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Boosting Innovation by Rethinking Government Procurement

North Carolina and Philadelphia explore new methods to procure technology and award government contracts.

Earlier this month, Philadelphia announced a new 12-week accelerator program called FastFWD that will soon select 10 entrepreneurs to develop innovative projects around public safety challenges. One end goal is that the city will award contracts to several of the projects developed during the program.

FastFWD comes on the heels of a newly launched innovation center by North Carolina that will let the state test technologies before purchasing them. Both initiatives are attempts to ease frustration with government procurement processes that tend to discourage innovation and limit flexibility.

The traditional government RFP process -- with its long timelines, complex rules and tight guidelines around liability -- tends to scare off some of the IT industry's most innovative companies, said Dugan Petty, former Oregon CIO and procurement director.

“You have this situation which is still going on today, where in many states there’s an effort to transfer all of the liability to the contractor,” Petty said. “And that’s got a cost that makes it exorbitant.”

In addition, traditional RFPs can rob both vendors and customers of the ability to adjust 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. 

North Carolina Opens Innovation Center

To help rethink some of these restrictions and find better ways to procure technology, North Carolina plans to test products before purchasing them in the state’s new innovation center.

In April, an audit revealed that 84 state projects were collectively $356 million over budget, a situation that state CIO Chris Estes said stems primarily from how the state procures technology. The state will use the innovation center to pilot technologies before committing to large-scale, expensive purchases.

“The idea behind innovation center is changing our RFP processes in the future where we will take a test drive to make sure that the vendors’ solutions meet the business requirements that they are intended to solve,” Estes said.

So far, vendors are supportive of the new process and are currently working with the state to test products, Estes said. For instance, North Carolina currently is piloting hardware and software associated with virtual desktop technology in the innovation center.

Philadelphia FastFWD

Philadelphia's bid to improve procurement involves incubating startups through the city’s new accelerator program. Entrepreneurs and the city will work together upfront to identify community problems and then develop innovative solutions, according to Story Bellows, co-director of Mayor Michael Nutter’s Office of New Urban Mechanics.

Bellows said the city’s traditional RFP processes don’t have that early engagement phase with vendors, which can limit what vendors or entrepreneurs create.

“One of the reasons we don’t necessarily think RFPs are the best way to engage the creative insights of entrepreneurs and some of the most effective problem solvers in our society today is that we prescribe a solution in an RFP,” Bellows said. “And so there’s no opportunity for an entrepreneur or an innovator to really work with the city through our traditional RFP process to first make sure we are defining the problem correctly, and that we also have access and exposure to the range of potential solutions.”

Bellows said the accelerator program also will help manage procurement risk, since the city will have the chance to pilot technologies on a small scale before deploying them on a broader scale.

Rethinking Procurement

Petty, who now serves as a senior fellow for e.Republic's Center for Digital Government, says both North Carolina and Philadelphia are developing more effective procurement practices.

“The key thing here is this is now a new approach that is helping to evolve procurement technology in a way that keeps up with what’s out there on the industry side," Petty said. “I think a lot of people should be evaluating these incubator move-to-contract scenarios because they minimize the risk of the project.”

Sarah Rich is a former staff writer for Government Technology.