At the GITA Pacific Northwest Annual Conference in Mukilteo, Washington, Greg Babinski, Finance Manager for the King County GIS Center (KCGIS), gave an overview of benefit-cost analysis of the financial value add of GIS. The study was lead by Professor Richard Zerbe of the Benefit-cost Analysis Center at the University of Washington Evans School of Public Affairs. Professor Zerbe has developed a methodology for determining the costs and benefits of a variety of things that municipal and other governments are responsible for.
Some of the areas that the KCGIS is reponsible for include mapping, public information delivery, growth management and planning, property assessment, land development permitting, site selection, simulating environmental conditions, emergency response planning, crime analysis, transportation planning, bus and van routing, road maintenance management, public health service delivery, service center location analysis, E911 operations, airport sound abatement, boundary management (legislative districts, voter precincts, tax unit boundaries), and so on.
According to Greg, the study was jointly funded by the Oregon Geospatial Information Officer (Cy Smith) and King County. Both Cy and Greg have been involved with a URISA effort to quantify the benefits of geospatial data and technology in the context of local government. The New Zealand study on the value of geospatial information to the New Zealand economy was an inspiration to try to do something similar at the local government level.
The approach used by Professor Zerbe was to estimate the cost of providing these services with and without GIS. The study involved a literature survey and about 30 qualitative interviews with agency heads and key employees to set the stage for 200 quantitative interviews with employees and managers all across the Kong County government. The quantitative questionnaire solicited quantitative estimates of the benefits that have been realized across different groups of users of GIS applications, as opposed to what these users would have done in the absence of GIS applications. By comparing the “with and without” scenarios, the study team was able to estimate the added value provided by the GIS applications. Fortunately King County had maintained very good records of the expenditures on GIS hardware, software, and staff over the past 18 years so there was a lot of confidence about the cost side of the analysis. Interview and survey results were compiled by output type, agency, and productivity levels. Results were then monetized.
Examples of the type of questions employees were asked to answer
- How many units of this output do you personally produce? Choose # of units:
- How many units of this output do you personally produce Per Unit of Time:
- What percent of your time do you spend producing each output now? (%)
- What percent of your time do you spend producing each output now: Per Unit of Time:
- Number of Employees in your workgroup (including you) currently producing this output:
- Total FTEs in your workgroup (including you) currently producing this output:
The report found that GIS expenditures of about $215 million provided a conservative estimate of net benefit of about $775 million in net benefits over the 18 year period 1992 to 2010. (The estimated net benefit ranged from a very conservative $775 million through almost $5 billion.)
The use of GIS at an annual cost of about $15 million, compared to not having a GIS, had a net benefit of about $87 to $180 million for the year 2010. That's a return on investment (ROI) of between 6 and 12. The benefits were broken down into cost-savings due to more efficient production of original output and benefits generated from increased productivity beyond the original production level.
This type of study, which can be expressed as a return on investment, is critical for geospatial projects because governments increasingly are using ROI as a way of prioritizing the allocation of scarce resources. Typical ROIs are in the range of 2 to 4, so if a GIS project is projected to generate an ROI in the range of 6 to 12, all other considerations being equal, it will tend to get funded before a project with a lower ROI. KCGIS offers a URISA certified workshop for IT Directors/Managers, GIS Managers, decision makers and operational personnel on quantifying return on investment.