Financing transformation without losing control

It is often believed that the sovereignty of a transformation is decided in the technology or in the skills. It is decided first, and very early, in its financing. The financial structuring of a programme (who pays, when, on what conditions, with what counterparts) maps out the dependencies in advance. A poor structure produces effects that no excellence of execution can recover; and its heaviest clauses are rarely the ones discussed most.

Three families of choices determine the financial sovereignty of a transformation: the perimeter of the cost one looks at, the allocation of risks one accepts, and the dependencies the contract installs.

First choice: which cost you look at

Most programmes are decided on their investment cost: what must be spent to build. Yet dependency lodges in everything that figure excludes: recurring operation, licences and their indexation, evolutionary maintenance, the capability building of the teams, and the exit cost (what it would cost to change solution or partner).

Reasoning in full cost changes the decisions. A solution that is cheaper to build turns out to be more expensive to own; a structure that is attractive at signature locks you into recurring charges that the ordinary budget will not be able to sustain. The question of sustainability must be asked before the commitment: this charge, in five years, on which budget will it weigh, and will that budget exist? A programme whose operation cannot be financed is not an asset under construction; it is a liability in the making.

Second choice: who bears which risks

Every financing is a sharing of risks: overrun, delay, non-performance, currency, demand. The sound principle is well known: each risk should be borne by whoever is best placed to control it. Structures that depart from it are paid for, sooner or later.

Two symmetrical pitfalls await public organisations. The first: keeping all the risks, believing you save the partner's margin: the organisation then bears alone hazards it cannot manage. The second: believing you transfer everything, in global contracts where the partner officially assumes everything; the price of that transfer is high, and when the partner fails, the public service still owes what is due: the ultimate risk never transfers. Between the two, a lucid sharing requires knowing precisely what you transfer, at what price, and what you keep.

Third choice: which dependencies the contract installs

This is where financial sovereignty meets all the others. Some clauses, innocuous at signature, organise captivity: technical assistance imposed as a condition of the financing, which durably installs outside decision-makers at the heart of the arrangement; operation entrusted to the builder with no deadline or handover condition; intellectual property of the developments kept by the provider; the service's data accessible to the organisation only through the partner's tools; tacit renewals that no one re-examines.

None of these clauses is illegitimate in itself; each has a justifiable use. What is not acceptable is that they take hold without having been seen, weighed and negotiated. The practical rule is simple: any clause that makes the partner hard to replace must be identified as such, costed as such, and accepted, or refused, with full knowledge.

Negotiate control, not only price

These three choices converge on a shift: in the negotiation of a financing, control must be an object of negotiation on the same footing as price. This translates concretely: reversibility and data ownership set as non-negotiable requirements from the tender stage; skills transfer written in as a deliverable, with criteria; exit conditions costed before entry; and, for financing backed by development funders, a frank discussion of the conditionalities: what they bring, what they cost in autonomy, and how their weight fades over time.

One principle sums it all up: you can borrow resources, expertise and time; you must never borrow your ability to decide. The organisations that negotiate their financing with this compass sometimes pay a little more at signature. They own what they have paid for.