Such cooperative agreements help jurisdictions that simply don’t have the funding or expertise to purchase technology on their own. Master contracts are another approach that can leverage the idea of cooperative purchasing and speed up government procurements.
“Not everyone needs to do their own individual procurement for everything,” Miri said. “Master contracts can satisfy procurement rules, reduce the number of vendors involved and qualify the vendors. Then once the master contracts are in place, it really speeds up the purchasing process.”
Capitalize on Pilots and RFDs
Under traditional procurement rules, conducting a pilot with a vendor often precludes it from bidding on the actual project. That stipulation in some cases discourages government agencies from conducting pilots. Allowing innovation to flourish may require government agencies to figure out a way to run pilots and tests of technology earlier, or to work that process into the procurement.
“Government agencies need to incorporate pilots into the procurement process itself,” said Miri. “Instead of conducting a pilot before you start the procurement, the pilot is a phase of the procurement, so private-sector companies can participate in it without violating any rules.”
A request for demonstration (RFD) is a similar approach, wherein the proposed technology is demonstrated during the procurement process, simulating how an agency’s problem would be solved using actual data and allowing the government customer to “see and touch” the proposed solution. This could also allow the agency to write broader requirements, Miri said.
“You wouldn’t need to have 5,000-page RFOs [requests for offers] because you would be able to put your hands on and see some of the technology.”
Solve Business Problems First
Traditional RFP processes don’t encourage early engagement with vendors, which can limit what companies or entrepreneurs create. Worse, the RFP often prescribes a solution, so there’s no opportunity for an entrepreneur or innovator to ensure that the agency is defining the problem correctly.
According to Strategies for Procurement Innovation and Reform, “Many of the practices that still exist today evolved from efforts to reduce collusion and corruption in the procurement cycle. While this continues to remain one of the goals of the system technology, successful procurements demand a different approach. It is not cost effective to create an adversarial relationship between the buyer and the seller by encouraging arm’s-length relationships throughout the process.”
In addition, traditional RFPs often prevent vendors and customers from adjusting projects as new needs are discovered.
“Jurisdictions may not fully understand their business requirements when an RFP is drawn up,” Petty said, “but contractors often can’t deviate from the scope of the RFP once the contract is awarded.”
This can result in a situation similar to the one outlined in the introduction of this Digital Communities report.
“Sometimes government doesn’t really understand what its needs are, we don’t articulate them well, and we don’t understand what the best technical response is,” Petty said. “That’s a big problem when it comes to IT procurement because we are trying to apply IT to business processes that we don’t understand.”
“Too often people on the business side will turn to their technology counterpart and say, ‘Just fix this,’” added Miri. “The business side of the agency is not really engaged in the process. And even if they are, they aren’t putting on the table the option that the business process might need to change.”
Both Petty and Miri suggest that agencies in some cases invite a proposal that gets a vendor involved earlier in the process and examines the entire business process to determine the best course of action in ultimately solving the problem.
“Agencies need to start coming into the process saying, ‘Not only are we willing to change processes on the business side, but our goal is to achieve a business objective. So we’ll do a combination of adding new tools, changing processes, adding training, maybe adding new staff,’” Miri said. “When you have all those options on the table and you are working in a true partnership between business and technology, not only can you do innovative procurements, but you can buy things for orders of magnitude less money.”
Revise Terms and Conditions
It’s no secret that there is a significant conflict between industry and public jurisdictions when it comes to terms and conditions like indemnification, limitations of liability, intellectual property and warranty provisions that tend to push project risks onto the vendor.
“That’s really where the tension between dynamic evolution in the IT world runs up against reactive evolution in the procurement world,” Petty said. “We are trying to make everything bulletproof, and what’s happening in some cases is vendors simply aren’t competing. Those that do compete may not have the wherewithal in the event that a default triggers some of those provisions that are so draconian anyway.”
When Petty was CIO of Oregon, he took on a mission to negotiate new terms and conditions that apply more appropriately to IT procurements. In January 2009, Oregon’s Department of Administrative Services State Procurement Office and the CIO Council created a state task force made up of agency stakeholders and the industry group TechAmerica. The task force explored terms and conditions commonly used for IT agreements, and discussed alternative strategies to solicit, negotiate and administer IT contracts. Eventually they agreed on more than 100 proposed revisions to Oregon’s IT contract terms and conditions.
“The state backed down its efforts to place all responsibility on the contractor to make it more in sync with what was going on in the marketplace,” said Petty. “That’s a key component that has to continue to evolve because even if you get great solutions coming out of innovative processes, you still have to write a contract between a jurisdiction and a supplier. If you can’t come to an agreement on those things, you have a big problem.”
Petty said getting there requires both sides to work together. “You have to create a dialog between industry and the public. In some cases, it will involve elected officials helping resolve some of those rules.”
Open up the Possibilities
“There is an enormous barrier to entry to working with government, no matter whether you are a big company or a small company,” said Chopra. “The procurement function should be more open to business and more accessible.”
Chopra suggests government explore the potential of abandoning the existing RFP templates in favor of a one-page problem statement.
“We simply say, ‘Here is our problem, we want the most brilliant solutions out there, and then we are going to let you fly,’” he said. “We’d still protect the integrity of the public dollar, but we’d figure out a way to let the private sector be inventive. Clearly none of us are satisfied that procurement as it exists today delivers optimal results when it comes to technology. Why not let the public money fund entrepreneurial ideas that might prove to be the new way to govern?”
Ask the Private Sector for Help
Numerous third-party companies are available to help government agencies manage procurement issues. These companies can educate agencies and bring them up to date on current trends before they get too far down the road.
“It’s common that requirements in government procurements can be out of date, asking for things the way they used to be done rather than the way they are done today,” Miri said. “In those cases, the vendor has very limited ability to raise that issue and as a result, many just won’t bid.”
Local governments might consider conferring with a third-party organization before they launch a new technology procurement. Asking such organizations questions like “What is the state of the art?” or “How is this type of problem handled in the private sector?” may ultimately save the agency time and money and result in a better procurement.
It’s Time for Change
As the costs of procurement within the public sector continue to rise, it has become critically important to examine ways to introduce reform and innovation. Technology is advancing rapidly, while prices are dropping. It’s now easier than ever for government agencies to capitalize on innovative solutions, yet in most cases, they are not taking advantage of it.
“Procurement is making some progress, but it still is probably one of the single biggest barriers to innovation in government,” Miri said.
It won’t be easy, but government must continue to push the envelope to encourage an approach that enables it to strike a balance between allowing innovation and preventing corruption.
Richard Pennington, who previously served as a Colorado state purchasing director and director of the Colorado Division of Finance and Procurement, released a book in 2013 titled Seeing Excellence: Learning from Great Procurement Teams. The book examines skills and behaviors necessary for government procurement teams to succeed. Pennington suggests that, no matter where you start, some kind of action is better than none.
“Public procurement is one of the most hidden and misunderstood functions in all of government,” said Pennington in the book. “Your organization’s approaches may vary. But most importantly, get started using an approach to continuously learning and getting better.”