Antiquated Procurement Process Blocks Cities from Digital Age

From the perspective of a city trying to move operations into the digital age, software often seems overpriced, inflexible, and more complicated than flying a jet, with no clear measurable return on investment either in cost savings or improved service delivery.  From the perspective of the software provider who is big enough and smart enough to jump the hoops of public procurement, the cost needs to be high because the city wants a unique solution and there’s little chance of selling that software to other cities.  Not a well functioning marketplace.

These are problems typical of early days in the digital evolution of cities.  They will be overcome.  Rosenberg’s article shows four procurement options: traditional bid, problem-based procurement,  pay-for-performance and prizes.  All could work.  What are the strengths, the weaknesses of each?  And for whom?

from:  Opening City Hall’s Wallets to Innovation

lamp posts -Chris Burden - LA
Chris Burden: Art Exhibit in Los Angeles, August, 2015

Six years ago, the city of San Francisco decided to upgrade its streetlights.

This is its story:

O.K., stop. This is a parody, right? Government procurement is surely too nerdy even for Fixes. Procurement is a clerical task that cities do on autopilot: Decide what you need. Write a mind-numbing couple of dozen pages of specifications. Collect a few bids from the usual suspects.

Yep, that’s procurement.

But it doesn’t have to be. Instead of a rote purchasing exercise, what if procurement could be a way for cities to find new approaches to their problems?

San Francisco first tried for streetlights with procurement-as-usual: in 26 leaden pages, it issued a Request for Proposals, or R.F.P., to sell the city dimmable LED streetlights with wireless monitoring and controls. “We wrote very restrictive, tight specifications,” said Mary Tienken, the project manager.

Six businesses, most of them local electrical distributors, submitted proposals. But none had the wireless capability San Francisco needed. A second round in 2011 brought the same results.

In the meantime, what San Francisco was looking for was becoming more complex. Other city agencies were asking to add their own antennas atop the streetlights: to monitor traffic or parking spaces, locate gunshots, read electric and water meters.

Now the city was looking for streetlight boxes that could wirelessly manage various city services — and had the capacity to add more later. To find them, San Francisco turned to a brand-new idea called problem-based procurement.

“Instead of saying to the marketplace ‘here’s the solution we want,’ we said ‘here’s the challenge, here’s the problem we’re having’,” said Barbara Hale, assistant general manager of the city’s Public Utilities Commission. “That opened us up to what other people thought the solution to the problem was, rather than us in our own little world deciding we knew the answer.”
The city got 59 different ideas from businesses in numerous countries. A Swiss company called Paradox won an agreement to do a 12-streetlight pilot test.

So — a happy ending for the scrappy and innovative Paradox? No. Paradox’s system worked, but the city could not award a contract for 18,500 streetlights that way. It held another competition for just the control systems, and tried out three of them. Last year the city issued a traditional R.F.P., using what it learned from the pilots. The contract has not yet been awarded.

Dozens of cities around the world are using problem-based procurement. Barcelona has posed six challenges that it will spend a million euros on, and Moscow announced last year that five percent of city spending would be set aside for innovative procurement. But in the vast majority of cities, as in San Francisco, problem-based procurement is still just for small pilot projects — a novelty.

It will grow, however. This is largely because of the efforts of CityMart, a company based in New York and Barcelona that has almost single-handedly taken the concept from a neat idea to something cities all over want to figure out how to do.

The concept is new enough that there’s not yet a lot of evidence about its effects. There’s plenty of proof, however, of the deficiencies of business-as-usual.

With the typical R.F.P., a city uses a consultant, working with local officials, to design what to ask for. Then city engineers and lawyers write the specifications, and the R.F.P. goes out for bids.

“If it’s a road safety issue it’s likely it will be the traffic engineers who will be asked to tell you what you can do, what you should invest in,” said Sascha Haselmayer, CityMart’s chief executive. “They tend to come up with things like traffic lights. They do not know there’s a world of entrepreneurs who work on educating drivers better, or that have a different design approach to public space — things that may not fit into the professional profile of the consultant.”

Such a process is guaranteed to be innovation-free. Innovation is far more likely when expertise from one discipline is applied to another. If you want the most creative solution to a traffic problem, ask people who aren’t traffic engineers.

The R.F.P. process itself was designed to give anyone a shot at a contract, but in reality, the winners almost always come from a small group of businesses with the required financial stability, legal know-how to negotiate the bureaucracy, and connections. Put those together, and cities get to consider only a tiny spectrum of the possible solutions to their problems.

Problem-based procurement can provide them with a whole rainbow. But to do that, the process needs clearinghouses — eBays or Craigslists for urban ideas. CityMart began in 2009 by asking eight cities to provide a challenge. Each city made a commitment to taking the idea it liked best out for a spin (the businesses agreed to fund the pilot, because they desperately needed to demonstrate their ideas).

That exercise became a yearly event: in last year’s challenge, for example, London called for ways to decrease residential electricity use at peak hours, Moscow sought ways to quiet traffic noise, Sant Cugat, Spain, wanted ideas for getting otherwise-wasted food to hungry people and Lagos asked for ways to provide residents with power off-grid.

Nearly all the ideas the cities received were new to them. Copenhagen, for example, is a global leader in urban biking. Yet when Copenhagen asked for ideas to better integrate bikes into the city’s transit system, city officials had not previously heard of 33 of the 37 solutions proposed, including the winner: a navigation system named Billy Bike from Copenhagen’s near neighbor, Stockholm. “The probability that you know the best solution for the problem is quite low,” said Julia Haselmayer, Sascha’s wife, who runs CityMart’s American programs.

CityMart also holds an annual summit, which drew 30 cities last year, to help cities find out about what others are doing instead of starting from scratch with each new project. “If New York wants to develop a parking system, you can buy one off the shelf from another city for about $60,000,” said Sascha. “It might cost about 30 times as much to reinvent a solution than to find something that works that’s out there.”

Problem-based procurement is part of a very welcome development: Governments are starting to realize they don’t know everything.

“There has been a very significant shift in the last five or 10 years,” said James Anderson, who heads the public sector innovation program at Bloomberg Philanthropies. “It’s from top down to bottom up, from government goes it alone to government as a platform for lots of people to contribute and solve problems,” he said.

One example is the trend of pay-for-performance. Governments set a goal and pay service providers for achieving it; how they do it is completely up to them. Another example is the increasing popularity of prizes. This is actually a throwback — prize challenges have a long history. A clock that worked at sea and so enabled navigation was the famous winner of Britain’s Longitude Prize in 1714. (Here is a list of thousands of prizes.) Prizes went out of fashion, but now they are back, even among governments. The Obama administration’s website lists 445 challenges open this week.

While San Francisco put out a very detailed problem to solve, Philadelphia’s challenge in 2013 was brief and broad: do something to make the city safer. Philadelphia’s approach combines problem-based procurement with a business accelerator. The city won a grant from Bloomberg Philanthropies’ Mayor’s Challenge to start the program, which is called FastFWD, and provide money for pilot projects.

Ten finalists began a twice-a-week boot camp in February, 2014. There they learned how to tailor their products to the city’s needs, and how to work with the city. They could also display their solutions in showcase events attended by city officials. This was helpful in cracking the insiders’ network, said Brian Hill, the chief executive of Edovo, one of the winners. (Edovo, which at the time was called Jail Education Solutions, provides prison and jail inmates with digital tablets pre-loaded with lessons but, for security, without Internet connectivity.)

Khalil Morrison is a case manager with the Philadelphia mayor’s office that helps people coming out of prison. He gets ex-offenders into literacy, high-school equivalency diploma and vocational classes, fatherhood programs, and job readiness training. He reminds them to register to vote. He tells them about jobs. The city of Philadelphia is safer when Morrison succeeds.

To help his clients, Morrison first has to find them. He used to do this by sending out letters. “But a percentage of our population is transient,” he said. “Sometimes the addresses they provided a month ago have changed.” Or he would make a lot of phone calls, leaving voice mail messages that rarely got returned.

Now Morrison uses Textizen, a program from another of the winning businesses, to communicate with his clients. Almost all of them — he has about 90 at a time — have phones they can text with, and when they don’t, a friend or relative does. “I use it to have daily contact with my clients,” he said. “If they’re working, I don’t want to interrupt them at work by calling. But I text every day: How’s it going? Any issues? Need help with kids? Mental health issues? People respond to a text much quicker than to a voice message.”

He uses group texts to send clients reminders about programs and classes. “Attendance has improved exponentially,” he said. Clients now take photos of their pay stubs and text them in, rather than having to come by the office. Using texts for routine matters and contact with low-risk clients frees him up to spend face-to-face or on-the-phone time with high-risk clients.

“This has revolutionized case management,” said Morrison.

Despite the appeal of the idea, it will take time for problem-based procurement to become a significant force. “This will require more institutional change than individual pilot projects on their own,” said Story Bellows, who runs FastFWD from the mayor’s office in Philadelphia. One of the lessons FastFWD learned from its first challenge was that other city agencies had to get more involved and perceive the benefits. “It can’t be: ‘the civic innovation office is working on this,’” Bellows said. In the next competition, each entrepreneur will be paired with a city employee who will guide the business and help design its project.

CityMart, too, has changed its approach, abandoning annual challenges in favor of more intensive work designed to speed organizational change in a smaller number of cities — among them New York, which is starting a two-year partnership with CityMart. “Lots of governments are using the challenges,” said Sascha Haselmayer. “But that’s only just scratching the surface.”


Tina Rosenberg
Tina Rosenberg won a Pulitzer Prize for her book “The Haunted Land: Facing Europe’s Ghosts After Communism.” She is a former editorial writer for The Times and the author, most recently, of “Join the Club: How Peer Pressure Can Transform the World” and the World War II spy story e-book “D for Deception.” She is a co-founder of the Solutions Journalism Network, which supports rigorous reporting about responses to social problems.

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