Challenge-based procurement ‘just makes sense’

Up until just a few years ago, New York City’s procurement and government contracting system was paper-based. The approval process took months as applications were shuffled from desk to desk, unless a business used personal connections to skip the line.

Meanwhile, the requests themselves could be overly prescriptive and leave little room for companies to innovate or iterate, or be one-off requests—not large enough to allow businesses to scale their solutions, even if successful. Chief Procurement Officer Lisa Flores said it created a “complete black hole.”

New York City is attempting to change that. Procurement and the approvals process is now done electronically, and the city is experimenting with a new approach to procurement adopted in California whereby it identifies problems and solicits solutions from businesses.

Called challenge-based procurement, it’s a big change. Previously, the city would identify the solution it wanted to see and write a contract accordingly. During a keynote speech at last week’s Smart Cities Expo USA in New York City, Maria Torres-Springer, the city’s deputy mayor for economic development, housing and workforce development, said the new system will help “fix the piping of our procurement policies.”

Already, the New York City Housing Authority has used challenge-based procurement to find solutions for homes that get too hot in the summer. And the New York City Economic Development Corporation is employing it in its search for anchor academic tenants for the new Science Park and Research Campus Kips Bay project.

“With this tool, the city will be able to issue a challenge or problem statement to solicit solutions from the market rather than what we usually do, which is to put out a 1000-page [request for proposals] as if we know exactly all the contours of the problem,” Torres-Springer said.

It marks a dramatic change from the previous way the city procured new technology, and represents a recognition from those in the public sector that there is so much knowledge to tap into in the private sector. Making better use of that knowledge just makes sense, leaders said during a panel discussion at Smart Cities Expo on public-private partnerships.

“We see a lot of frontier technology, but that doesn’t mean we understand it,” said Lindsay Greene, president and CEO of the Brooklyn Navy Yard Development Corporation, a nonprofit that manages the city-owned site. “And we know it.”

Greater cooperation between the public and private sector on procurement helps alleviate what Margaux Knee, chief administrative officer at LinkNYC, called the “natural tension” that exists when it comes to spending money. LinkNYC, an infrastructure project that plans to convert 4,000 old pay phone booths into kiosks that provide free Wi-Fi in the city, had to scale back its original ambitions of converting 7,500 booths amid cost concerns.

Scaling back those ambitions required both LinkNYC and the city’s Office of Technology and Innovation to be “nimble,” Knee said, and would not have been possible without a solid relationship between the two entities.

Panelists acknowledged that doing business with city government will always have its challenges and may feel like an uphill struggle in the face of regulations and bureaucratic red tape. But Greene said businesses would be well advised to remember where their counterparts in city hall are coming from.

“Where [it may feel like] they just say no all the time, it comes from that they have an entirely different mandate that isn't about usually advancing technology or improving the city, it's about keeping it safe,” she said. “It's just a very different perspective. The more you can do to appreciate that perspective and try to help, or offer something that addresses that, the better all those relationships will be.”

In the meantime, speakers for the city throughout the expo encouraged designating more initiatives as pilot projects to help streamline the procurement process.

Currently, if a pilot project is deemed successful and tapped for expansion, interested parties must go through an entirely new bidding process and have a new contract written, which can cause delays in any expansion. Flores said that creates “pilot purgatory,” as companies are unsure if they can continue with the city and so can struggle to find any extra capital.

Letting a successful pilot scale up more quickly under the new approach thus avoids that purgatory, she said, and allows vendors to continue their good work.

“That allows us to change the dynamic and the paradigm of our risk-averse approach to procurement and really understand that in order to gain innovative solutions, not all of your pilots will be successful, and that's OK,” Flores said. “But if they are, you need to be able to quickly invest and have partners with you to scale up and bring that across all the problems that we're trying to solve.”