It’s rare to see change in how governments handle their contracting and procurement processes. However, more and more cities are turning the process upside down by asking contractors to produce their own solutions to described problems instead of bidding on government-mandated solutions. Perhaps the cities have learned from PYMNTS Innovation Project’s ThinkaThon?
Typically when a government requests proposals for contracts, it sets out the specific parameters on which vendors bid in a competitive process based mostly on cost and time to complete. However, several towns have started to pursue ideas for solutions as well.
Instead of using the traditional contact-bidding process, Spain’s Barcelona, for example, is asking bidders to submit ideas on how to solve specific problems, such as ways to combat bicycle thefts, identify potholes and various other issues affecting everyday city life. As the city’s leaders see it, the traditional method of bidding based on pre-specified parameters kills innovation by restraining inventiveness, reports Governing.com.
“It also limits the pool of bidders to established companies familiar with the sort of solution the tender asks for,” according to a report on the site, which notes Barcelona is using the new method for projects as small as €60,000 (US$44,385). “Anyone around the world with a creative idea, including startup companies or even individuals, has a shot at a contract and all the market legitimacy that comes with that. Winning bidders also get free space to set up their business.”
Sascha Haselmayer, co-founder of Citymart, is the engineer behind the new bidding process. The consultancy has done dozens of similar “challenge” programs globally, according to Governing.com.
“City governments need to get out of procuring by specifying the solution they want,” Haselmayer told the site. “They can’t possibly have enough knowledge to do that well. What they should do is specify the problem they want to solve and show metrics on what success looks like. And then allow the market to inspire them to find the best solutions.”
Haselmayer’s methods are not dissimilar to hackathons that invite hackers to try to break into what are thought beforehand to be secure websites or databases. Internal staff may not have the intuition to identify holes others might find easily, or over time given the opportunity. PYMNTS.com also offers a similar test of innovative thinking through its ThinkaThon contest conducted during its annual Innovation Project.
U.S. governments also are using the concept to build more ingenuity into their contract-bidding process. Philadelphia, for example, last year formed FastFWD, a partnership involving the city, social enterprise accelerator GoodCompany Group, the Wharton Social Impact Initiative. It was created through the city’s participation in the Bloomberg Philanthropies’ Mayors Challenge, a competition to inspire American cities to generate innovative ideas that solve major challenges and improve city life.
Philadelphia last year won $1 million through the Bloomberg Philanthropies Mayors Challenge to create a means for new organizations to bid on city work, and FastFWD was the result.
For its first initiative, Philadelphia chose public safety as its focus. Wharton Social Impact Initiative analyzed the market sector for different areas, such as prisoner reentry, neighborhood surveillance and substance-abuse treatment, that seemed ripe for innovation, Governing.com. noted. Some 82 applications came were submitted from different places globally, and 10 applicants were selected to go through a 12-week program aimed at refining those ideas.
Story Bellows, who runs FastFWD for Philadelphia, told Governing.com. she was looking not just for the “best” ideas but for a diverse group of entrepreneurs whose varied backgrounds in technology or marketing or finance would complement each other. As the group went through a weekly curriculum run by Philadelphia-based GoodCompany Ventures, they also provided frank feedback on each others’ business models, she said.
“We wanted people who would be coachable,” Bellows said. “They were companies and people within companies who had more than a sketch on a napkin. They’d quit their day jobs and committed to making the company move forward. But they weren’t at a point where they had more than $1 million in revenue and not at a point where they couldn’t pivot or change their idea.”
Each company received a $10,000 stipend for the 12-week program. The first round of FastFWD wrapped up in May. Seven of the 10 companies competed for a share of $100,000 to pilot their refined ideas. Three were chosen and will receive actual city contracts worth $30,000 to $35,000.
Philadelphia is preparing for its second $100,000 FastFWD round, seeking applications for ideas promoting “community stability” that are due Aug. 1. Barcelona, meanwhile, intends to announce finalists in each of its six challenges later this month and decide who will win contracts valued at €1 million in another month or two.
At this point, the change in how governments are awarding contracts is a test project to determine the viability and usefulness such methods can be. But should the trials prove fruitful in solving problems better and less expensively, expect more cities around the world to similarly get more innovative in their contract-bidding processes.
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