Governments are famous for having highly bureaucratic procurement functions. Request for proposal (RFP) processes in local and national governments are so commonly time consuming -- and difficult to win -- that you rarely see successful bids from local or global startups. Furthermore, most procurement offices tend to focus more on soliciting specific solutions with detailed specifications.
Yet there is another way, one that goes hand-in-hand with smarter government and emerging open innovation concepts. The alternative to bureaucratic, closed, and costly procurement is something called "procurement for innovation." The idea behind procurement for innovation is that governments solicit innovative solutions to a need area as opposed to requiring proponents meet detailed requirements of a pre-determined solution.
Do we really think governments are always the best at determining the most innovative and effective potential solution to a need area? Innovation is occurring so fast, especially in the development and use of information and communication technologies (ICTs), that even smart governments have a hard time keeping pace.
Procurement for innovation poses the potential to address this challenge while also streamlining procurement processes and improving the possibility for supporting entrepreneurial solutions. A hypothetical example I like to use to discuss this concept is the idea of a city that seeks to improve use of electric vehicles.
The old school way of doing this would be for an internal government team (probably energy or transit-focused) to develop a detailed specification of their budget and the solution they seek. Perhaps the city has decided to allocate $1 million transform a part of their municipal fleet to EVs. In the traditional procurement model, the local government would develop their specifications for the vehicles they plan to acquire.
The question is: What is the city's real objective? Perhaps it is to contribute to increasing demand for EVs in the city. This sounds reasonable at first, since the increased use and exposure of EVs in the city may inspire citizens to also consider buying EVs. But what if that is not the most effective or innovative way to achieve the real desired goal (increasing use of EVs in the city)?
Instead the city might choose a procurement for innovation approach. We have a $1 million budget dedicated to helping spur the adoption of EVs in the city. Let's allow the private sector to present innovation ways of spending that money that have the most potential to impact the true goal of the program. An EV manufacturer may propose switching out some of the municipal fleet. But others might suggest alternatives, such as:
A system of rapid charging stations;
An incentive program for citizen purchase of EVs in partnership with local dealers;
A pilot program of EV carsharing by a startup or established carsharing company.
Applying a procurement for innovation model would allow city staff to evaluate all of the proposed solutions for potential impact on their desired objective.
I just learned of a new procurement for innovation project from the city of Barcelona. Barcelona of course has been pushing the envelope of smart city solutions for many years so it is no surprise to see them emerge as a pioneer in procurement for innovation.
The program is called BCN Open Challenge and is being conducted in partnership with Citymart, a platform intermediary for connecting cities with smart cities solutions from large and small companies. The BCN Open Challenge is focusing on six need areas for the city, ranging from reducing bike thefts to digitizing museum collections. The city is purposefully being vague on the desired specific solutions and instead leaving it open to the private sector to propose innovative solutions to the six challenges.
Beyond embracing procurement for innovation, Barcelona also sees this challenge as an opportunity to help spur the local innovation ecosystem by allowing winning bidders to gain access to office space in the city (since the challenge is open to international companies and startups) and tangible support for diffusing their innovation to other cities after they are able to validate the success of the project.
Smart cities are about more than just the use of ICTs. They're also about smarter use of limited budgets to achieve the most impact and quality of life for citizens. The BCN Open Challenge is one such example of smart governance. From speaking with the founder of Citymart, Sascha Haselmayer, I understand that Barcelona is the first of many cities planning to use the Citymart platform in this way. I can't wait to see which cities will follow Barcelona's lead.
Re: Lets still have the conversation Terry, perhaps contract language is changing to make governments more flexible. This RFP innovation is a few steps beyond adopt a park or a City-Private partnership. Change and new processes can make a difference of financial success to a city which in turn allows Unions to obtain better benefits for City employees.
Cool concept... What a great idea, particularly the bigger picture of boosting local innovators and helping spread their solutions to other cities if they win the bid. Thanks for bringing it to our attention, Boyd.
As a Barcelona resident, it was interesting to hear what was on the city's list. Bike thefts are a healthy business here, so I'm glad that's getting attention. Reducing social isolation is a global issue and maybe Barcelona will be a leader. The others seem like more conventional city issues: monitoring pedestrian flow, getting alerts about bad road surfaces, increasing local commerces use of tech....
Just one question, how long to companies have to respond to the innovation request? Is it longer than a conventional RFP?
Re: Lets still have the conversation The plan does seem like a good one. But, if our area is any indication of what happens in lots of other places, the bid writers have such a vested interest in getting nods from their higher ups that the very specific requirements are almost always suited to meet the anticipated bidder's current capabilities and brands sold and for quick choosing among the lowest bidders for the awards. That way no one can complain they think.
Lets still have the conversation I love the premise of your idea, Boyd... but government employees (and their unions reps) are going to flatten this plan against the wall like an annoying housefly. It makes government employees less relevant, less useful, and not worth their salaries if they just throw open RFPs and tell respondents, "Go innovate."
That doesn't mean there shouldn't be a broader conversation around the underlying objectives or strategy of a municipal plan to transition to EVs, for example. Citizens, elected officials, lifelong government employees, and subject-matter experts should hash through these complexities in true, democratic fashion.
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