Overview | Procurement Office or “Living Lab?”
Experimenting with Procurement and Partnerships for Smart Cities Technology in Canada
This article summarizes findings from a full-length study. Access the report here.
Study Scope
This report explores municipal procurement approaches and their implications for ensuring the best technology solutions become part of Canada’s growing smart city infrastructure, and includes the following:
- Traditional and innovative approaches to municipal RFPs (requests for proposals) and their impact on startups, medium-sized, and large service providers
- Intellectual property in procurement and its implications for supplier companies
- Data ownership in smart cities projects
- Social and ethical requirements in procurement contracts
Study Context
The United Nations anticipates that 68% of the world population will live in urban areas by 2050, when the global population reaches 9.7 billion. Municipalities today and in the future will need to manage their resources efficiently and fairly.
Public procurement represents a significant portion of a country’s GDP and can be a highly strategic tool for building more efficient “smart cities” that serve citizen interests.
Procurement practices allow municipalities to signal investment intentions, engage in long-term planning, and express social and environmental values.
Procurement Types
Understanding and choosing the right procurement approach can help ensure the best suppliers and technology are secured.
The following list of procurement approaches are discussed:
- Traditional or solutions-based
- Problem, challenge or outcomes based
- Pilot programs, living labs or other municipal challenges for startups or SMEs
- Non-competitive or sole sourced
Traditional Procurement
Many Canadian startups and emerging companies offer new and innovative tech solutions, however, traditional public procurement processes disproportionately and negatively impact small companies.
- Traditional RFPs are also not well suited for new technologies that municipalities aren’t familiar with (companies then need to spend time and resources to educate their potential buyers)
- Small companies may not have dedicated staff or resources to seek out and apply for procurement opportunities from siloed municipal procurement websites, unlike their larger competitors
Smaller companies are typically awarded substantially smaller contracts:
Traditional RFP processes that stipulate geographic requirements for firm ownership or a set number of previous projects can also hinder small company participation in RFPs.
Examples:
Challenge-based Procurement
Challenge-based procurement is less likely to exclude emerging technology solutions (however, traditional procurement obstacles such as experience requirements and a lengthy process can still stand in the way).
Cities across Canada are adopting novel challenge-based procurement to make the process more accessible to small companies and startups.
Innovative “pre-procurement”
“Living lab” approaches are typically a partnership variation of offering city infrastructure or other support to companies, researchers, and individuals to test and try ideas and products in a real-life environment for technologies under purchase consideration.
The category includes pre-procurement arrangements involving partnerships prior to awarding contracts. This allows cities to “try before they buy,” reducing the risk associated with emerging technology adoption.
Startups can sometimes leverage R&D to make their product adoption ready, however, pre-procurement arrangements can be risky for a startup company because there is often no guarantee of financial return by being awarded a contract.
Provincial and Federal Funding Programs
Government funding programs that support tech development help cities offer innovative programs and give startups an opportunity to receive financial return for their time.
Government funding varies widely in scope, but the federal government alone has more than 25 programs supporting smart city projects (over the last four years). Federal contributions to companies ranged from $5,000 to $451,694,410.
Sole Source
There are multiple routes to sole-source procurement:
- As an outcome of “pre-procurement” (a pilot program that moves directly to a larger contract)
- When working closely with “living lab” participants to build needed services and then moving to a formal partnership
- May be justified when a company’s product offering is highly unique (unique IP can sometimes secure a contract)
- As a subcontractor to a company that already has a pre-existing contract with a municipality
Intellectual Property in Smart Cities Procurement
Companies and cities each have their own pre-existing intangible assets, IP, software, hardware, and institutional knowledge. Additionally, new IP might be created during a partnership. Details of IP and data ownership might be clear-cut or highly complex, and stakeholders with varying levels of experience will need to deal with them appropriately.
- RFPs that don’t address IP can lead to mid-project ambiguity
- Cities may or may not have internal capacity to draft appropriate IP statements
- Generally, companies retain IP that existed before a project’s launch but are asked to forfeit IP for products developed as part of a partnership
- Companies typically avoid RFPs that ask them to forfeit rights to their pre-existing products or services
- Some companies prefer SaaS arrangements to retain the use of their software.
Data Ownership in Smart City Projects
Data ownership and IP might require separate treatment in procurement and contracting.
- Many RFPs currently do not address data ownership (leading to mid-project ambiguity)
- Some RFPs pose questions about data rather than offering governance models. Others note data storage needs (e.g., data must be stored in Canada with security standards)
- Some RFPs include a privacy-by-design mandate, while others allow the public sector partner to investigate or audit the proponent’s information management practices
- Existing data ownership clauses may not address metadata or training data, causing ambiguity for companies whose IP has been trained on data owned by the public sector
Data co-ownership (of de-identified data) can be helpful for some startups that can repackage data for new services.
Degree of Municipal Involvement in Projects
Municipalities take varying degrees of involvement in smart city projects. Municipalities in larger provinces tend to be more involved in these partnerships.
Social Impacts and Ethical Parameters in RFPs
In addition to minimum guidelines under the law, some RFPs include social impact statement requirements to encourage social and environmental outcomes.
- 41% of the RFPs read for this paper included social impact requirements
- Ethics statements range from high-level to actionable guidance and evaluation criteria
Common social impact topics include environmental sustainability, accessibility, equity and non-discrimination, and inclusion of Indigenous personnel or Indigenous-owned businesses.
