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Towards a Procurement Strategy

What enables innovation? This is an oft-asked question. Some argue it’s the aggregation of divergent viewpoints, or the density of the creative class; others say it’s the proximity to academia or industry.

A less common, but no less important question is what impedes innovation? What are the structural roadblocks inside an organization that stop it from trying something new or moving ahead? If anything, the blanket rejoinders of “bigness” or “bureaucracy” are offered, but any institution at scale will be big and so demand a kind of bureaucracy — and government is no different, arguably even more so.

So let’s ask ourselves, what’s slowing government innovation?

In a word: procurement.

What’s that? Governments (and really any other large size institutions) have rigorous regulations to delimit the process and qualifications for winning a contracting bid — bids ranging from tanks and dump trucks to pencils and software. That’s procurement. They are the rules of the game. Yet, many argue, that these rules cut out small, agile startups from playing. They are overly complex, biased towards established vendors, and costly in in terms of both time and money. (Both of which, of course, being rare resources for a startup.)

Procurement rules were put in place for logical reasons: to ensure quality and competition, to fight against corruption and patronage, and most of all to ensure that public dollars were spent fairly. Over time, however, layer upon layer of specificity and interest — e.g. a preference for local vendors or a requirement of a particular technology — have piled up to the point where many in government can’t even describe the process. (I was speaking to a researcher who offhand mentioned that it would likely take six months just to map out the entirety of one city’s procurement process.) So even eager entrepreneurs looking to take a swing at a startup, the procurement hurdle can seem like the Green Monster. Particularly when compared against more open and accessible markets like mobile, social, or even traditional enterprise.

On the other hand, success stories are emerging: civic startups are showing that scale in the government IT space can be achieved through creative sales processes, an understanding of the system, and frankly hard work.

The challenge then becomes how to systematize their success, how to turn the exception in the new rule.

In an ironic way, procurement itself is a kind of hack. Free market dynamics are designed as well for fairness and efficiency, yet instead of requiring credentialization and review, the market relies on transparency and competition. But your typical contractor doesn’t list its prices online. Thus, the procurement system was designed to use rules to provide the assurance of fairness in an otherwise opaque process. If you can’t openly assess outcomes, you can at least trust the process.

This is exactly why there’s an opportunity now for systems change.

  • Technology enables open marketplaces. Technology now makes it easier to track and open reports on spending, particularly when technology itself brokers the transaction (e.g. modern financial markets). As online marketplaces emerge for government contracting, data will as well, leading to accountability through transparency and cost-savings through competition.
  • Governments are increasingly open to new software. Changing what is currently a closed, typically paper-based process into an electronic, open one will require substantial political leverage; fortunately, senior leadership in local, state, and federal government is emerging that not only understands technology, but realizes the procurement process has to change.
  • Software is eating the (government) world. The rapid disruption in other markets is driven in large part by the commoditization of technology through software-as-a-service. There’s no reason governments couldn’t do the same — except for the paucity of civic startups. That’s changing though. Dozens if not hundreds of companies are now beginning to recognize the opportunity to get into the govtech space.

These dynamics are not unique to government. Other industries such as healthcare and education are going through similar transformations — and some already have. “Software is eating the world,” Marc Andreessen says, and that’s a good thing. It means lower costs, better services, and wonderful experiences. Why wouldn’t we want that for the institution designed to serve us all, our government? We do. So let’s get to work taking down this man-made barrier to a government of the people, by the people, for the 21st century.

Photo courtesy of Flickr user sonrisaelectria.


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