WEB EXCLUSIVE: Inside-out innovation

Oct. 4, 2016

City of Atlanta Deputy CIO Kirk Talbot on procurement optioning and cutting through red tape to innovate

Innovation is necessary for any organization to survive and even more importantly, to thrive. Frequently, innovation is viewed as a singular event or a standalone process. But for a healthy government agency to deliver the best possible service at the lowest possible cost to its constituents, innovation must be viewed as an on-going process or supply chain.

While there are many different factors conspiring against a healthy innovation supply chain in government, one of the biggest impediments tends to be the procurement process itself. There are numerous good ideas, technology and even the capital necessary to improve government operations; but if you can’t put them to use through the procurement process, you can’t effectively innovate. Understanding the reasons for why procurement rules exist helps to speed the acquisition of innovation. But, at the end of the day, the procurement rules keep the agency out of trouble. And that is paramount in all government settings.

The good news is, there are time-honored methods of accelerating and innovating in the procurement process. These let an agency safely experiment with ways to find what works and still stay within the necessary procurement guidelines. Each method has its own strengths and weaknesses, but when used at the right time they can be powerful accelerants in the innovation process:

  • Cooperative purchase: Cooperative purchasing is the process of one agency buying off of the previously vetted contract of another government agency. Because the original procurement was competitively bid, the second government agency meets all of the competitive process requirements, but does not have to duplicate the lengthy process itself. This greatly speeds the acquisition of the good or service, but it does require acceptance of whatever terms and conditions the original agency put in its contract. The best known examples of this are WSCA-NASPO and GSA contracts;
  • Sister agency purchase: This method can take on many different forms depending on which government agencies are involved. The concept is that multiple government agencies band together to make a procurement where all agencies would benefit. However, the strategy requires that the agency with the most favorable procurement model take the lead and all other agencies participate through the resulting cooperative purchase method to realize the benefits. Where Memorandums of Understanding (MOU) already exist, the final procurement may take the form of the second agency transferring funds to the first agency in an existing relationship. Either way, the key is to have the most favorable agency’s procurement method deliver the benefit to multiple government agencies. The best-known example of this method is the Public-Private Partnership (P3) where a government agency benefits from the procurement process of a private entity through predefined relationships;
  • Transaction-based pricing: This method, oftentimes, is the least costly for a government agency to utilize. The vendor in question does not charge an upfront fee for the technology being procured, but provides a charging mechanism for each transactional usage of the technology. If the full cost of the service used is then passed along to the constituent using the service, then the government agency does not pay anything at all. The best-known examples of this model are web- or mobile-based systems that process court fees or parking tickets, where the user of the system pays a convenience fee. A government agency can quickly explore whether this technology is worth the cost to its constituents without undertaking an onerous procurement process before the outcomes are known;
  • Discretionary spend limits: This method is probably the best-kept secret in government circles. Most government agencies have a small or micro-procurement process that allows them to rapidly buy a good or service under a small dollar amount ($5,000 to $50,000, depending on the agency). If the vendor can provide an initial pilot below this price limit, the government agency can quickly sample the solution before committing to a larger procurement. Great caution must be exercised with this method as “stringing procurements” (buying the same product or service multiple times in a row just under the limit), or awarding the ultimate contract to the pilot vendor, can trigger a negative response from all parties involved. The best known example of this model is Software as a Service (SaaS) , where a small number of people within an agency try out the service before committing to an agency-wide deployment; and
  • Sole source: As the name implies, when all else fails, many government agencies can award a contract to a single vendor when no other vendors provide this good or service. This method is the least favorable in procurement circles, and rightly so given documented abuses. But this method is often unavoidable when dealing with emerging technology or services. Many startup companies have no identifiable competition if they are just starting to build a market for their solution.

Remember, no matter the amount of friction that may exist in a government agency, if the value of the innovation is great enough, people will find a way to make it happen. The corollary holds just as true: if the agency can’t find an acceptable means to buy the innovation, it isn’t for lack of options. They are really saying the innovation doesn’t hold enough value for them to make it worth the effort. 

About The Author: Talbot is deputy CIO for the city of Atlanta.