Need to Close a City Fiscal Gap? Don’t Overlook Procurement
It’s a tool that can deliver better services, budgetary savings, and greater equity.
The COVID-19 pandemic is straining municipal budgets. Revenues have declined while spending on pandemic response has increased. The resulting budget cuts threaten not only to reduce the quality of city services in the short term but also to delay investments in infrastructure and economic development that are critical to longer term city vitality. Budget cuts can also undermine progress on city equity goals, as vulnerable populations are often those most reliant on city services.
What if there were a tool that could simultaneously reduce spending and deliver better services?And what if that tool could also enable cities to make significant progress in advancing equity? Earlier this year, Professor Jeffrey Liebman, Director of the Harvard Kennedy School Government Performance Lab (GPL), pointed out that better management of procurement can be that tool.
Liebman was speaking to CFOs and budget directors from 29 U.S. cities who are participating in What Works Cities’ City Budgeting for Equity and Recovery (CBER) program. Liebman described the Results-Driven Contracting (RDC) approach and how city leaders can use it to help their cities recover financially while also strengthening their commitment to equity.
Cities can do four things to save money, improve results, and increase equity in city contracting, according to Liebman. His GPL team shared case studies from cities to illustrate successfully implemented RDC strategies.
Cities can do this by process mapping to reduce cycle times and wasted efforts, inventorying contracts to reduce duplication and identify opportunities to save money, and streamlining the process to make things easier for vendors.
In Saint Paul, MN, the City’s contracts for public works projects like repaving streets and replacing curbs had for years received bids only from the same couple of contractors, and these projects routinely ran over budget and past agreed-upon timelines. With the GPL’s help, Saint Paul surveyed vendors in the surrounding metro area to learn more about why businesses were not bidding on the City’s contracts and realized vendors held outdated perceptions about how hard it was to do business with the City, including how long it took to get paid.
By shedding light on these concerns, Saint Paul was able to design a campaign to communicate the improvements they’d made to the procurement process over recent years. The number of bids the City received for street reconstruction the following year doubled as a result — and early indications in recent projects show fewer change orders and contract amendments, which translate into cost savings.
Cities can orient RFPs around the goals and outcomes they seek to produce for residents, design contract vehicles and scopes of work intentionally to align providers with these goals, and actively manage contracts using real-time performance data to improve results over time.
In Boulder, CO, the City’s less affluent neighborhoods lacked access to reliable high-speed internet, limiting economic opportunity in these areas. The GPL helped the City procure a contractor to construct 65 miles of fiber optic infrastructure to close this digital divide. By making explicit the project’s goals and communicating with vendors about these throughout the contracting process, the City was able to contract with more small and minority-owned businesses to do the work, while also saving $8M through the competitive solicitation process.
Other results making progress on equity goals include minimal community disruption in all construction areas and more equitable access to broadband speed internet across the City.
Cities can do this in three ways: 1) engage senior leadership to proactively identify high-priority upcoming procurements for services that need improvement; 2) dedicate resources to working on those RFPs and contracts; and 3) train staff more broadly to use procurement and contracting as a strategic opportunity to improve service delivery.
In Glendale, AZ, the decentralized nature of the City’s procurement system contributed to multiple departments holding separate contracts for the same service with the same vendors and often renewing these contracts despite lackluster vendor performance in delivering key city services like landscaping for parks and janitorial services for libraries.
The GPL helped Glendale implement a new system for department leaders to come together annually and identify the City’s highest-priority contracts. The City then set up a cross-departmental team charged with re-procuring these services to improve results. After streamlining and re-procuring three key services across departments in the first year, Glendale is now repeating the process in its second year. It has also trained a new “Strategic Procurement Team’’ cohort in charge of improving results on priority procurements.
Cities can be purposeful in using procurement to advance equity, both in service delivery and in opportunities for businesses to receive contracts. For example, they can manage contracts in order to achieve equitable service delivery by measuring and correcting service disparities, use contract terms to hold vendors accountable for equitable results, and listen and learn more from end users.
In addition, cities have the opportunity to increase the share of city dollars going to local, small, and minority- and women-owned businesses. They can do more outreach to these business communities, making it easier for them to do business with the city, and providing resources for these businesses to develop and grow. The bottom line, in terms of how change happens: you can’t just set a big goal, say you value equity and diversity, and expect results. Meaningful change requires intentionality and commitment — of time and resources.
In Boston, MA, the City had identified dozens of streets and sidewalks projects to improve transportation networks throughout the city as part of a comprehensive, 15-year transportation plan, but needed a way to sequence these improvement projects in a way that aligned with broader city-wide goals. The GPL worked with Boston to develop a sequencing tool to prioritize upcoming transportation projects based on customizable strategic criteria, including whether the project advances mobility, promotes social equity, and improves public safety. By allowing city leaders visibility into where and when work should be done, the project helped the City’s Streets Cabinet reprioritize over $700 million in spending on its 5-year capital plan.
Some places, such as California, have laws and regulations that limit cities’ ability to put race- or gender-conscious procurement preference programs into place. But the most impactful equity-focused procurement practices can be implemented in a race- and gender-neutral environment. Laws and regulations don’t prevent a city from addressing inequitable service delivery, investing in local business development, or making it easier for all firms to do business with the city.
The bigger challenge to advancing equity, Liebman says, is people who say “well, we haven’t done it that way before.
How to Get Started — And Make Lasting Change
As anyone with change management experience knows, there is no substitute for getting senior-level and staff buy-in and changing the culture. Changing procurement practices is no exception. A CFO or other finance leader can play a crucial role, even if they don’t oversee procurement, by exerting influence on the person who heads up this area or elevating issues to the mayor.
If you’re sold on overhauling procurement as a way to simultaneously improve services, save money, and boost equity, but aren’t sure where to start, consider who you can dedicate to this effort. It will likely take one full-time equivalent (FTE) — a dedicated project manager — about a year to make systemic change, Liebman noted. “No one’s going to transform an entire city’s procurement process with one-tenth of a full-time employee working on Friday afternoons,” he said.
If, like many cities during this challenging fiscal time, you don’t have an FTE to spare, download the GPL’s new stand-alone Guidebook for Crafting a Results-Driven RFP and dedicate one-fourth of an FTE to applying these strategies to one important contract for a quick win.
“Then, maybe you can make the case to the mayor that you should put a full person on this next year,” Liebman said. Or dedicate one-fourth of a person’s time to procurement process mapping and improvement, so that cycle times can be reduced and dollars can be put to work more quickly for residents.
A losing approach to making long-lasting change is to just give new responsibilities to existing procurement and contracting staff, adding stress to their workload. Streamlining the procurement process is essential to freeing up staff time to focus more on performance and results. If done right, overhauling procurement should improve the way people work, as less time will be spent on inefficient processes and change orders, while staff see their efforts culminating in better city services.
There was plenty of room for improvement in procurement before the pandemic. But now, as cities grapple with historic revenue shortfalls and the disparate impacts of COVID-19, the stakes are much higher. Thankfully, strategies exist to create change, and cities are already modeling progress. If you can marshal the energy and resources to change the status quo in procurement and contracting, the ROI on the fiscal and equity front is clear.
Launched by Bloomberg Philanthropies in April 2015, What Works Cities helps local governments improve residents’ lives by using data and evidence effectively to tackle pressing challenges.