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

Encouraging Innovation

Clearly, reforming procurement rules is necessary to enable government to take advantage of some of the innovative technology solutions available today.

“Buying technology requires nimbleness and flexibility,” said David Gragan, senior procurement executive of the federal Consumer Financial Protection Bureau. “Using a system that was designed to buy pens to buy a complex item like a technology system just doesn’t work, and that’s been proven over and over.”

Gragan says if agencies trust complex IT procurements to traditional procurement professionals, they will likely get poor results because the long-standing position is that the tighter the specification, the better the procurement.

“Almost the opposite is true when you are asking people to invent a solution to a problem that’s never been solved,” he said. “If we are asking experts to help us solve complex problems using technology, then why don’t we let them use their imaginations?”

“Traditional procurement works best when acquiring commodity goods,” agreed Petty. “If I wanted to buy computers for everyone, it probably makes sense to do that in bulk and across the enterprise so we don’t have variation in the product and lots of unnecessary cost. However, if I am building a customer-facing application like a website or digital service, I might want a lot more creativity. Maybe I’m not sure what I want on the front end. I may want to iterate until I get what I want. So I need a more flexible vehicle to allow for innovation.”

“The basic principle is trying to strike balance in a world where there is no one-size-fits-all,” added Chopra, who is involved in a number of initiatives aimed at reforming procurement at the federal level. “The key question is: Is there a way to adjust these policy levers in order to get something that better fits the greater good?”

Designing a Better Way

Several local governments are already leading the way. For example, New York City initiated a major procurement reform strategy under former Mayor Michael Bloomberg designed to reduce procurement cycle times, improve customer service and employ strategic sourcing to leverage spending. The city set a goal of saving $500 million over the next four years.

Photo: Palo Alto CIO Jonathan Reichental. Photo by David Kidd

Today, New York City has too many contracts that fragment its buying power and force it to pay too much. Managing those contracts also takes up too much staff time. The city therefore introduced a strategic sourcing initiative where procurements are structured and managed to maximize cost-effectiveness. The effort also allows the city to identify opportunities to bundle similar contracts together and use the increased volume to negotiate lower prices.

In addition, New York launched a Lean Six Sigma initiative to reduce the typical procurement cycle, which can last up to 14 months. Lean Six Sigma focuses on every step in a process and eliminates those that don’t add value. Using this approach, staff found ways to reduce procurement cycle times by roughly 25 percent.

On the other side of the country, Palo Alto, Calif., is also trying to slim down bloated procurement processes. When CIO Jonathan Reichental came on board in 2005, he naturally expected to find the city, with its worldwide reputation as a high-tech leader, to have a high-tech government. What he found was quite the opposite. Since then Reichental, a former private-sector CIO, has challenged the status quo, using many lean startup ideas.

Before Reichental’s arrival, Palo Alto had procured services for an updated website that was not well received. “People had a lot of issues with it, so it was eventually taken offline and many months were spent rewriting code and fixing things,” he said.

When Reichental joined the city, he examined the site and did some quick work to bring it up to par with other local governments in the region. He then suggested that Palo Alto adopt a lean startup approach, rereleasing the site as a beta and getting input and feedback from residents before going live.

“We asked the public to try it and tell us if they could find what they wanted and what was missing,” he said. “It allowed us to use a low-risk approach to get an enormous amount of feedback before our big go-live.”

Reichental and other Palo Alto officials were so happy with the results, they have employed the lean approach in a number of other instances, allowing them to try out new ideas while also speeding up the procurement and deployment processes.

“We are still at the beginning of this journey,” Reichental said. “But even in these early stages, it’s redefining how we operate. Palo Alto is a well-run city, but we still tend to approach problems with the typical government mentality — study the problem, bring in consultants, present the information, etc. Very deliberate and very long. With the pace at which we live today, it’s not the right approach and it doesn’t meet citizen expectations.”

Sharing Services

Oakland County, Mich., has been sharing applications and technology among its agencies for more than three decades. A few years ago, officials decided to formalize the process, collaborating with the Southeast Michigan Council of Governments and the National Association of Counties to launch an initiative that’s allowing the partners to leverage a shared services model into a national system available to America’s more than 3,000 counties, boroughs and parishes.

Photo: Phil Bertolini, CIO, Oakland County, Mich. Photo by Scott Stewart Photography

The idea was that, through cloud computing, Oakland County could position its applications in cyberspace, making them available to other government agencies regardless of size, budget or resources. Dubbed G2G Cloud Solutions, the initiative is essentially a government-to-government cloud that, with the help of private-sector partners, provides computing services to other counties and cities using a cloud platform. The initiative therefore creates an opportunity for those local governments to use technology that may otherwise not be within their reach, eliminating infrastructure requirements or upfront costs, and providing a centrally managed information system that reduces redundancy.

Oakland County launched its initiative in the midst of the Great Recession.

“We watched revenue streams come to an end, and we lost 60,000 jobs in Oakland County alone in 2009,” said Phil Bertolini, the county’s deputy executive and CIO. “We realized we needed to find a way to share technology, because none of us was going to be able to do it alone.”

Today, the county provides three applications to other governments that consume them as a shared service.  

“The economy may be better, but many locals still can’t procure their own technologies — they just don’t have the resources,” Bertolini said. “If we can procure them and allow others to consume them, then that’s a great way to help. And many governments like to consume from other governments because there’s a level of understanding of what we do. The value add for us is that it lowers our costs too.”

Justine Brown Contributing Writer