanahi said. “That becomes a win-win situation for both of us.” 

In the long term, Yazdanpanahi said cooperation and building bridges are the way of the future for local government, not just IT. He said Tyler’s water utility department is starting talks with Whitehouse, too, and he’s working on a marketing brochure to reach out to other cities if the Whitehouse contract is a success. 

For these agreements to work, Yazdanpanahi had two recommendations. 

“No. 1, you have to have a good team that has a good understanding of the infrastructure,” he said. “Secondly, the infrastructure needs to be bulletproof. We have redundancy and continuity throughout the city, so if I want to become the cloud for an organization … I can house those things without them just being a single-point failure.”

The Hub-and-Spoke Model

With multiple agreements in the works, Tyler could become the center of a hub-and-spoke model. This generally entails a region’s most-equipped city, with a data center, advanced infrastructure and trained staff, becoming the IT provider for many smaller government agencies around it. Most often this means interlocal agreements between cities, counties or school districts sharing fiber, radio networks or emergency services. 

Hampton, Va., which has been sharing a public safety radio system with more than 12 public entities since 2011, is collaborating with surrounding communities to build out broadband connectivity and installing a fiber connection with nearby Newport News, Va. Lee’s Summit, Mo., is the latest addition to the Metropolitan Area Regional Radio System (MARRS), a system of interconnected digital emergency service radios across the Kansas City metro area. Shawnee, Kan., has laid over 25 miles of fiber since 2006, allowing it to share technology with nearby De Soto school district, Johnson County and the cities of Overland Park and Lenexa, and to operate nearly 700 traffic signals across the region. 

In central California, an ever-expanding e-gov initiative from 2003 has linked the city of Fresno, Fresno County, the city of Clovis and other nearby schools and agencies in a fiber-sharing agreement that also involves information and data sharing. A vision statement from 2002 proposed five critical factors for success: strong and sustained leadership, solid budgeting support, accountability of management and staff in making changes, well-defined organizational priorities, and execution in incremental steps that can be tested and fixed. 

Fresno CIO Bryon Horn would add collaboration and relationships to that list, since parties must be able to work together, especially when crossing political boundaries for council approvals or other legal hurdles. He also said a shared-service agreement should benefit all involved. 

“We had the fiber, we had an opportunity, we needed to share information between the city and the county and the city of Clovis, so for us there was a need for information sharing,” he said. “But I’m not going to manufacture a sharing opportunity if it’s going to be too costly or I don’t need to do it. We’ve got to watch taxpayer dollars. For us it’s all about making sure we’re good stewards.” 

One of the largest shared IT hubs is in Oakland County, Mich. The county provides e-commerce services to about 100 public entities across the state and is in the process of adding its first out-of-state partner, Vigo County, Ind. 

“We saw mid-size to small governments not being able to take advantage of larger technologies, because the private sector saw no profit margin in these smaller communities and counties,” said Oakland County CIO Phil Bertolini. “Since we were already sharing internal to Oakland County, we thought we could broaden that base and provide that service for other governments that just weren’t able to get that on their own, or it wasn’t profitable for a company to provide that for those governments.”

Bertolini said the county customizes interlocal agreements which are browsable on, a free marketplace exclusively for governments where they can find copies of contracts, GIS strategic plans and social media policies.

He said the program is nonprofit, all cost-recovery through usage fees. Bertolini estimated transacts about $70 million a year, supported by a staff of eight.

With so many partners, Oakland County can buy bigger contracts with tech companies that don’t work with small to mid-sized governments. He described it as a three-way win: 

“There’s a win for the large government, us, because of the volume of transactions and the ability to manage costs; the small government gets a win because they get to use bigger technology and don’t have to worry about a company dropping them because there’s not enough profit; and the third win is for the private-sector partners we have in our G2G marketplace,” he said. “A lot of the contracts we use to run these technologies are also available for the other governments to buy off of.”

State Government Authorities

In some states, legislation has created a public cooperative or other organization to accommodate basic IT services where needed. Such is the case with Digital Towpath, a government entity and shared service in New York formed in 1998 by an intermunicipal agreement.

Project Director Jeanne Brown said Digital Towpath hosts a private community cloud with a suite of basic Web-based services, such as a website contact management system, an email system, electronic records management and a code enforcement actions tracking program. The cooperative has 161 participating agencies, mostly small towns with an average population of 3,000 and villages of less than 1,000.

Digital Towpath is supervised by a nine-person executive board, elected by co-op members, which oversees four contractors and two technical support staff. It is also a member of MS-ISAC (Multi-State Information Sharing and Analysis Center), a federally backed cybersecurity resource. 

“There are two different ways to design a shared service in this state, and most of them are a larger entity that has excess capacity, and they share that with smaller entities that are related to them in some way,” Brown said. “What’s different about Digital Towpath is, it’s statewide and there is no larger entity. Every municipality has equal standing within the group. They each have one vote at the annual meeting where the big decisions are made.” 

Brown said the cooperative is mostly funded by state grants and an $850 annual membership fee, supporting an annual budget of less than $200,000. For an operation that size to sustain itself, she recommended two things: a clear agreement describing how it will be run, who will make decisions and what members are responsible for; and active participation at the organizational level by all stakeholders. 

“They’re not customers, they’re members of the cooperative, and those that wanted to be treated as customers have kind of dropped off over the years,” she said. 

Another statewide model is Colorado’s SIPA (Statewide Internet Portal Authority), a self-funded technology authority created by statute in 2004 to give state and local government agencies, special districts, K-12 districts and public universities support, security and tools to put more information and services online. 

SIPA is the oversight organization for the free portal and employs about 50 people in the state between SIPA and its portal integrator, Colorado Interactive, which is a subsidy of NIC Inc.

Spokeswoman Jamie Desrosier said besides its free portal services, Colorado SIPA was also created as a procurement entity for the state, contracting with vendors to deliver competitive contracts to members so they wouldn’t have to put out RFPs for services. She said SIPA works with about 500 different entities across Colorado, the smaller of which use SIPA primarily for their free websites and payment processing. 

SIPA’s Sales and Marketing Manager Beth Justice called the authority a unique model for IT services, because unlike models where the administration of these services is wrapped inside government and paid for by tax money, SIPA is not. The shift toward electronic service delivery may be inexorable, but who pays for it is the problem everyone must solve. 

“Legislation has to be in place for this to work, and I think the hurdle is, is it OK to add a 75-cent transaction fee or whatever that amount is, and pass that fee on to your constituents?” she said. “We have very few entities to absorb that fee, but that is what pays for those things.”

*The Center for Digital Government is part of e.Republic, Government Technology's parent company.

Andrew Westrope is managing editor of the Center for Digital Education. Before that, he was a staff writer for Government Technology, and previously was a reporter and editor at community newspapers. He has a bachelor’s degree in physiology from Michigan State University and lives in Northern California.