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Public Sector Versus Private Sector Budgeting Solutions

In our experience working with over 80 public sector budgeting organizations, Public sector budgeting is fundamentally different than the private sector due in part to differences in  organizational purpose, governance models, and resource allocation approaches. These differences should be carefully considered when selecting a public sector budgeting solution.

Most public sector organizations have a highly iterative budgeting process (executive and legislative) which includes a nearly limitless number of interested constituencies, participants, and incremental decision-makers. This creates a more complex decision-making model than found in the private sector where financial indicators primarily drive resource allocation decisions. In public sector, the allocation of resources tends to be more of a compromise between stakeholders’ objectives and priorities rather than aligned with a unified corporate strategy. Thus, budgeting solutions for public sector must be very flexible in supporting a very broad range of policy and budget analysis requirements as the budget will be viewed through many different lenses.

At the same time, public sector budgeting is more participatory and more transparent. Public budgets, which often carry the weight of law, are typically available to the public for the world to see how different priorities were funded. In other words, the public can see if their elected and appointed leaders, as the expression goes, “put the money where the mouth is”. This means the context behind the budget numbers, such as written justifications or performance information, is more critical to public sector budgeting. Accordingly, public sector budgeting solutions typically must provide integrated word processing functionality and automated budget publishing capabilities to fully support and automate the budget process.

There are many software applications marketed to public sector which were developed for the private sector and which do not translate over to the public sector successfully. For example, many commercial planning and budgeting tools have text handling limitations or lack detailed position and employee-level budget modeling and forecasting tools. It is, therefore, important to understand how public sector budgeting contrasts to the private sector and unique public sector budgeting solution requirements such as those mentioned above and which will be further explored in more depth in future posts.

Over the next several weeks, we will explore more detailed considerations when evaluating public sector budgeting solutions including: approaches to software and consultant vendor solicitation and evaluation, evaluating the degree of functional fit, the software’s long-term viability, the underlying technology, implementation considerations, term software support, expected total cost of ownership (TCO), and the expected return on investment (ROI).