Introduction and Landscape: Linking Public Procurement Reform to Improving Benefits Delivery in States

Each year, the United States allocates billions of dollars, largely administered by states, to safety net benefits and services for the purpose of improving outcomes in recipient health and well-being, nutrition, housing, and economic security. While states spend billions of dollars each year procuring systems and services to digitally administer these benefits, the digital solutions often fail to effectively serve the millions of people who rely on the benefits to make ends meet. Additionally, thousands of eligible individuals and families do not even access available benefits.

The COVID-19 pandemic exacerbated the reliance on digital systems to administer much-needed safety net benefits and existing concerns about system efficacy. Long-standing deficiencies in benefits infrastructure impeded the pandemic response from the start as Americans in need of assistance encountered overwhelmed call centers, websites, and service centers. Existing processes imposed huge time burdens on families, preventing 10 million otherwise eligible people from accessing antipoverty programs and forcing thousands to wait months for their unemployment claims to be paid. These broken systems are part of the reason that only 36 percent of Americans believe the federal government is effectively lifting people out of poverty.

The pandemic also gave rise to an entirely new ecosystem of digital services and data-driven approaches created to aid response. Often, states were forced to quickly lean on newly formed and patchworked IT teams to revise websites, share up-to-date information, and tap into new data sets. Many of these systems were developed or deployed under new models of multistakeholder governance and were led by novel collaborations of public servants, health officials, academics, scientists, technologists, companies, and sometimes volunteers. It was an all-hands-on-deck pivotal moment. Solutions that produced less than optimal outcomes, and even those that completely failed, still yielded important learnings for future public digital systems that can be codified with contracting or procurement practices.

Public procurement is a foundational pursuit that normally defies political divides, and digital systems are something that all states need to acquire, build, or manage. The challenges for each state are familiar: an opaque procurement process from start to finish, lack of internal technical capacity, risk aversion, vendor lock-in, and high barriers to competition. In addition, state capacity to manage mounting issues surrounding inefficient digital systems while looking to the future is compromised by a lack of allocated resources or trusted sources of support. Experimental or smaller piloted successes often go unshared and unreplicated across jurisdictions.

While the broader administration of public benefits can be improved in several ways, transforming the public procurement process is a key component of making public benefits accessible for those who need them. This transformation can be achieved in several ways: by prioritizing people at the foundation of digital solutions; remodeling procurement processes to be open, accessible, and competitive; enabling tech innovation and digital solution development; supporting state technical and administrative capabilities and capacity; and maximizing opportunities to scale, iterate, collaborate, and share knowledge. Changing the status quo will require a transformative vision for procurement that is people-centered, accessible, open, and based on innovation and collaboration. This report is designed as a resource to help demystify the field of public procurement, identify priority areas ripe for change, and offer actionable recommendations to improve outcomes.

While most public procurement officials share similar definitions for the term “procurement,” general understanding of procurement and all it entails can vary by organization, individual, agency, or government. This report’s definition of procurement is informed by the official definitions used by two states, Pennsylvania and Nebraska.

Pennsylvania’s Procurement Handbook (last updated in 2015) defines procurement as:

Buying, purchasing, renting, leasing, licensing, or otherwise acquiring any supply, service, or construction. The term also includes all functions that pertain to the obtaining of any material, service or construction, including description of requirements, selection and solicitation of sources, preparation and award of contract, and all phases of contract administration.

Nebraska’s Procurement Manual (last updated in 2017) defines procurement almost identically but adds a significant final sentence:

Ultimately, it is the act of utilizing taxpayer funds to meet the needs of government in a fair, transparent and efficient way in order to uphold the people’s trust.

Adding the word “public” in front of the term “procurement” produces a profound shift in expectations. While some goods and services are not procured directly by the government for the public, anything the government procures is ultimately for the benefit of the public. Reconceptualizing procurement as public procurement is a necessary first step toward reconceptualizing and transforming the field.

In addition to addressing the challenges associated with the current vendor and deliverable status quo, transforming the culture and process of public procurement to deliver better, people-centered outcomes requires rethinking how states procure software systems from start to finish. When procurement is broken down into phases, the challenges and opportunities for change become clearer. We see four distinct phases:

1. Planning, Research, and Proposal Process
2. Proposal Evaluation and Partner Selection
3. Negotiation and Contracting
4. Implementation and Contract Fulfillment

1. Planning, Research, and Proposal Process

Public procurement often feels like it happens in a black box. Many people do not have a sense of how it works or how foundational it is for improving digital systems’ outcomes. A well-thought-out public procurement strategy can provide measurable guidelines, flexibility, and mitigation techniques to allow states to develop and deploy digital solutions coherently and confidently. Conversely, lacking well-formulated project goals and performance indicators contributes to systems that do not fully meet the needs and expectations of states or benefit recipients. Many procurement goals are more focused on reducing costs than on serving the public. Budget concerns limit options to hire and train civil servants with the needed technical skills to efficiently manage the tech aspects of the procurement process. Competition for staff with these skills from the private sector only makes it harder to secure and maintain internal teams. More often than not, poorly formed procurement strategies are affected by drawn-out state budget cycles that do not take advantage of modern software design practices, further complicating the planning phase in the run-up to issuing a bid or request for proposals (RFP).

2. Proposal Evaluation and Partner Selection

All levels of government face herculean challenges in maintaining and modernizing legacy systems. Rather than using the initial planning period to strategically address systemic challenges, governments tend to rely on contractors to determine what needs to be done or come up with new systems as a workaround to old systems. Procurement of digital systems not informed by end-to-end user research often creates barriers to efficient administration and access of benefits through the system that is eventually delivered. As security and privacy concerns grow, many states are unable to quickly adapt their outsized and outdated systems to safeguard recipient data, which leads to evaluating proposals for what vendors can fix rather than evaluating whether they can deliver more sustainable transformative change.

3. Negotiation and Contracting

No state or government wants to deploy or run a system or website that crashes. Nor do they want to be delayed in deploying or modernizing a program with a drawn-out contracting process. While risk aversion is valid and necessary, states miss out on innovative solutions by using contracts that are aimed at prevention and compliance measures rather than creating more favorable conditions for better future outcomes through agile technology development and other methods. Negotiation, coupled with collaboration, with a vendor is an opportunity to ensure that contracted requirements are optimal for the successful delivery of a system.

4. Implementation and Contract Fulfillment

The political risks or potential for blame associated with implementing digital systems that are ineffective or inefficient make administrations wary of experimenting with innovative procurement practices that could greatly improve outcomes and reduce costs in the long run. Opaque contracts can make it difficult to decipher what deliverables were exactly agreed upon or if the agreement was breached. In addition, the monitoring and evaluation of a public procurement contract are often based on budget compliance rather than people-centered outcomes.

Social safety net benefits are critical to providing much-needed assistance to people in need. About two-thirds of people living in the United States between the ages of 20 and 65 will use a safety net benefit for at least one year. In an average month, one-in-five people, or approximately 59 million people, receive support from one of these six major social safety net programs:

• Supplemental Nutrition Assistance Program (SNAP)¹
• Supplemental Security Income (SSI)²
• Temporary Assistance for Needy Families (TANF)
• Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)³
• Child Care and Development Fund (CCDF) subsidies
• Public or subsidized housing

Additionally, Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) help more than 135 million people access health care. Research shows that expanded safety net benefits have been the main driver in reducing child poverty in the United States by 59 percent from 1993 to 2019, with all states reporting improvements and similar rates of poverty reduction among children across all demographics.⁴ Overall, these programs have proven to be pivotal in delivering improved outcomes for marginalized communities and low-income recipients, thus reducing social inequality.⁵

Despite the widespread benefits of these programs for low-income individuals and families, social safety nets are delivered by a patchwork of state and federal agencies. Their administrative processes, including program requirements and extensive information needed to establish eligibility, enrollment, and recertification, can be difficult and cumbersome for applicants to navigate.

As a result:

• Sixty billion dollars in safety net benefits go unclaimed each year by otherwise eligible individuals and families.
• Of the over 46 million people living in poverty, nearly a third of them—13 million people—are not connected to a major federally funded safety net program (SNAP, SSI, TANF, WIC, CCDF, and public or subsidized housing).
• Five million people who are eligible recipients for the earned income tax credit do not claim the EITC, missing out on $7 billion in unclaimed funds each year.

Given states’ control over how benefits are distributed, user experiences vary greatly from state to state during the application and recertification process. Poorly designed and deployed state IT systems managing safety net benefits applications and portals can worsen administrative burdens and create barriers to use. For example, in August 2019, Code for America completed a nationwide survey of SNAP, Medicaid, TANF, WIC, and LIHEAP (the Low Income Home Energy Assistance Program) to explore accessibility. While Code for America found that 7-in-10 benefits applications were accessible online, only 3-in-10 were mobile-friendly. This limits access as mobile phones are the top tool for accessing the internet. In addition, while 44 states had some sort of combined benefits application, no states had combined all five programs into one application, increasing the administrative burden for applicants.

Administrative burdens and concerns about the complexity of digital systems are well documented. A different foundational process to procuring public systems can address many of these complications:

• System and portal complexity: Applicants and users often face application systems that are difficult to navigate, such as portals with excessive pages, unsavable data or applications that have to be completed online in one session, and navigation features that are not intuitive. As a result, eligible applicants may not apply correctly, delaying receipt of the benefit or service, or they may be deterred from applying at all.
• Time it takes to apply/length of application: The administrative burden of applying for benefits is known as a “time tax,” and this web of confusing paperwork can deter needy applicants from applying for safety net programs. The Michigan Department of Health and Human Services partnered with Civilla for Project Re:form , which found that cutting a 42-page application in half reduced the time needed to apply by more than half. As a result, the share of applications that were completed increased from 72 percent to 94 percent, allowing a total of 2.5 million people to access benefits without undue hardship.
• Accessibility, language, and comprehension of application: Even for English speakers, complex legal topics and terms present a barrier. And for applicants with little or no English-speaking ability, it is especially challenging to read, comprehend, and complete the forms. Moreover, applications lacking specific visual, auditory, or cognitive accommodations may impede access to people who need accessible versions.
• Documentation requirements: Excessive or inflexible requirements such as asking applicants to supply documentation that they may not have or may have produced many times before often add to the administrative time tax of applicants.
• Onerous logins and ID proofing: Programs that require multiple logins or remote ID proofing (RIDP) to confirm the identity of online users can present barriers. RIDP asks users questions to which they may not know the answers or they may not remember the answers. But RIDP isn’t the only or necessarily the best way to ensure the security and confidentiality of client information.
• Mixed and out-of-date communication methods: Benefits applications that are only partially online can deter eligible applicants from applying and accessing necessary benefits. Many programs mix online applications with in-person interviews, mail renewal forms, or other paper-based requirements, making it difficult to enroll, maintain, or recertify eligibility. In 2018, Missouri removed 70,000 people from Medicaid enrollment, including 42,000 people who had not replied to a mailed renewal form and 20,000 whom the state could not locate.

Some states, technologists, and nonprofits are engaged in cross-sector collaboration that focuses on tackling these issues with state benefits programs through outreach and communication, application design, cross-benefit integration, renewal processing, back-end technology, and customer service. These partnerships are critical, but they may not be enough alone to transform entire systems to improve access and safety net service delivery of programs. Instead, large-scale changes are needed to transform the culture and processes of public procurement of these digital solutions.

The digital systems that administer safety net benefits are essential, but they can be costly and complicated. Yet, the increased cost, and the risk of potentially hindering benefits delivery, makes trying new approaches and vendors politically unpalatable. Well-established technology providers that can deliver projects at this massive scale often lead technology market innovation. But because they favor their existing technologies and solutions, these large firms are often less flexible, innovative, and willing to iterate than smaller firms when working with states or other jurisdictions on developing proofs of concept outside of their established technology infrastructure. Governments, lacking sufficient internal capacity to build and maintain their own digital products, are reliant on the systems and technology of these private partners due to contractual obligations—a process known as vendor lock-in.

It’s no secret that all governments use private sector IT vendors to help deliver digital services. Too often, the vendors that win these contracts develop proprietary, closed-loop software systems to manage complete business processes. Their systems for processes like identity and data are unique and can’t be replicated, even though states have a clear need for interoperable data. This results in multiple systems that are difficult for government workers to manage and users to navigate, rather than one navigable digital system built and harmonized across a range of programs delivering benefits.

In addition, these custom-built systems are often so large in magnitude and price that only a few vendors have the experience, staff, and resources to compete for these contracts. As a result, the state government tech solutions market is dominated by a small number of large firms. Consultancies, like Deloitte and Accenture, and software companies, like Conduent and FIS, hold contracts with most states to design, develop, implement, maintain, and operate benefits eligibility digital systems.⁶ While these companies play a significant role in delivering systems associated with much-needed relief to individuals and families, the lack of competition stymies innovation and opportunities for states to find better fits and better solutions. A more robust effort is needed to diversify public-private sector partnerships to deliver more effective digital systems.

The failures of following the status quo are well documented. According to an MIT Technology Review article, “Deloitte has a long history of making malfunctioning things for state and federal governments: most recently, it was in the news for charging states hundreds of millions of dollars for unemployment websites that did not work.” Altogether, unproven systems contribute to 87 percent of government software projects, yet research shows that government tech projects costing over $6 million succeed only about 13 percent of the time. Despite the failed projects, large vendors continue to win multiyear contracts from states that have their own unique requirements and regulations, furthering the lack of transparency and efficiency while ensuring continued vendor lock-in.

When states continually award contracts to large, legacy firms despite their failure to deliver successful and effective digital solutions, it does more than deprive people of access to needed safety net programs. It also denies small minority- and women-owned business enterprises (M/WBEs) the opportunity to compete for contracts and contribute innovative ideas for state digital solutions, which speaks to a larger diversity and equity issue in government contracting. According to the National Equity Atlas, “people of color are 39 percent of the population and own 29 percent of all American businesses, yet entrepreneurs of color receive less than 12 percent of federal government contracting dollars. While this exceeds the official contracting goal of five percent, it is far from being proportionate and even further from proactively advancing racial equity in business ownership. And while women own 42 percent of American companies and women of color start businesses at the fastest rate of all racial/gender groups, the federal government fell shy of meeting its 5 percent contracting goal for small women-owned businesses in 2020.”

Despite all of these challenges in delivering effective solutions, large technology providers are still a necessary component of transforming public procurement practices and delivering improved outcomes to people across the country. Technical providers and vendors can help with a transformative shift and remain profitable, developing systems that strengthen the provision of government services. For example, large incumbent firms can be encouraged (or required) to partner or team up with smaller design firms, universities, or policy labs. An example of this model is Civilla, a nonprofit design studio reimagining public institutions that partnered with leaders in Michigan and Deloitte, the state’s technology vendor, to redesign the MI Bridges website. Over 400,000 Michigan residents use the site each month to access food assistance, health care, and other critical services.