Trade-offs in Procurement

When looking for truly innovative ideas, “don’t throw the baby out with the bathwater” is the best pop-wisdom we can use.

When we try to solve a problem, we tend to focus on what’s wrong with the status quo miss the bits that we’d actually like to keep.

If we really want innovation however, we need to find the best of both worlds; like healthcare that is “holistic” and efficient, or like we want cars that are fast and safe. Innovation is about reconciling these values, rather than choosing between them; more “yes-and” as opposed to “either or”.

In procurement, we want processes that are both fair and participatory. That support SMEs but aren’t discriminatory to other businesses. That can get the City innovative solutions, but aren’t so vague as to leave people scratching their heads about what the City actually wants. There are more. By talking to different people in the world of public procurement, the trade-offs are hard to miss.

Bill

Meet Bill Stewart. Bill’s office reflects his two passions in life – there’s hockey merchandise on a table and the wall, and a hard copy of the 35-page City of Guelph Purchasing By-Law on his desk. Bill is a long term volunteer with the OHL, a regular at Guelph Storm games and a life-long Montreal Canadian’s fan. He’s also the Manager of Procurement and Risk Management for the City, and he had a leading hand in actually writing the By-Law that sits on his desk. As Bill says, for him and his small team, “that’s our bible. It’s how we operate and the guidelines by which we operate.”

Here’s how Bill sees it: His job is to protect tax payers by ensuring the City does everything it can to get the best value for the money it spends. To get there, he spends a lot of his time asking two questions – is this bidding document clear? And, is our process defensible? If the answer to both is yes, Bill will have done his job.

Clarity Increases Competition

For Bill, clarity is paramount. In his words…“Garbage in. Garbage out.” Basically, a bad RFP is probably going to get you a bad product or service. In fact, Bill’s litmus test of an RFP is the number of clarifications the City has to issue once an RFP has been published. (These are called Addendums, and they are issued when potential vendors need to ask clarifying questions. The Purchasing By-Law mandates the City make the addendum’s public so that all potential vendors have the same information). The better the bidding document (e.g., an RFP) the fewer, if any, addendums that need to be issued.

In Bill’s experience, 99% of all addendums that the City has to issue are related to the scoping of the project, and not the terms and conditions his department adds to the RFPs by way of legal protections for the City.

Clear specifications also help to protect the vendors – Bill knows that it takes time to respond to RFPs, and he wants to minimize that cost by ensuring the RFP is as clear as possible. If the costs of bidding are minimized, more people (companies, organizations) are likely to actually bid, making the overall process more competitive and we’re back to his overall goal – this gets us value for money.

Defensible

There are a lot of rules, regulations, precedents and practices that shape public procurement. This is public money, so that’s not a bad thing. Unsurprisingly, Bill uses words like ‘defensible’ a lot. And for good reason. Bill worked in the private sector before joining the City nearly 10 years ago, and he knows it’s a very different environment, “everyone is watching the City, and we have to make sure our ducks are in a row.” At every step of the process, Bill wants to make sure the City follows procedures and has a “good” answer if anyone was to ever ask. Who was on the committee that assessed a proposal? Did they have any conflicts of interest? How did they arrive at the scores they gave? Did some bidders get special treatment? Did anyone from outside of the City influence the process?

It’s not that Bill thinks this kind of oversight and scrutiny isn’t a good thing, but he knows it comes at a cost. “Compared to an agreement in the private sector, legal agreements are probably weighted more firmly in the City’s favour, but it’s because no-one is going to challenge your decision making in the private sector. {in the private sector} If you don’t like someone, and don’t hire them, it’s “see you later.”

Blair

Now, meet Blair. Blair’s the General Manager of Technology and Innovation at the City. (Full disclosure, Blair is also Co-Chair of the Guelph Lab). Blair is responsible for not only the computers staff use, and the servers their systems run on, but also also trying to figure out how a Municipal Government operates in the fast-paced, mobile enabled, social networked 21st Century. This includes an entirely new online platform that might incorporate everything from online points of sale (i.e., a way to pay your taxes), to a “311” service (a simple way to get information about City services or programs – you ask a question, the City gets back to you with the answer), to readily accessible stores of shareable City data (e.g., crime rates, demographics, etc) or even forums for providing input into the City’s decision-making. In other words, Blairs got a pretty complex task on his hands.

Now, some of the elements of this web platform already exist, and simply need to be integrated. But others don’t. How does Blair decide what should be part of this new web presence and how should he go about acquiring it? What if the features Blair thinks are important aren’t actually the ones citizens will want or use?

Blair would like to have the input of citizens because these are the people he knows are going to use this web presence and who are directly effected by it’s success or failure. He’d also like to have them actively participate in actually deciding between option(s). It’s not a question of expertise – the City has this in abundance – but of perspective. Who knows what’s important, what will work and what won’t better than those people who are the supposed benefices / recipients of a service?

What’s more, some of the features Blair might be interested in can be taken right off the shelf – they already exist. But some are extremely novel – it’s not like picking a good email service, where there are lots to choose from, the tech is quite mature and we already know exactly what email is, and what we want from an email service. Government in 21st Century might need really leading edge or highly customized technology. It’s really hard, maybe even impossible, and possibly not even very helpful for Blair to try and describe what’s needed with the kind of detail and clarity that Bill knows is important. What’s more, this kind of technology is often where the smaller companies can offer something that larger ones can’t. But getting them to bid might actually be another challenge.

Kelly

Now, meet Kelly. Kelly runs a boutique tech company based in Guelph and Toronto. It’s a small firm by comparison to many tech companies, but Kelly sees this as an asset to her clients – they can be extremely agile – upgrading and updating the systems and tech they use in a matter of days – really responsive, and they do “custom” by default (they’re not locked into a particular product, platform etc). Kelly’s firm could be just the right fit for the web technology Blair and the City are going to be building. But Kelly doesn’t think about City contracts. She barely even thinks about looking for them. Why not?

Well, she doesn’t know anyone at the City, and, even if there’s no preferred vendor network at the City (there isn’t), relationships matter. It’s how you get known, and it’s how you might get those smaller contracts. You might call this the “old boys club.” (Unfortunately for IT, the emphasis on boys is appropriate). It’s also to do with size – bigger firms can invest more money in business development. She could work with the City much earlier on, in scoping the project, but then that would actually preclude her from bidding on it.

The “legalese” is another reason – lengthy legal provisions, both in the RFP and in the actual contract she’d sign. (It costs to have professional legal advice on what she’s committing to). Couldn’t there be a staggered process, whereby the legal commitments and requirements are built up as they move closer to a final agreement and the project moves ahead? She’s done this in the private sector.

It also costs time to answer an RFP, and the intellectual and creative energy that her firm puts in won’t necessarily assure them of success. As Kelly says, “if you like what we do, hire us, and then we’ll give you our all of our best ideas.”

The Challenges in Public Procurement

With these three “users” of the procurement process, we see the trade-offs in public procurement – we have Bill, doing everything he can to ensure clarity and compliance. (And thank you Bill for that). And we have Blair, who does want those things, but also wants to have active participation and needs to be able to experiment. And, finally, you have Kelly, who’s probably going to have some good ideas but doesn’t know who to talk to about them and when it comes to bidding on City contracts, the costs are just prohibitive. How do we square this particular circle? Looking for solutions that reconcile the trade-offs of public procurement is what Guelph Lab is working on. We’re testing out some ideas right now, and if you’d like to learn more, or get involved, contact us.