UK PSI shareholder perspective!
London: 7 December 2009
The UK Government on the 7th December 2009 published an update on the Operational Efficiency Programme: Asset Portfolio as part of the UK Prime Minister announcement on Putting the Frontline First: smarter government. The report provides and update since the Operational Efficiency Programme: Asset Portfolio was first published on the 7th April 2009.
The report titled: Operational Efficiency Programme: Asset Portfolio (ISBN 978-1-84532-663-0, 92 pages) sets out the Governments options for a number of assets that include public sector information holders that include the:
- Land Registry
- Met Office
- Ordnance Survey
The options considered include further commercial activity, public-private partnerships, and privatisation amongst others. The Policy Options refer to the re-use of public sector information framework and the INSPIRE Directive.
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With respect to the Land Registry the report refers to public sector information and commercial activities and states:
(Extract copied from page 23)
“Policy Objectives
Objectives
To underpin the property market by providing a definitive register of the ownership of property and land with a government-backed guarantee against error.
Policy Considerations
Licensing and charging for the re-use of public sector information (PSI) is regulated by the Office of Public Sector Information (OPSI) which operates from within the National Archives. OPSI applies the policy framework contained in the Information Fair Trader Scheme which is based on six fundamental principles – maximisation; simplicity; transparency; fairness; challenge; and innovation.
Pricing of statutory services is in line with HM Treasury guidance to ensure a return of no more than 3.5 per cent is earned from these services. There is an interdependency with the Ordnance Survey, as the mapping data of the Ordnance Survey is a key input into the work of the Land Registry, so pricing and licensing / regulatory limits over the use of this data affects the Land Registry.
Alternative Asset Options
In the short term, the Land Registry’s focus is likely to be on increasing its commercial activities and appropriately restructuring the organisation as outlined in the Accelerated Transformation Programme option below. In the medium term, further consideration of the outsourcing and minority sale options would be useful.”
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With respect to the UK Met Office the report refers to public sector information and commercial activities and states:
(Extract copied from pages 27, 28 and 29)
“Public Policy Objectives
Through the provision of weather forecasting services to the public and to critical government operations such as health and defence, the Met Office carries out activities of strategic national and international importance. It also performs a number of key governmental roles, especially in international data collaboration and through the UK’s representation on important global forums. In order to preserve and enhance the quality of its services, it will require long-term investment and the freedom to develop its operations.
The Operational Efficiency Programme (OEP) review of the Met Office has examined the organisation’s business model, ownership structure and financial framework in order to fully exploit the market opportunities open to it.
Building on recent improvements, the Met Office is increasing its commercial revenue and has robust plans for significant growth in the next few years. The OEP review has identified a number of further areas where greater freedoms and flexibilities will improve the business model. In order to provide greater value for money and reduce costs it has also identified opportunities to work more collaboratively with other government departments where delivery of public services relies on weather data. The review recognises that the Met Office’s world leading performance and status is underpinned by the value of its longer-term contracts and partnerships, which it remains committed to, and should look to strengthen. The Met Office will set out a programme of commercialisation over the next three years to develop these areas further.
Licensing the re-use of public sector information must comply with the principles set out in the Information Fair Trader Scheme run by the Office of Public Sector Information.
Alternative Asset Options
The Met Office’s focus will be on increasing its commercial activities and presence while maintaining the quality of delivery to its customers, both governmental and in the private sector.
It is likely that the Met Office will be provided with additional operating freedoms that allow a greater commercialisation focus. An increased number of commercial opportunities would be pursued either through the provision of existing services, or through the development of private partnerships for enhanced services.
Key issues for consideration are:
- models for private partnership through enhanced services, new customer relationships or both;
- funding models with respect to the investment programme;
- operational framework under the funding models considered;
- ownership and operations of areas of the business of strategic and national importance; and
- maintenance of links with international organisations and links with academia.
The OEP review also recognises that currently, privatisation is not a viable or good value for money option in the short term, as the business is not structured appropriately. It remains though, an option in the medium term and as in previous reviews, the status should be kept under review as conditions and opportunities change. The next phase of the review will further consider medium-term options which may make it easier to raise finance and work with, or in, the private sector.
Private Sector Opportunity
Proposals may include increased commercialisation opportunities with government ownership, or opportunities around sharing revenues through specific capital expenditure programmes.
Opportunities should consider the preservation and enhancement of the Met Office’s research capabilities, its business model that combines climate and weather services, and its relationships with international organisations and academia.”
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With respect to the Ordnance Survey the report refers to public sector information and commercial activities and states:
(Extract copied from pages 44 and 45)
“Ordnance Survey has for some time made some of its datasets available for free via its webbased innovation platform OS OpenSpace. OS OpenSpace supports developers, non-commercial community groups, and charitable organisations. Licensing the re-use of government data is in accordance with the principles embedded in the Information Fair Trader Scheme which is administered by the Office of Public Sector Information.
In July 2009, the Prime Minister announced the “Making Public Data Public” initiative under the leadership of Sir Tim Berners-Lee. This initiative has led to a fundamental examination of information policies across government generally, and in relation to Ordnance Survey in particular. As a result, CLG has been conducting a wide-ranging review of options from the existing licenced-based revenue model through to a fully free-to-use subsidised model. The role of government as a customer of information has been a key element of the work.
On 17 November 2009, the Prime Minister announced that Government proposes to make certain datasets from Ordnance Survey available for free, including information about administrative boundaries, postcode areas and mid-scale mapping. There will be a public consultation on these proposals from December 2009, with implementation of any change from April 2010.
The consultation will also cover other issues around the interaction of Ordnance Survey with the market – particularly the regulatory environment and the governance structure around the free offering.
Market studies have identified significant growth opportunities across the geographic information (GI) market, as data is made more available and new technologies are used to support innovation and greater use of GI data and services. The outcome of the consultation above may affect the opportunities available to Ordnance Survey in some of these growth areas and the alternative asset options outlined below. It may also open up new opportunities to work more closely with other parts of the public sector to realise efficiency savings, for example in local government resource planning and deployment, or working more closely with the Land Registry. Similarly there may be an opportunity to collaborate with local government and Royal Mail to provide a definitive addressing solution for Great Britain.
Ordnance Survey core activities are the collection, collation and distribution of digital and paper geospatial data products and services. Ordnance Survey’s products are available in large, medium and small scales, and cover the following market segments:
- digital topographic – a national product covering natural and man-made topography with additional overlays covering postcodes, addressing, roads and routing information;
- paper maps – Landranger and Explorer paper maps with strong Ordnance Survey-branded cartography; and
- OS OpenSpace – web-based service supporting innovation by developers and access to GI data for non-commercial use.”
(Extract copied from pages 46 to 49):
“Public Policy Objectives
Ordnance Survey’s public policy objectives are to:
- collect and maintain uniform national geographic datasets to provide nationally consistent mapping;
- maintain a definitive three-dimensional satellite based geodetic reference framework to enable
- correct positioning of mapping and other data against the National Grid;
- ensure that its data is capable of supporting the principles underlying the Digital National Framework, to allow integration and association with other geospatial information;
- make the content of its datasets widely available in forms that are accessible to all customers for wider benefit, and to charge its customers for the licensing and use of its products; and
- conduct its activities efficiently and effectively to maximise the broader economic value of its data, while complying with trading fund requirements and creating long-term shareholder value.
At Budget 2009, the Government announced a new business strategy for Ordnance Survey, and confirmed that Ordnance Survey would continue to self-finance its activities by charging for the use of its data and services. An important element of this announcement included a recognition that Ordnance Survey would increase the ease of access to, and use of, its data for innovation in the UK economy.
As a result, a number of strategic initiatives were agreed and have been implemented:
- enhanced OS Openspace service – more data, free entry level access, and expanded developer community;
- simplification of pricing and licensing framework;
- facilitation of greater collaboration across public sector customers;
- the creation of an innovative incubator unit; and
- an efficiency programme to reduce costs by five per cent per annum for five years.
The outcome of the consultation on the proposal to release certain mid- and low-scale Ordnance
Survey datasets without charge will affect how these initiatives are taken forward.
Alternative Asset Options
In the short-term, Ordnance Survey’s focus will remain on implementation of the existing strategic initiatives depending on the outcome of the consultation. In the medium term, further consideration of a number of options would be helpful.
Accelerated business transformation
The transformation programme currently underway within the business is expected to drive a series of changes over a three- to five- year implementation period. The pace and nature of transformation may increase as a result of the consultation above; however, all options could potentially benefit from the assistance and experience of the private sector.
Accelerating the rate of change would require significant additional expenditure which, in turn, would require Ordnance Survey to have access to further sources of funding other than its existing revenues and government-provided debt facilities.
Business separation
A separation of data collection and processing capabilities from certain product and service capabilities is a possible structural response to the consultation. This has similarities with the approach followed by regulators in the utility sector. An alternative option that regulators have followed is separation accounting.
Joint ventures, partial sale and/or full sale Access to new markets and the development of new services could be accelerated by the introduction of partners to Ordnance Survey. Working collaboratively, a partner or new owner could bring access to new technologies, new capabilities and new markets. In addition, access to private sector capital may increase the pace of innovation within Ordnance Survey as private capital is better able to identify and respond to new market opportunities.
Outsourcing
As the transformation programme develops, a range of existing business activities will be considered for outsourcing. This could include support functions e.g. property, HR, finance and/or existing core services such as downstream services and paper maps. Opportunities exist to interact differently with other parts of government; these include the opportunity to outsource to Ordnance Survey the mapping and GI capabilities currently with the Land Registry.
Vesting
A number of the options above would require a full or partial vesting process. Vesting is a change in the legal status from a trading fund to a Companies Act company 100 per cent owned by government.
Any options would require careful consideration of how government’s ability to access and reuse data – both for itself and on behalf of the public – would be maintained, especially given the proposal for change under “Making Public Data Public”.
Other Considerations
As a public body, Ordnance Survey data is subject to Crown copyright and the Re-Use of Public Sector Information Regulations, which are overseen by the Office of Public Sector Information.
The Cabinet Office’s “Making Public Data Public” initiative has the potential to bring significant opportunities, and/or changes to Ordnance Survey’s existing business model. A geographic representation of many public data sets considerably broadens their accessibility and utility for local government, business and citizens.
The European Union Directive INSPIRE and the Location Strategy both highlight the growing importance of a definitive and high quality geospatial information infrastructure. Ordnance Survey’s industry leading data capture and processing capabilities provide an interesting platform for realising these ambitions across Europe and elsewhere.
As a trading fund, the ability to raise finance is limited. The availability of new sources of funding – free from public sector debt classification – would be beneficial.
Private Sector Opportunities
There are a growing number of commercial market opportunities, particularly around value-added services using geospatial information, which Ordnance Survey is not currently well placed to exploit.
A private sector investor and/or partner might bring expertise, new market access or additional capital for innovation. This could accelerate the development and delivery of these opportunities more quickly and successfully than Ordnance Survey operating alone.”
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