How Better Procurement Can Drive Better Outcomes for Cities

It's a mistake to view it as just a back-office bureaucracy. As Seattle is demonstrating, reforming it can help improve lives.
October 12, 2017
A homeless person sitting on the ground, near a trashcan
Seattle's Human Services Department dramatically reformed its contracting for homeless services. (Flickr/Alex O'Neal)
By Andrew Feldman  |  Contributor
Host of the Gov Innovator podcast and former special adviser in the White House Office of Management and Budget
By Jason Johnson  |  Contributor
Deputy director of Seattle's Human Services Department

If your job involves working to improve outcomes for your city, whether you're staff to a mayor or helping lead a city agency, results-driven contracting needs to be in your toolkit. The reason: About half of most city budgets is spent on goods and services acquired from the private sector, so whether or not your city achieves its goals depends a lot on its procurement processes.

Unfortunately, procurement as a driver of city outcomes is often overlooked, viewed merely as a back-office function focused on compliance and invoicing. A growing number of cities, however, are seeing procurement as a key lever to achieving their goals. A good example is Seattle, whose leaders have made tackling homelessness a priority. A variety of programs already existed to serve the more than 3,000 unsheltered individuals in the city, from survival services to housing assistance. Those contracted services, however, were generally uncoordinated, existed in silos and were not outcomes-focused. The city needed a more strategic approach.

In response, Seattle's Human Services Department (HSD, where one of us, Jason Johnson, is deputy director) dramatically reformed its contracting for homeless services. Working with the Harvard Kennedy School's Government Performance Lab through Bloomberg Philanthropies' What Works Cities initiative, the department used a three-step process:

Step 1: Consolidating contracts. Up until 2016, HSD had more than 200 separate contracts with 60 providers for homelessness services -- one provider had 18 separate contracts. That fragmentation meant that service providers had to fit individuals into narrow funding categories rather than directly supporting them in the ways they needed. Aside from the lack of funding flexibility, other downsides included high transitional costs, lower data quality and the challenge for the city of tracking and managing performance across so many contracts. As its first step toward reform, the city consolidated 26 contracts held by five providers into eight much larger, more flexible contracts.

Step 2: Establishing metrics and tracking results. HSD established five key metrics for both monitoring and paying for performance. They include the number of people a provider moved into permanent housing, the number served by a provider who later returned to homelessness, and the length of time that families were homeless. The metrics are designed to create a unifying, clear expectation -- for both providers and funders -- that homeless people should experience that situation for as short a time as possible and that the solution should be one that is permanent.

Step 3: Adopting active contract management. While establishing performance expectations was important, city officials knew that expectations alone were not enough to embed a results focus into homelessness services. As a result, they began working closely with providers to make sure those providers were successful -- a process known as active contract management. To start, HSD established monthly meetings with each contracted organization to check in, discuss their data together and create or update action plans designed to ensure that good results continued and problems were fixed.

Next, to encourage service providers to work together to improve their results, the department launched "learning circles." These monthly meetings, first piloted with five organizations, allow providers to examine their data together and discuss common challenges and opportunities for addressing homelessness. Is it surprising that competing service providers are helping each other improve? Not when government sets a clear expectation about cooperation and when providers see cooperation as an opportunity to better achieve their missions.

These same three steps could be used improve contracting in a wide variety of program areas, as a growing number of forward-thinking cities are doing. Boston, for example, reformed the way it procures for asphalt resurfacing, while San Francisco and Washington, D.C., reformed procurement around workforce-development services. Other cities that have moved in the same direction include Charleston, S.C., with waste-collection contracts, Wichita, Kan., around grounds maintenance, and New Haven, Conn., with services for high-risk youth. Twenty-two cities have worked with the Government Performance Lab on procurement reforms so far.

These cities have realized that the traditional procurement approach -- writing very specific contracts and choosing the lowest-price bidder -- makes it difficult for them to take advantage of new and innovative solutions to the challenges they face. That is especially true when the nature of what a city is buying is rapidly changing. Technology purchasing is the most obvious example, but our knowledge about "what works" has also changed in recent years for a variety of social-policy challenges such as homelessness.

What happens when you see your city tackling high-priority challenges through results-driven contracting and improving people's lives in the process? You realize the importance of getting procurement right -- and that this could be a game-changer for effective, efficient local government.