[Ccwg-auctionproceeds] Auction Proceeds Mechanisms

[Sam Lanfranco]

Thanks Xavier,

Your point 1, linking costs to the "products" being delivered, is well 
taken. However an estimate of total costs is not the central issue here.
It is, as you explore in your point 2, the relative costs of of the 
respective Mechanisms for supplying the same "products mix", those 
"products" being funded projects, evaluations, etc..
Let me take your arguments one at a time:

  * /RE: suggestion/ that A (in-house) would have lower overheads. That
    is not a forgone result. While ICANN might cover administrative
    costs at a competitive rate, it has little expertise in managing
    competitive grant funding, and the ongoing administration of funded
    projects. (/how the funds are administered can be a nightmare/). It
    also does not have the expertise for ongoing and final project
    evaluation, and for presenting those results in ways that ICANN org,
    its Board and the stakeholder communities can understand. All of
    that expertise will have to be bought, retained, and added to the
    ICANN payroll.
  * /RE: suggestion/ that B will result in some duplication of costs
    between ICANN and partner organization. That need not be the case. A
    partner organization would be selected based on its competencies,
    and Mechanism B would benefit from having that expertise "in-house",
    within Mechanism B. Each of the Mechanisms has similar internal
    work: funds distribution and evaluation, and an Accountability
    component. There is little reason to believe that costs, all
    assigned to the Mechanism, would be higher for B than for A. If such
    costs stood out as exceptional, that would be a red flag that
    something is being done wrong.
  * /RE: suggestion/ that C would have higher overhead costs than B. I
    believe it is a mistake to compare operating costs for C to B, and
    not count partner costs in B. While it is true that a partner
    organization would leverage its existing structure in B, the costs
    of those resources would be levied against the Mechanism's operating
    costs. The partner selection for B would be based on its capacity to
    do the work (/not because it is a charity providing free services/).

Lastly, one distinguishing feature as between A and B&C, especially C, 
is that B and C carry the potential to be ongoing activities with 
funding from other sources (grants, whatever). That may or may not be a 
significant factor.

Sam Lanfranco, NPOC



On 11/21/2019 5:23 PM, Xavier J. Calvez wrote:
>
> All,
>
> You are having a great productive brainstorming about costs. To feed 
> into this brainstorming exercise, please consider the following few 
> comments which have been made at some point, usually verbally, by the 
> Board liaisons, Sam and I over the past 2.5 years:
>
> 1. Any estimate of costs can only be done once we know what we do. The 
> mechanisms will need to be transformed into implementation plan with 
> detailed design in order to be able to evaluate the costs. An 
> illustration of such questions (please don’t comment on this example, 
> it just an example), is the size of the grants: 1 grant of $200m is 
> very differently managed than 200,000 grants of $1,000, with many 
> differences in costs.
>
> 2. However, some differences and logical principles can be formulated:
>
> - mechanisms B and C would have higher overheads costs than A, because 
> there would be some duplication of costs between ICANN and the partner 
> organization (mechanism B) and ICANN and the foundation (mechanism C). 
> There is also a cost of coordinating 2 entities which exists with B 
> and C and does not with A.
>
> - I would expect C to have, for the same reason, higher overhead costs 
> than B, because some of the costs in B would be shared resources since 
> the partner organization would leverage its existing structure.
>
> - resources directly and fully allocated to the program would probably 
> cost the same in the 3 mechanisms: there is a requirement in 
> not-for-profit oversight that salaries must be reasonable for the job 
> purpose, so we would expect that across each of these mechanisms, the 
> salaries paid to support the program itself would be somewhat similar.
>
> - If the focus is on selecting the lowest cost mechanism, the focus 
> would be on areas of duplication of roles and cost drivers.
>
> I hope this helps.
>
> Thank you.
>
> Best,
>
> Xavier
>
> *Xavier Calvez*
>
> SVP & Chief Financial Officer
>
> ICANN
>
> P: +1 (310) 301-5838 (Direct) | M: +1 (805) 312-0052
>
> E: _xavier.calvez at icann.org <mailto:xavier.calvez at icann.org>_ | 
> www.icann.org <http://www.icann.org/>
>
> 12025 Waterfront Drive, Ste 300, Los Angeles, CA 90094
>
< rest deleted>
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