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@icann.org | www.icann.org

12025 Waterfront Drive, Ste 300, Los Angeles, CA 90094

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