Two Transformative Movements in Procurement: Creating an Ecosystem for Dialogue & Experimentation and Pursuing Outcome-Oriented Results (Sascha Haselmayer)

I have a passion for procurement—it is simultaneously simple and complex. There are two big actionable movements that will ignite change.

Recommendation 1: Create an Ecosystem for Dialogue and Experimentation for Procurement Reform

Most forms of public procurement are a linear process, in which a group of people scope out specifications with only minimal input from stakeholders and potential vendors. The result: inflated specifications, either tailored to the offering of a specific preferred vendor, or an almost unworkable sheet of requirements, which often leaves procurement contracts big, all or nothing bets with high failure rates.

Nothing prescribes procurement to work in this way. A more effective way to think about procurement of benefits is to think of it as managing an ecosystem of ideas and vendors, funneled through selection into deployment. This approach is more promising because it doesn’t reduce vendors to simply deliver a scope at lowest cost, but encourages new ideas to emerge that can better serve citizens.

What is needed to make this happen?

• Create a space where procurement/government needs can be openly presented to potential vendors, and where vendors can get access to experts, benefit users, and administrators to better understand their needs. This can happen in an environment with clear rules about sharing information, data, and designs, where vendors share their discovery and raise questions about different approaches, ways of organizing priorities or dividing up modules. Buyers should not be afraid to allocate budgets, in the form of small grants or stipends, to this process.
• Use prototypes and pilots in which vendors can work with real-life constituents to create experience prototypes or modules, by providing access to designated pilot sites like towns or neighborhoods in cities. Such prototyping also has the added benefit that, instead of writing complex specifications, answers and integrations can be explored on the ground. Again, grants and small pilot budgets can be disbursed to level the playing field for smaller vendors.

There are several benefits of taking an ecosystem approach.

• Lower risk: By encouraging vendors to directly engage with users and specifications, there is a lower risk of deploying a solution that doesn’t work. This can be strengthened further by creating citizen panels to provide feedback and co-create solutions.
• Encourage greater competition: Creating an incubation stage opens the door for procurement contracts to more vendors with different skill sets, encouraging more competition and innovation. Whereas benefit contracts are traditionally open only to the largest of vendors who can claim to meet all the complex requirements, the ideas and prototyping stage can be open to smaller consulting firms with skills in design, concept development, and user engagement. With comparatively small amounts of funding, this incubation stage can be open and attractive to a diverse group of small vendors and teams to develop and demonstrate creative new solutions.

The result?

An ecosystem of solutions and options that gives buyers greater choice, while evening the playing field between vendors by increasing transparency and dialogue during the RFP process. There are many options to design such an ecosystem approach: it can allow for a high degree of competitive secrecy or mandate that all knowledge and technology created be open and shared. Buyers can also choose to allow small vendors to compete for delivery contracts, encourage partnerships, or separate the design and prototyping from final deployment contracts.

Recommendation 2: Creating Social Value: Tackle the Root Causes with Outcome-Oriented Procurement

As with any public services, benefits are a problem that can be served or solved. Procurement is an important demonstration of a government’s intention.

An example: Many waste management contracts will pay a vendor according to the amount of waste they corrected and the completion of collection routes stipulated in a contract. Vendors deploy equipment and staff on the ground to carry out the task.

The problem: These types of contracts do nothing to reduce waste, a goal of communities everywhere. Instead of waste management vendors using their assets to help change behaviors in communities, they are incentivized to do the opposite by being paid per ton of waste collected.

Public procurement offers different opportunities to tackle challenges, through:

• Outcome Oriented Procurement: It starts with defining the objective of a system, tool, or program. Is it there to only manually process a benefit, or can it do more, like proactively engaging people who may have the right to benefits, but have not applied? Can it be connected to other signals about needs for benefit or other services, to get closer to a user?

  For example, as more communities do daily counts of people experiencing homelessness, how can this information and case management be correlated with benefits applications and payments? Or vice versa, what can we learn from benefits applications to signal a risk of homelessness?

  In other sectors, like public transit, governments have begun to develop holistic models to capture the economic value of solving a variety of problems in their community like reducing waiting times or improving safety. By modeling a wider set of interconnected needs, buyers and contract managers can reward the added value of tackling root causes or solving related problems. This also involves collecting good data on the performance of existing services as a baseline for progress.

  To return to the example of waste management, vendors can do a lot in the way of encouraging behaviors that avoid waste or increase separation in the communities they serve, and should be rewarded for progress accordingly.

• Contract management: Contract management is often an after-thought, focusing more on deployment milestones than service outcomes.

  Governments in the U.K. and elsewhere have begun to invest in contract management as a critical process to improve performance. The focus here is less on adversarial enforcement of contract terms, but on using every opportunity to collaborate with the vendor to improve service outcomes. Central to this process is the collection, at high intervals (e.g. weekly or monthly), of service performance data and a mandate to respond with some flexibility to opportunities to improve outcomes. This agility in contract management, especially on large or long-term contracts, can lead to truly transformative results.