Building a Better Government Innovation Supply Chain (Step 1: The Procurement Process)

Image Credit: Fast Company

Editor’s note: Kirk Talbott is the Deputy CIO for the city of Atlanta, Georgia.


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 is the procurement process itself. There are numerous good ideas, technology, and often times 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 that there are time honored methods of accelerating and innovating in the procurement process. This lets an agency safely experiment 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
Probably the easiest method of the bunch. 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 themselves. 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 their 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 existing Memorandums of Understanding (MOU’s) exist the final procurement may take the form of the 2nd agency transferring funds to the 1st 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. While yet another variation on this model, the best known example of this method is the Public Private Partnership (PPP) where a government agency benefits from the procurement process of a private entity through predefined relationships.

Transaction Based Pricing
This method is often times 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 their 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 (anywhere between $5K and $50K 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 very negative response from all parties involved. The best know example of this model is SAAS where a small number of people within an agency try out the service before committing to an agency wide deployment.

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 the historic abuses) but this method is often times 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.

*Final Note

Remember, no matter the amount of friction that may exist in any government agency (and there always is a palpable friction in any agency of size), 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.