Procurement

Procurement – What is it?

Procurement is the process of agreeing to terms, acquiring goods, services, or works from an external source. Procurement is different than purchasing a good/service. Purchasing is simply the process of acquiring goods and services. Procurement, in contrast, involves purchasing pursuant to a tendering or bidding process which may involve negotiation among parties. Thus, when a public or private organization begins the procurement process they must: identify what is needed, submit a purchase request, assess and select a vendor, negotiate price and terms, create a purchase order and receive and inspect the goods.

Municipal procurement involves the expenditure of taxpayer funds, and so tends to be heavily regulated in Canada to ensure accountability, fairness and transparency.

Smart City Procurement: Why is procurement a particularly significant activity for smart cities?

A smart city requires tools to collect data and tools to analyze data. For example, to optimize traffic sensors may be placed across traffic lights to collect information on how many cars are on the road. Next, that information will then go to a network to be analyzed then acted on (i.e telling which traffic lights to turn green). It is not feasible for every city to manufacture or implement the infrastructure needed solely on the basis of internal expertise. Municipalities will inevitably need to turn to private sector partners for the expertise to implement and manage many technology-intensive smart city tools. These will need to be selected though the procurement process.

Risks – what are the major risks municipalities encounter in smart city procurement?

Politicians Require Digital Literacy

To decide who is the winner of the tendering process, politicians will need to have high digital literacy. Procurement does not only require finding a vendor that can solve their needs, but it will also require them to find a vendor that solve future unpredicted problems. By committing to a vendor who is unable to solve unforeseen problems, a city may be committed to purchasing and installing out-of-date technology or out-of-scope technology. To overcome this issue, vendors should be tested and demonstrate their products on a smaller scale. This would allow the city to see if the vendor can solve real-life problems in real-time. This will prevent the city from locking in with a vendor who is unable to adapt to problems as they arise.

Transparency

As in all procurement situations, smart city procurement requires transparency. This can be a challenge in the technology space, where private sector partners insist on confidentiality to protect trade secrets. Large smart city projects will often involve public-private partnerships. Such arrangements may put municipalities at a disadvantage

Vendor Lock-in

Technology acquisitions often implicate long term commitment to a specific vendor. This creates a danger that a municipality, having committed itself to a particular vendor through a competitive and transparent procurement process, is now at the mercy of the vendor for follow-on services and products. Municipalities need to be aware that taxpayer funds are vulnerable not only through the technology selection process, but also throughout the life cycle of the technology.

Resources

The following bibliography of sources looking at best practices and guidance on open smart city procurement. The sources include topics of procurement in the context of a smart city as well as open procurement.

Guides and Toolkits

Smart Cities - A best Practices Guide for Building Our Future Cities, Canadian Urban Institute 2019 (smart city master planning guide) Short section on procurement (p32-33) - A holistic guide for municipalities designing smart cities, this document lays out the phases required of a municipality in order to design a fully functioning smart city. The section of most interest to us is phase V where the smart city design is implemented. an earlier discussion to implement smart city procurement.

European Commission, Analysing the potential for wide scale roll out of integrated smart cities and communities solutions: Public Procurement models for SCC solutions, 2016 - This report is a comprehensive analysis of how different public procurement models impact smart city solutions. It describes the types of public procurement models (new and traditional) and then uses case studies to observe trends and make recommendations.

European Commission, Guidance on Innovation Procurement - This document is created to assist municipalities in adopting innovation procurement. The document defines and establishes a need for innovative procurement followed by recommendations on creating a framework for adopting innovation procurement.

UK Open Source Procurement Toolkit – All About Open Source and Open Source Software Toolkit Security Note - The UK government published a toolkit on best practices in evaluating open source solutions in support of its open source procurement policy

Canadian Sources

OpenNorth, The State of Open Smart Communities 2019 - Short section on procurement (See p30-33) The report evaluates the use of open procurement in smart cities. IT procurement is related to data governance and poses privacy and security risk to partners, stakeholders and the government. As a result, the report recommends data ownership, third party resale, re-use parameters, and privacy protection. Having provisions addressing privacy risks will increase trust and allow for transparent procurement processes.

OpenNorth, Open Smart Cities Guide v1.0 - This Open Smart City Guide is intended to assist stakeholders participating in smart city projects. It includes guidance and examples of open procurement practices.

Open North, Procurement, (2020) - Guide for municipalities on procurement when engaging with the private sector.

Canada’s 2018-2020 National Action Plan on Open Government (see 2. Financial Transparency and Accountability) - The government of Canada made a commitment to financial transparency which resulted in more transparency in government procurement and spending processes. This means that citizens now have access to open data on the government’s procurement spending and contracts.

Sara Wilson, "Building Canada’s Low-Carbon Approach to Infrastructure Investments through Prioritization, Policy and Procurement Future Cities Canada", Evergreen 2017 - This resource concentrates on sustainable, green infrastructure initiatives. However, the innovative approach to procurement is a good model for smart cities as well. The report recommends using procurement as a proactive tool for sustainability, encouraging bidders to innovate, submit bids that are low-carbon, and work on creating a more flexible procurement process. The report also cites “Going Green: Best Practices for Sustainable Procurement”. It outlines how national policy frameworks can change to promote better public procurement.

Foreign Sources

Smart Cities Stakeholder Platform – Finance Working Group, Public Procurement for Smart Cities - This guide assists cities in implementing public procurement frameworks suitable for smart cities. The guide not only identifies best practices in procurement practices, but also identifies barriers to implementing best practices. Finally, the document is designed in the context of the low-carbon and environmental goods and services (LCEGS) sector but addresses problems that are common to other smart city procedures as well.

Other Useful Sources

Sean Kolenko, “Procurement Process 101: The Stages in the Procurement Process”.

Matt Lim, “What is the Difference Between Procurement and Purchasing?”.

Jeremy Devray-Benichou, “Smart procurement for smart cities”.

Laffont, Jean-Jacques; Tirole, Jean (1993). A Theory of Incentives in Procurement and Regulation. MIT Press. p. 1. ISBN 9780262121743.

BC Developers’ Exchange - The BCDevExchange is a platform for delivering digital public services through partnerships with public and private sectors to deliver solutions to public challenges. They have the capacity to act as a matching platform between governments and tech suppliers. By providing a space for developers to innovate, the aim is to encourage and grow the private technology sector through public sector resources to develop products that meet public needs. The BCDevExchange offers the DevOps Platform and Exchange Lab which will host government projects that have been procured.

Government of BC Request for Qualification (RFQ) template - The Request for Qualifications (RFQ) template is used to create a pre-qualification list of vendors who are eligible to participate in a subsequent procurement process for goods and services. This template is relevant for vendors to demonstrate that their products or services meet the prerequisite performance standards. It can be applied in a smart city solutions context to have vendors demonstrate its product or capacity to meet qualifications before advancing to a solicitation phase.

Government of British Columbia Procurement Process Guide - This site outlines and describes each phase of the procurement process from planning, pre-award, award, management, and close-out. The guide provides an overview of the different tasks to be completed within each phase and the desired outcome, while building and maintaining vendor relationships. The site provides information on the risks associated with poor vendor relationships, along with potential consequences and mitigation tactics. Although this guide does not provide for the procurement of smart city solutions specifically, the pre-award phase is relevant to addressing the risk of insufficient digital literacy and transparency.

Government of Saskatchewan RFSQ template preparation guide - The Request for Supplier Qualification (RSFQ) guide describes the different elements that must be developed to create a customized document that suppliers understand and respond to. The guide indicates that the template is meant to be customized to match specific competition needs. In particular, Part 1.1 Invitation to Respondents and Appendix A – RFSQ Particulars can be customized to reflect the needs of a smart city technology including the demonstration of solving real problems in real time.

Municipal Innovation Exchange (MIX), MIX Municipal Innovation Procurement - The MIX research report on challenges and opportunities for municipal innovation procurement provides insight to innovation procurement around the world and particularly focuses on Ontario cities as case studies to reflect those barriers and opportunities.

Guelph Civic Accelerator Case Study - The Civic Accelerator report describes Guelph’s experiment in reimagining procurement by explaining the Civic Accelerator model, its goals, and how the model works in practice. The report is described to assist and inform other cities in innovating the process within an existing policy framework. The report shared key insights for successful implementation for a Guelph-like model, and included working within existing procurement regulations, as well as being strategic with government and local innovation partners to champion the reimagined model (see p12-17).

Pittsburgh Smart City Procurement - This resource advocates for the use of Request for Information (RFI) in the realm of smart cities procurement because it allows companies to respond with information relevant to the city’s challenge and are well suited to conduct market analysis without it becoming outdated. The City of Pittsburgh is one example of an RFI used for the replacement of city streetlights revealed a lack of coherency in the smart city space in terms of best practices or solutions but did reveal that all responses emphasized the value of network. The Pittsburgh case offers one strategy to reimagining the procurement process beginning at the RFI phase.

City of Toronto Civic Innovation Office - The City of Toronto has released an “Invitation to Partner” (ITP), a more accessible document in lieu of an RFP, to encourage entrepreneurs to get involved in building and imagining a better 311 service.

Canadian Digital Exchange Platform (CDXP) - The CDXP is Canada’s strategy to create a “Government as a Platform” in order to allow government departments to provide any service on any platform, device or trusted partner in a secured manner. The vision of the CDXP is the digitization of all government services at every level of government. This presentation outlines the phases in which a service provider could onboard onto the strategy where the service would work with CDXP to test, deploy and be made public to consumers.

Montreal Smart and Digital City Bureau City Contracts Transparency - This article describes Montreal’s development of a visualization tool for municipal contracts that allows users to see data that is structured in open contracting format. The open contracting format ensures that public money is spent openly and fairly and supports open data standardization efforts. The article identifies procurement process knowledge to be one challenge in implementing the tool. This was because procurements have different contract lifecycles and varying degrees of complexity associated with administrative approvals. Though the challenges remain, the tool has been subject to evaluation and recommendations so that ongoing improvements are made to improve transparency.

18F: Procurement - 18F is an office within the U.S. General Services Administration that collaborates with agencies to fix technical problems, build digital products, and improve government services through technology. The 18F blog has various posts about ways in which traditional procurement can be changed to increase efficiency. 18F advocates for modular contracting, the practice of breaking up large, custom software procurements into a small constellation of contracts to increase efficiency.

John Loxley and Salim Loxley, “Asking the right questions: A guide for municipalities considering P3s”, CUPE (2d ed.) (2020). -This Guide provides municipalities with specific questions to ask prior to engaging in public-private partnerships to understand their costs and benefits.