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The RFP Is the Enemy of Innovation -- Here's Why

Traditional public procurement processes don't work in an era of startups and rapid technological change.

For decades, the private sector has been forced to jump through increasingly challenging hoops to do business with government. At the heart of this problem is the familiar request for proposal, a solicitation document intended to enable efficient evaluation of bids from potential vendors. The RFP process is meant to bring structure and transparency to the procurement process, while reducing risk through open requirements and discussion. For decades this has made sense, particularly for larger government organizations whose contracts can be very large and typically are open to negotiation.

But with the rise of cloud-based technologies -- which have democratized technology of all kinds in both the public and private sectors -- and the ever-accelerating rate of technological innovation, the traditional RFP process is increasingly proving to be a poor tool for procurement, leaving public servants and citizens with few options, locked into predatory contracts and languishing years behind private-sector counterparts.

How did the RFP process, meant to encourage competition, end up undermining it? A major reason is the long list of requirements that companies are required to meet but which make little sense for young, innovative companies and create often-unsurmountable barriers for them.

Take, for example, company age requirements, which specify the length of time a bidder must have been in business. Some RFPs require a company to have been in business for 15 or even 20 years, which would render Google (founded in 1998), Facebook (founded in 2004) and countless other innovative technology firms unable to compete. It may have made sense decades ago to vet the technological proficiency of a company by its age, but today it certainly does not -- and it's hurting government.

There's another problem: Silicon Valley is wary of wading into bureaucratic waters, resulting in fewer available options for government. Knowing that working with governments is more challenging, time-intensive and generally not as profitable, tech startups have mostly focused (and built for) the private sector, resulting in a widening gap between the products and services available to private- and public-sector organizations.

It's not as though the startup community doesn't see a need for better public-sector technology. Rather, young technology companies are skeptical that they'll be able to get better products into the hands of the public servants who need them due to an unfriendly, overly difficult procurement process. As a result, inferior legacy products go unchallenged. One recent list of top government technologies reveals a stubborn reliance on legacy technologies that savvy private-sector organizations have long since abandoned.

Thankfully, the tides are finally turning. As with the private sector, cloud-based technologies are increasingly moving upstream in government, from smaller to larger organizations, driven by demand for simple user-friendly alternatives to legacy solutions. It makes good business sense too: Cloud-based offerings are more flexible, generally have fewer upfront overhead costs, and enable government operations to scale more effectively.

The impact of cloud technologies on public procurement is most evident in local governments, which often are less constrained by strict RFP processes. The mid-size city of San Rafael, Calif., took the lead in 2016, by simplifying its RFP process and adopting a number of new technologies as part of a broader citywide plan to update digital services. Increasingly, as cloud-based technologies sweep through government, cities can pick the software and other technology they need without tying themselves into long-term contracts or having to undertake costly customization.

With tens of thousands of local governments in the United States, there's reason to hope that these kinds of successful deployments in smaller places will cause larger governments to take notice and recognize the value of a simpler procurement process. The traditional RFP may not be long for this world.

This column was originally published by Governing.