In January, I (David) was invited to Washington DC to meet with the UK’s Technology Strategy Board and a delegation of EU member states at the British Embassy. The focus of their meeting: striving to improve innovation support in Europe for Small and Medium-sized businesses. In particular they were seeking out best practices in innovation, and regarding us, innovation in procurement. The group included representatives from six European innovation agencies: Enterprise Ireland (Ireland), FFG (Austria), Agentschap (Netherlands), Tekes (Finland), Technology Strategy Board (UK) and VINNOVA (Sweden). You can read the first report here.
Why were we invited to meet with this esteemed group from across the pond? It seems that the RFP Database had caught their attention. Our site’s ability to harness the collective efforts of over 100,000 registered users to create a dynamic information gathering and information providing portal, within the procurement space, was something they wanted to learn more about. They wanted to know more about how the system operated, what we’ve learned from it in terms of what has worked and what hasn’t worked, and what effects it has had on both the issuers of RFPs found in our system as well as the vendors that download the RFPs. It was a pleasure meeting with such an interesting group and getting a chance to discuss our site with them, but also perhaps have some impact on their own project(s).
During the course of the meeting one topic kept coming back: how can government organizations encourage innovation in small and medium sized businesses?
The typical way that bureaucrats respond to this question is by simply giving money away through “innovation grants”, which can be found through Grants.gov, and totaling approximately $500 billion in annual awards.
I think we can do better. I believe that governments of all sizes (federal, state and local) can best encourage innovation by demanding innovation in their purchasing.
Government spending in 2010 totaled approximately $5.8 trillion, or ~12x the amount awarded through grants. The vast majority of that money is spent purchasing products and services, primarily with the goal of procuring a solution that will accomplish the task while costing the least. Check the requirement boxes, submit a fixed or hourly rate that is $1 less than your competitor, and you have a race to the bottom of the barrel. There’s a great acronym for this: TALP (Technically Acceptable, Lowest Price).
The only thing “innovative” about this is figuring out how low you can go with your pricing or how you can outsource more of your work in order to lower your pricing even more. This often doesn’t encourage innovation, but instead encourages shipping work overseas, which frequently leads to a lower quality deliverable.
In the interest of pitching an idea (and not simply complaining), I’ve written out the following process; the goals of the process are to a) lessen the amount of paperwork and non-billable time investment in order to continually bid on vague RFPs, b) reduce the barriers for entry (liability insurance, proof of, etc.), c) bring outside experts in to the procurement process in order to encourage innovative solutions.
Open Innovation Sourcing model
- Percentage of contracts identified or targeted through open voting as “ripe” for innovation
- Agency defines the problem(s) and goal(s)
- Agency issues a RFQ, selects 3-5 vendors to become collaborators based on their project pitch and examples of innovative solutions to related problems (a stipend position). At least one vendor must be new to government procurement.
- Each collaborator is tasked with participation in creative sessions to create an innovation solution to the problem and define the solution. Solutions are peer critiqued with multiple rounds of revisions, then graded by the procurement officer on projected savings (both short and long term), force multiplying affect, and support for small/medium sized businesses
- Based on the definition, a RFP is released to implement the defined solution
This solution does not tear down the concept of RFPs, nor does it rely on the input of just one vendor, but instead encourages creative competition in a paid process. In a sense it is “crowd sourcing”, but on a limited and focused scale so as to keep the project moving along (avoiding too many cooks in the kitchen) and will be paid (not a competition, but instead compensated expertise).
Do you think this will lower costs, encourage government innovation, and provide opportunities to more small and medium-sized businesses? I’m eager to hear your thoughts!