Chapter 1.6: Partnerships on a cost recovery basis
Ideally, national statistical offices (NSOs) may have the authority to provide professional services on a cost-recovery basis. This means that the client covers all costs of the service requested.
The rationale behind these cost-recovery services is that they contribute to enhancing the overall quality of the NSOs' statistical programs. In fact, without the ability to respond quickly to other organizations' needs, the statistical agency could be at risk of missing opportunities to increase the relevance of its activities. In other words, cost recovery of statistical services provides an opportunity to fill data gaps that could remain unfilled if the statistical agency does not receive directly the budgets necessary to address them, or if existing surveys cannot respond to information needs. Cost-recovery projects are a way to increase relevance and answer data users' needs by providing them with high-quality information.
Cost-recovery projects allow the NSO to support a more integrated statistical system by avoiding duplication and offering the opportunity to occupy a space that would, otherwise, be spread across the National Statistical System (NSS) or outside of it, thereby allowing the NSO to have an implicit, enhanced way to coordinate the NSS.
It is important, however, that cost-recovery projects be congruent with the mandate and ongoing activities of the statistical agency. They should be seen as activities that the agency might carry out of its own volition if it had the financial resources to do so.
Cost-recovery activities can, and often should, extend to the analytical phase, provided the analysis remains within the policy-neutral boundaries. The client can thus benefit from the statistical agency's analytical expertise and from its ability to draw from its many other information holdings to enrich the analysis and make it more relevant to the issues being addressed by the client.
Another important benefit of providing services on a cost-recovery basis is the increase in staff's capability, expertise, and depth of knowledge. Working on cost-recovery projects allows the organization to develop and/or enhance customized and innovative solutions to its heretofore unmet or new data needs. The staff assigned to these projects is expected to be very innovative, flexible, client-oriented and responsive, and to be focused on an inclusive approach that integrates methodology, collection tools, project management and other statistical production areas. This expertise can then be applied throughout the organization.
When Statistics Canada delivers custom survey and analysis services to Canadian organizations on a cost-recovery basis, the costs charged to the client must cover all resources expended on the client's project. Such custom services are not funded by the budget that Parliament allocates annually to Statistics Canada; therefore, clients must cover the direct and indirect costs of doing the work. Direct costs include salary costs for highly skilled staff, non-salary costs such as translation, travel, training, professional services, supplies and other costs. Indirect costs include corporate administrative services and the marginal costs associated with the fact that Statistics Canada's statistical and administrative infrastructure is larger than it would be if it supported only the activities funded from the agency's budget. The matrix management and the associated analytical cost accounting approaches used by Statistics Canada are very useful for estimating and properly measuring the cost of this additional infrastructure, as they are for tracking the direct costs of cost-recovery activities. For more details, please refer to the Chapter 2.3: Financial Management. Typically, the agency provides the service first and then recovers those costs once the service has been provided. For very large and multi-year projects, progress billing can be employed.
All cost-recovery projects are not systematically approved and carried out by Statistics Canada. Projects must satisfy several criteria:
- The project must be compatible with Statistics Canada's mandate, which is to collect, compile, abstract and publish statistical information relating to the commercial, industrial, financial, social, economic and general condition of Canadians;
- The project must be statistical in nature;
- The project must not compromise Statistics Canada's reputation;
- The project must not harm the agency's relationships with respondents;
- The required capacity and resources are available and ready so that this work can be completed within the set deadlines; and
- The results, or outputs, are treated in the same way as those of regular Statistics Canada information products. They become part of the public domain and are made available to all Canadians, under the same confidentiality principles and rules.
In Canada, partners for cost-recovery projects are mostly federal departments, provinces or municipalities, while very few projects are commissioned by the private sector.
Clients are not required to use the services of Statistics Canada. Rather, they choose to do so. There are three main reasons for this. First, Statistics Canada's brand is a valuable attribute; it gives the output of these projects the character of "official" statistics, and carries with it the agency's reputation for quality, impartiality and credibility. Second, all statistics produced by Statistics Canada must be placed in the public domain. This is to provide a sound mechanism to ensure that results are widely known and available through the agency's well-developed dissemination infrastructure. Third, some of these cost-recovery projects are on a very large scale and require extensive national survey-taking infrastructure, conditions that give the agency a competitive edge.
As illustrated in figure 1.6.1, the demand for cost-recovery services remains high, even though the total amount of recoverable revenue has declined since 2011-12, further to government pressure on federal expenditures. For the last four years, cost-recovery revenues have been in the magnitude of CAN$84 million to CAN$104 million. This represents about 15% to 17% of the total expenditures of the organization.
Figure 1.6.1 Cost-recovery revenues as a total amount and as a percentage of total Statistics Canada expenditures, Statistics Canada, 2011-12 to 2015-16
The demand for cost-recovery services relates mainly to social, health and education data (55% of total demand), economic data (22% of total demand), and statistical infrastructure (such as support work performed under international cooperation initiatives, special analysis requests, custom tabulations from business register data) (7% of total demand).
Strategies, mechanisms and tools
This section describes the strategies and tools used by Statistics Canada for cost-recovery projects.
1. Services and tools offered as cost-recovery services
1.1 Types of cost-recovery services offered
Statistics Canada is often called upon to
- design, build and deliver statistical products that integrate a variety of data sources to support research, decision making and policies;
- conceptualize, design, plan and conduct new surveys, from beginning to end;
- perform microdata linkages and extract integrated custom datasets for research projects;
- produce custom data tabulations;
- carry out research and conduct special studies;
- develop new measurement frameworks and indicators to support program development; implementation, monitoring, and performance assessment; and,
- supply technical assistance.
1.2 Specific statistical expertise
Statistics Canada is known to provide quality survey methods and results because it can capitalize on the following advantages:
- large and methodologically sound samples that can be drawn from scientifically proven frames;
- collection and processing practices;
- sampling and estimation;
- explicit methods to measure, and inform on, accuracy (this includes reliability indicators determined by statistical methodology experts);
- sound and documented methods;
- data analysis;
- policy-relevant socio-economic, macroeconomic, demographic and health modeling;
- data integration.
2. Key entry points
These cost-recovery services are managed through the following main entry points:
- Statistical Information Services (SIS) are located in Statistics Canada's regional offices. They handle custom tabulations (approximately 900 Census tables and over 1,000 custom tabulations from other sources) on an annual basis. In terms of volume, SIS receive the most requests.
- The Special Survey Division provides customized and innovative solutions for ad hocor new data needs, for both internal and external users in the social field. It also collects, processes and disseminates social statistics and develops new data files through record linkage to data in the social domain. The division also manages the most significant portion of cost-recovery services in terms of the value of contracts.
- The Centre for Special Business Projects offers a wide range of services with regard to business data: from integrated business microdata, database extractions tailored to specific research needs, and data analysis, to custom business surveys. The Centre is the point of entry to Statistics Canada's expertise on business data.
- The Statistical Consultation Group (SCG) offers statistical consultation, project management services, and statistical training to federal departments and agencies, provincial and territorial departments, and public institutions and administrations.
3. Key management skillsEndnote 1
To conduct an effective cost-recovery service, the following conditions must prevail:
3.1 Legal and statistical frameworks
First and foremost, a national statistical agency should know when to accept a request for its services, and when to say "no" to any project for which there is no legal justification, to support it, or that is not aligned with the agency's mandate (see paragraph in the context of specifying conditions for Statistics Canada to carry out a cost-recovery service).
In addition, the statistical organization should avoid being involved in, for example, public opinion or marketing polling, where the statistical office may be perceived as judging the appeal of policies or of specific goods or services.
3.2 Project management
Statistics Canada has made great efforts to improve its project management capacity and the rigour and consistency with which it is applied. It has developed a Project Management Framework, where the stages of a project are identified, as are the gatekeeping (approval) steps required to move a project from one stage to the next, as well as all necessary documentation associated with each step. For more details, please refer to Chapter 2.4: Project Management Framework.
Essentially, the Project Management Framework at Statistics Canada is designed to ensure that projects remain: (1) in scope (meaning that they do not deviate from the planned objectives); (2) on budget; and (3) on time.
At Statistics Canada, the more complicated projects, such as custom surveys, usually have a steering committee or project committee made up of a team with members from all interested parties in the organization. Typically, this would involve a subject-matter or survey manager lead, with participants from methodology, data collection, and information technology, and from any other service required to ensure the success of the project.
3.3 Financial management
An important element of any cost-recovery project within a statistical office is the financial management of the service. It is important to develop realistic cost estimates by ensuring that all relevant costs can be directly associated with the project—salary costs (for employees and contractors, including benefits) and non-salary costs (travel, special equipment, etc.). All other costs not directly associated with the project are considered indirect costs (meeting space, information technology and communication devices, general costs such as heating and cooling of the building, and electricity). Cost-allocation formulae have been developed as part of the agency's cost accounting systems.
Before moving to the execution phase of the project, a promise of service and payment must be made between the parties involved. In most cases, the cost-recovery service is to be managed with another federal department or a provincial government department. In such cases, the promise of payment comes in the form of a "Letter of Agreement" between the two parties. A letter of agreement is a document that describes the service being provided. It has five sections:
- a cover sheet, with signature boxes;
- a description of work to be provided, including specifications of quality and timelines;
- the terms of payment;
- the general terms and conditions;
- the information necessary to make the financial transfer.
As with any project, it is important to establish mechanisms for financial tracking, to ensure that funds are spent within the planned period and for the intended purpose.
A form of entrepreneurial risk-taking is also necessary. It is rarely possible, at the beginning of a fiscal year, to predict exactly the volume of cost-recovery work that will occur during the year. The agency must make an educated guess with respect to the capacity it wants to have in place to respond to new demands. Not having such a capacity could lead to having to refuse important work and to clients seeking other means to satisfy their needs in the future. Monitoring is performed throughout the fiscal year and actual results and forecasts are presented monthly to the Chief Financial Officer for review. The Executive Management Board, presided by the Chief Statistician, is also briefed monthly on results and projections.
3.4 Management of human resources
The management of human resources for cost-recovery projects may differ from that used for regular statistical operations, since certain skills may be emphasized. In addition to having in-depth statistical expertise, one must have strong client-relations skills. Because such projects require regular interaction with clients, diplomacy and tact are needed: to listen, to understand a client's needs, and to explain how statistical concepts and possibilities are, or are not, relevant to a client's needs.
In addition, it is important to determine the number and profile of the project staff, differentiating between temporary and permanent staff, as well as between internal staff and consultants. All these human-resources factors require flexibility in the approach for each project and with respect to work arrangements. Staff retention and effectiveness of training are key to the success of the project.
3.5 Client management
Cost-recovery services are client-oriented. In that context, it is very important to understand the needs and requirements for the project and to be able to establish and maintain a strong relationship with the client. A good way of achieving this is to have the client clearly articulate the analytical or decision-making purpose that is at the source of the project. The statistical agency's staff can then focus the discussion on the extent to which these needs can or cannot be adequately met, given the real-life opportunities and constraints of the statistical project envisaged.
3.6 Quality management
The quality aspect of cost-recovery projects must be managed as rigorously as it is for the organization's regular programs. Accountability and transparency must be of the highest order. Please refer to Chapter 1.5: Quality Management for a full review of quality management requirements.
4. Marketing and outreach activities help promote cost-recovery projects
The agency aims to continually increase awareness of its various services to stakeholders and data users. The strategy involves using various communications and outreach tools to not only provide information, but also engage Canadians in wanting to see the Statistics Canada's expertise used to its full potential. The following briefly explains the means through which the agency accomplishes this:
- Dedicated section of Statistics Canada's website has been developed to provide relevant and exhaustive information to data users interested in partnering with Statistics Canada to carry out cost-recovery surveys. The website includes an overview of the services offered and clarification on what to expect with respect to custom surveys, as well as the core advantages of conducting a survey with Statistics Canada.
- Regular engagement activities take place by actively participating in data users' consultations, conferences, and trade shows.
- Conducting learning and innovation activities by organizing workshops and seminars is part of the mandate of Statistical Information Services (SIS). SIS is composed of consulting-analysts who are located in Statistics Canada's three regional offices; they provide advice, make recommendations, and act as a direct link between the agency's subject-matter specialists, researchers and technical experts. As an example, in 2014/2015, more than 50 workshops and 50 webinars were held, allowing data users to participate in training activities.
- An active presence in international activities and various successes in technical-assistance projects have contributed to the increased demand for Statistics Canada's technical expertise internationally.
- Statistics Canada's reputation for excellence built around quality data and services delivery, also helped to attract cost-recovery projects.
Key success factors
In Statistics Canada's experience, the success of a cost-recovery program relies heavily on the following:
- the strength of the agency's expertise and statistical infrastructure, as this is usually the comparative advantage of statistical offices over other data producers;
- the delivery of client-oriented services, where listening and responding to clients' needs should be seen as a strategic objective; and,
- strong practices in human resources, and financial, project and quality management practices, which allow the organization to have the proper flexibility to respond to the demand for its services, while minimizing the associated risks.
Carrying out a cost-recovery program serves as an excellent training ground for the staff and managers of statistical organizations, and gives these organizations a "leading edge" in developing and applying new concepts and methodologies. The variety of subject matter, the client needs served, and the methodologies used, result in acquiring in-depth knowledge and expertise and in developing a high degree of staff capability.
Challenges and looking ahead
The attributes of high-quality outputs that a national statistical agency offers often come at relatively greater cost, and require longer timeframes than private-sector offerings which are often producing lower quality results. It behooves the agency, however, to continually strive to improve the speed at which it can deliver high-quality results, and to actively promote the advantages clients will obtain by making use of the agency's services to address their information needs.
In Canada, there is another limiting factor regarding cost-recovery activities: an organization is not permitted to bid on projects for which the federal government or other potential clients request submissions from potential service providers. This is why marketing and outreach are key to increasing awareness and interest.
Finally, Statistics Canada must continually invest in staff capacity, its infrastructure and organizational flexibility to sustain its ability to adequately respond to demand for high-quality cost-recovery services benefitting the national statistical system.
- Endnote 1
Bowlby G. 2015
Return to endnote 1 referrer
Bowlby, G. (2015). Professional Services at Statistics Canada; Best-practice guide to the Ugandan Bureau of Statistics. Ottawa.
Statistics Canada. Custom services at Statistics Canada. Consulted on the 11th of March 2016 and retrieved from http://www.statcan.gc.ca/eng/cs/index
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