Social Innovation Snagged in Procurement Red Tape

The hard truth is that our procurement processes work contrary to our original goal of efficient stewardship. Worse yet, they stifle creativity and innovation.
by , | September 29, 2010
 

Done well, public procurement must do two things. First, make the most of limited resources, and second, maintain the people's trust in their government. Lately, these challenges feel even more urgent -- and thorny.

The procurement process typically does a good job of protecting taxpayer dollars from fraud or misuse, but it has also become an exercise in isolating government agencies from the vendors they engage. Over decades we have built a wall, stacking a new layer of control on top every time an imperfection is identified and then "solved."

The hard truth is that our procurement processes work contrary to our original goal of efficient stewardship. Worse yet, they stifle creativity and innovation.

Few people are willing to engage in the hard work of fixing public procurement processes, which are often marked by archaic controls that add no public value.

Normal people do not consider reforming procurement as critical to advancing social justice. But we're not normal people. Inefficient procurement processes work against the efficient delivery of critical social services.

All of us who deal with procurement are painfully aware of what the landscape looks like today. It is a slow and laborious process that adheres rigidly to its rules and frameworks but frequently delivers poor results.

As deputy mayor for Health and Human Services for New York City, Linda supervises eight city agencies and coordinates closely across four others. Many of these agencies -- Administration for Children's Services, Department for the Aging, Department of Social Services -- protect the city's most vulnerable. All rely heavily on nonprofits to provide services; for some it is as much as 90 percent of their work. Last year, the 12 agencies issued 3,700 unique contracts valued at over $4 billion. To compare, the FY 2011 budget for the entire state of South Dakota will be around $4 billion.

In Washington, D.C., where David is chief of procurement for the District, the contracting process for vendors is equally burdensome in terms of cost and risk. In both New York and D.C., the time people must spend negotiating, documenting and registering contracts discourages smaller or newer nonprofits that lack the administrative capacity to fill out all the paperwork.

Many vendors have multiple contracts with different agencies. As a result, they are required to submit multiple copies of each document for each contract at multiple points along the way.

Each agency employs dozens of procurement staff to manage this massive paper shuffle, making it not only wasteful and outdated for vendors but also for the cities

We believe there is another way. After a combined five decades working for city and state government, we actually find procurement to be intriguing and full of untapped potential. Happily we are not alone in asking ourselves, if we could rebuild a new procurement system from scratch, what would it look like?

Simple problem statements. To begin, an ideal procurement organization would focus on results, not process alone. Solicitations could be problem statements on what we want results to be, encouraging vendors to provide innovative solutions. Defining common outcomes across service agencies, in collaboration with the provider community, and using these to guide solicitations and subsequent performance evaluation, would set this foundation.

Continuous open communications. We teach procurement officials to fear communicating with vendors or being too open about the process, but that works against us. Pre-bid and pre-solicitation conferences, for example, allow both the buyer and prospective sellers to have a better lay of the land, and should be much more common. We can also do much better with transparency.

Investing in what works. Measuring performance and then using past performance as an evaluation criteria sounds like common sense, but it is rare. In New York City, even with sophisticated tools for determining outcomes and performance, we still renew contracts with incumbent providers who do not measure up. Washington, D.C., experiences the same problems. The city wrestles continuously with how to best measure supplier performance and to remediate issues with poor performing vendors.

Innovation funding. The ideal procurement process would have a culture open to innovative and sometimes complex funding. It would loosen ties to the budget process and its additional layers of control. Leaders would celebrate flexibility and embrace the notion that a great idea lies in wait around the corner. Resistance to this will be great -- not only from inside government, but from without, as traditional definitions of integrity are used to attack results individual providers seek to overturn.

Right people with the right training and skill sets. Procurement officials of tomorrow should not be forced to act like control freaks. Government must encourage them to be inventors who are never satisfied with what they did yesterday and are not afraid to color outside the lines. We like to envision our staff as trusted business consultants to the agencies we serve.

In our nation's capitol, for example, David is making every effort to change the traditional view that process takes precedence. He seeks out and hires talented professionals who display the characteristics of innovators: critical thinking, flexibility, vision and the courage to change outdated rules. Add to the list a focus on results, affinity for people, trustworthiness, sense of service and extraordinary communications skills.

How does one find these characteristics? The city is developing interview techniques that drive specifically toward these talents. With each hiring decision we put another large stone into the foundation of the model procurement organization of the 21st Century.

In New York, the impact of the recession on nonprofit providers has catalyzed some of these changes. NYC Health and Human Services is launching an effort to streamline our procurement process, creating a single master service agreement for vendors. A settlement house providing services for youth, for example, will no longer have three separate contracts with three separate agencies.

Providers, especially new or smaller ones, will have greater access to service dollars. Agencies will be empowered and will have more time to engage in best practice conversations and negotiate relationships with nonprofits. And the required certifications and filings will be done once, rather than in multiple copy over and over, and will be online in a user-friendly format whose content is controlled by the vendor. No more copies in triplicate and lost documents along the assembly line.

Both New York City and the District of Columbia are one step closer to our shared vision of a better procurement system. But let us state clearly, these cities have a long way to go on a path that will not be easy. But it is possible and worthy of the journey.

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