Clickability tracking pixel

Bringing Innovation to Procurement

Almost no one likes the procurement process. Here are some ideas for changing it.

by / March 4, 2014
Former federal CTO Aneesh Chopra says public purchasing should welcome entrepreneurial ideas. Flickr/World Economic Forum/Eric Miller

When a mid-sized city in the northeastern United States became frustrated with its antiquated accounting processes a few years ago, officials there decided to seek a modern, technology-based solution. Hoping to capitalize on the latest accounting technology while minimizing the city’s investment in new servers and software, they opted to pursue a cloud solution.

Mindful of stringent government procurement rules, the city put together an RFP. But rather than write an RFP from scratch outlining its interest in a cloud-based solution, the city borrowed much of the text from an RFP written years before. The vendors that reviewed the RFP were confused. Here the city was saying it wanted a cloud-based solution, yet its requirements as outlined in the RFP were inconsistent with such a solution. As a result, most of the interested vendors simply did not bid.

The only company that did bid on the project recognized the problem, but assumed the situation could be fixed once the job was under way. It was wrong. The company was awarded the contract, but once its representatives sat down with city officials to begin the project, it became clear they weren’t on the same page. Unable to bridge the gap between what the city asked for in the RFP and what the company could provide, the contract eventually was canceled. Both the vendor and the city spent a great deal of money, time and effort — only to end up back at square one.  

Unfortunately this scenario is far from rare. News headlines regularly tout the latest government procurement debacles. Projects like can and do go wrong, leaving taxpayers baffled and the government agencies that awarded the contracts scrambling for an explanation. In fact, IT research firm the Standish Group found that 94 percent of large-scale federal IT projects have been unsuccessful during the last decade. Yet the United States has had rigid procurement rules and a system of checks and balances in place to prevent such scenarios for decades. Why are such failures still occurring?

One of the biggest factors preventing successful government procurements today may be the rapid evolution of technology. Purchasing in government is frequently cited as an example of a slow, inflexible and expensive bureaucratic process. But that becomes doubly true when purchasing technology.

“The alignment of technology and procurement has always had a lot of tension to it,” said Dugan Petty, former Oregon CIO and procurement director who now serves as a senior fellow for e.Republic’s Center for Digital Government. “Often, it’s about whether the jurisdiction has met the procurement laws first, and perhaps secondly whether or not they actually achieved the outcomes they were looking for.”

There is no quick and easy solution to government’s procurement struggles. But years of shrinking budgets recently have prompted many organizations to devote more energy to improving the process. The good news is, while procurement reform is a long-standing issue for all levels of government, cities and counties may be in a unique position to lead the evolution.

“Because local governments are more streamlined, it’s often easier for them to make decisions and to move on an innovative path than it is for states or the federal government,” said John Miri, who previously served as director of e-government and Web services for Texas. “Today, local governments are in a great position to help drive reform and encourage more procurement innovation.”

Arcane Processes versus Modern-Day Realities

The modern procurement process was born out of the civil service movement that reformed government contracting and hiring processes during the transition from the 19th to the 20th century. The goal of the procedure was to help ensure accountability and transparency in how government awarded contracts. The process had three main objectives: to prevent corruption and therefore protect taxpayers from fraud and abuse; to standardize processes in order to allow government to take advantage of scale and efficiency; and to ensure equality and prevent discrimination against certain groups like minority business owners.  

These traditional procurement policies, many of which are still in play today, serve legitimate purposes. They ensure the procurement process remains open to the public and makes government officials accountable for their purchasing decisions. A built-in appeal and protest process serves as a check-and-balance in case the procedures aren’t carried out effectively the first time.

6 Ways to Shake Up Procurement

1. Join a Group

Pooling resources, adopting standard purchasing specs and issuing cooperative bids using tools like cooperative purchasing agreements and master contracts help drive down costs and improve results.

2. Try Before You Buy

Find a way to test the technology before deciding to invest, by working with a vendor willing to conduct a pilot or a demonstration before the contract is awarded.

3. Business First, Technology Second

Spend time looking at the business problem that the technology needs to solve before issuing a bid, and don’t box yourself in to a tech-only solution.

4. Meet Halfway on Terms

Be willing to share some of the risks in the contracting process in order to keep innovative companies interested in bidding.

5. Throw Out the RFP

Consider a simpler alternative to a traditional RFP, like a one-page problem statement.

6. Get Help

Getting some private-sector advice before issuing a bid can ensure that you’re asking for the newest and best technology.

But the world that existed when these government procurement processes were introduced was paper-based. Interactions were face-to-face and business was conducted in brick-and-mortar buildings. Back then, when a public procurement officer put together a specification, the only discretionary part of the process was determining who could deliver the goods for the least cost.

“As long as the bidder was responsive to the specification, and as long as they had the capability of completing it, it was just a matter of determining the lowest price,” Petty said. “It was a good process, but it begins to break down in areas where you have to evaluate something other than price.”

In the late 1960s and early 1970s, the modern-day RFP procurement method was introduced, opening the door for factors other than price to be considered in the decision-making process. The concept of best value allowed for more clarification and multiple rounds of negotiations to determine who could actually deliver the best response to a need. Yet abuses still occurred, and as they did, more oversight requirements were added and costs gradually increased.
“For years we’d oscillate the dial one way or the other,” said Aneesh Chopra, former federal CTO, who is now a senior adviser of technology strategy for the Advisory Board Co. “The more we’d allow for innovative ideas, the more risk there was of fraud or abuse. Over the years, these additional tensions have been layered on those fundamental tensions. If you combine all of these, it leads to the kind of broken system we have today.”

Perhaps the biggest challenge today is that procurement’s ties to arcane policies not only make the system difficult to navigate, it also stifles innovation and creativity. Because federal, state and local governments fear bad results, they write layers of regulations and rules around contracting, which tends to scare off some of the IT industry’s most innovative companies.

Not only can strict rules put a vendor in a tough spot for proposing the best solution, they also often don’t account for rapid changes in technology. Tomorrow may bring a faster, cheaper solution, but the vendor may find itself tied to what is suddenly an aging technology without an option to change course and employ something better.

“These policies serve a purpose, but encouraging innovation is not one of them,” Petty said. “Startups may have great ideas and great technology, but they’re not necessarily built to make it through the procurement process.”

Instead, the procurement system often favors large, entrenched vendors. As a result, government may be missing some of the most innovative solutions.

Looking for the latest gov tech news as it happens? Subscribe to GT newsletters.

Justine Brown Contributing Writer
E.REPUBLIC Platforms & Programs